Tax Return Project CPA

Frank and Mary Carter are new clients to the firm. Frank is an attorney and Mary is a consultant. We will be preparing their 2017 Federal income tax return. Frank and Mary will be filing jointly and have the following personal information: Social Security # Date of Birth Frank Carter 476-48-8888 1/22/1958 Mary Carter 746-58-9999 6/17/1962 Son: Thomas Carter 231-88-9876 1/5/2003 Address: 735 Carnegie Street, San Bernardino, CA 92408 They have given us the attached documents for their tax return. They have also supplied the following information: 1. Frank is an employee of Inland Attorney At Law Inc, and Frank received a W-2 from the company. The W-2 form has the following information. Wages: $125,000 Federal income tax withholding: $34,815 California income tax withholding: $4,510 2. Frank is a sole shareholder of Inland Attorney At Law Inc. The company is an S corporation. Frank received a Schedule K-1 for the pass-thru income from the corporation. Frank materially participated in the business for the year. The Schedule K-1 shows $45,150 ordinary business income 3. Frank and Mary received $235 interest income from Nation Bank for their money market account. They also received $300 dividend income from the Disney stock they owned. The dividend is a qualified dividend. Frank and Mary had the following stock sales in 2017. The investment broker reported the stock basis information to the IRS. Description Date Acquired Date Sold Quality Proceeds Cost Amazon 01/26/2016 02/16/2017 10 shares $9,500 $8,200 Apple 09/25/2015 02/16/2017 20 shares $4,400 $3,900 4. Mary is a consultant working as a sole proprietor. Mary uses cash basis accounting for the activity, and Mary materially participates in the activity during 2017. Mary did not make any payments in 2017 that would require her to file any 1099 forms. She has given us her business income and expenses information for 2017. Gross income received $60,000 Expenses paid: Liability insurance $1,500 Supplies $450 Taxes and licenses $325 Conference registration $1,200 Travel $750 Marketing $2,150 Office rent $12,000 5. Frank and Mary bought a residential rental property in 2017. Address: 3010 Olive Street, Los Angeles, CA 90001 Purchase date: 2/1/2017 Purchase price: $450,000. The cost is broken down between land and building as follows: Land $90,000 Building $360,000 They have given us the following information related to the rental property. Rental income $30,400 Advertising $425 Insurance $825 Repairs $1,250 Mortgage interest expense $8,750 Property taxes $6,600 6. They received $670 income tax refund from the State of California from their 2016 tax return filed in 2017. They were not subject to AMT for federal income tax purposes in prior year, and they had the tax benefit of deducting the state income tax payment on their prior years federal tax return. 7. They provided us the following additional information related to 2017. On their personal residence they paid $4,850 in property taxes and $10,800 in mortgage interest. On their personal autos, they paid $1,080 in DMV fees and the portion based on the value of the vehicles is $525. They made cash donations to the American Red Cross of $15,000 and noncash donations to Salvation Army of $500. All 2016 California tax was paid in 2016. 8. Thomas is a high school sophomore living at home with his parents. He did not work, nor did he have any other income. 9. Frank and Mary do not have any overpayments applied to 2017 from prior year. 10. Frank and Mary made four equal payments of $1,000 each to the IRS for the tax year 2017 on 4/15/2017, 6/15/2017, 9/15/2017, and 12/15/2017 respectively.