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The Anderson Family: Family Tax Filing Federal Income Tax project Fall Term 2022 ACCT-43000 Individual Income Taxation Due: December 18th2022 Sina Rahimi The Andersons are one big happy family who are living happily ever after. But there is just one problem, they don't know how to do their taxes. They come to you as their Accounting savior and ask you to help them out with their tax return. Mr. Anderson is 66 and the Mrs. is 50 years old, both have good eyesight, and live with their three children, Eddie, Dennis and Ruth, at 789 N.Code Drive, Chicago, Illinois 60699, (312) 679-9999. Mrs. Anderson is a dual citizen, she has a Canadian passport but has not visited or resided over the last 10 years. Mr. Anderson wants to contribute $500 of his income tax for Election Campaign Fund purposes. Mrs. Anderson elects not to contribute. Eddie, is a junior in college and he is 20 years old. He worked during the summer and earned $4,000. Their other son, Dennis, is a 17 -year old high school student. He earned $3,600 during the summer and worked part-time during the remainder of the year. Neither son had any additional income. Their daughter, Ruth, is 6 years old and an elementary school student. She had \$ 10,000 earned and \$ 10,000 unearned income from an investment portfolio setup and ,managed for her by her parents during the year. In August, the Anderson's paid $6,000 in tuition for their son, Eddie, for the Fall semester. The Anderson's claim Mrs. Anderson's mother, Bonnie Taylor, as a dependent under a multiplesupport agreement. The total support of Mrs. Taylor is $6,000, received from the following three sources: (1) $3,000 from Mary, (2) $1,000 from another daughter, Annie Taylor, and (3) $2,000 in social security benefits. Mrs. Bonnie Taylor lived with the Andersons during all of 2022. Her social security number is 40044-0004. Annie Taylor provides the Andersons with a written, signed statement, that she will not claim her mother as a dependent in 2022. Annie Taylor lives at 1425S.62 nd Street, Chicago, IL 60699 , and her social security number is 500550005. General income and expenses During 2022, Mrs. Anderson was employed as a salesperson by a publishing company. Her Form W-2 for 2022 reports the following: - Box 1. Wages, tips and other compensation $75,000 - Box 2. Federal income tax withheld $4,950 - Box 4. Social security tax withheld $4,650 - Box 6. Medicare tax withheld $1,088 - Box 17. State income tax $2,250 Mrs. Anderson is not covered by her employers retirement plan. In addition, other arm's (non arm's) length transactions occurred between her and the employer: - Her employer bought her a shopping gift card in the value of $350. - While the market interest (short term federal) rate was 2.5% she was given a $100,000 one year loan to pay for her children's tuition costs at 3.5%. - During her office hours she had free access to the printing machine, coffee brewer and the vending machine. Mr. Anderson is a self-employed individual. Mrs. Anderson made a $1,500 contribution to a traditional IRA and a $2,000 contribution to a Roth IRA in 2022. Mr. Anderson decided against making a contribution to a traditional IRA. The Andersons received a $600 state income tax refund. They itemized in the prior year and elected to take the state income tax as a deduction. Andersons also received a $20 federal income tax refund. Form 1040, Schedule A: The Andersons made federal estimated tax payments of $2,000 for 2022. The Andersons incurred the following medical expenses during 2022: prescription drugs, S1,000; Doctor fees, $3,550; Clinical bills, $1,750; Meal during sickness, $1,000; transportation, $100; and eyeglasses, $700. In addition, Mr. Anderson, who is self-employed, paid $5,750 in premiums for health insurance coverage for himself and his family. The Andersons paid their 2021 real estate taxes of $1,810 due on July 1, 2022. In addition, they sold their residence on September 13, 2022. They allowed the buyer a credit equal to 70% of the estimated real estate taxes of $2,000 for 2022 . The real estate taxes on the new property they purchased on May 1, 2022, are nt payable until 2022. They sold their prior primary residence, but don't know if they have tax liabilities on it or not. Mr. and Mrs. Anderson paid $5,500 in deductible home mortgage interest to a bank. They also paid $3,000 in points when they purchased their new home. The Anderson Family: Family Tax Filing They paid the following personal interest in 2022: $600 to finance Mrs. Andersons car, and $400 in credit card interest charges and fees. The Andersons gave $1,500 in cash for charitable causes to organizations; all charities sent acknowledgments (email confirmations) of the contribution. Mrs Anderson purchased Amazon Christmas gift cards worth $500 for each of her children. Mrs. Anderson incurred employee business expenses in connection with her occupation as salesperson for the publishing company. On January 3, 2022, she purchased a new car that was used primarily for business reasons. The car cost $19,500, and she paid $500 in sales tax. During 2022, the car was driven a total of 20,000 miles by Mrs. Anderson. Of those miles, 16,600 were business related. Mrs. Anderson drove 1,250 miles while commuting (five-mile daily round trip commute), and 2,150 miles for personal purposes. Mrs. Anderson depreciates the car using a five-year MACRS recovery period, the 200% decliningbalance method, and the half-year convention. However, it should be noted that depreciation on the car is limited because of the listed property rules. Mrs. Andersons gasoline, oil and insurance expenses on the car amounted to $4,750. She paid $600 in interest on the installment loan incurred to purchase the car. She also paid $50 for business parking fees and $75 for a car rental while away from home. Mrs. Anderson elects to claim the actual automobile-related expenses. Mrs. Anderson elected not to claim any Code Sec. 179 deduction or additional bonus depreciation on the car in 2022. Mrs. Anderson incurred the following other business expenses: - Meals and entertainment, $1,500; - Airfare, $1333 - Gifts to potential clients, $150; and - Business Conference attendance, $150. Mrs. Anderson received $5,000 as a car expense reimbursement from her employer under a plan that required her to account for the expenses. The $5,000 was not reported on her Form W-2. Mrs. Anderson was not reimbursed for her other business expenses. The Andersons paid $500 for the preparation of their 2021 tax return (including $200 for the preparation of Schedule C, Profit or Loss from Business for Andy's furniture business), $50 for the rental of a safe deposit box where they stored their securities, and $350 for investment publications. During 2022, the Andersons received: - $500 in interest from the Heartland National Bank - and $150 as nominees from the Third National Savings and Loan. - They received $2,000 in interest from the Public Library facilities bonds program, issued by FairFax county, Virginia. They also received the following qualified dividends: - $1,400 from Walmart. (Board meeting date: August 1sl, Record date: September 1st, Payment date: November 3rd, Cash receipt date: January 5th,2022 ) - \$1,500 from Exxon, (Board meeting date: August 15ht, Record date: September 15th, Payment date: January 15th2022, Cash receipt date: January 25th,2022 ) - $250 from Fidelity Investments. (Board meeting date: December 12th, Record date: February 21st2022, Payment date: March 1st2022, Cash receipt date: March 1st,2022) In addition, the Andersons received $1,400 in non-qualified foreign corporation dividends from Suncor Energy and paid foreign taxes of $250 to various countries in connection with this investment. Form 1040, Schedule D: During 2022, the Andersons hold \& sold the following capital assets: (1) During 2022 they held Alphabet Inc. shares. They had been purchased on November 12,2010 for $2,500, plus $100 brokerage fees. (2) On November 5th2022,200 shares of A Inc. were sold for $5,000. They had been purchased on November 1st,2022 for $2,000, plus $50 trading fees. (3) On December 5th,10 shares of Netflix were sold for $6,803. They had been purchased on January 4th,2020 for $4,000 through the zero trading and commission fee app, Robinhood LLC. (4) On December 10th200 shares of Chime banking shares were sold for $5,000. They had been purchased on September 5, 2005 for $12,000. (5) On January 25th2022, a number of gold coins were sold for $4,000. The coins had been purchased (5) On January 25th2022, a number of gold coins were sold for $4,000. The coins had been purchased on October 15,2004 for $3,000, plus a $70 selling and transaction cost. Form 1040, Schedule E: Mr. and Mrs. Anderson own and rent a brick two-flat apartment building located at 12 West 5th Ave., Chicago, Illinois 60626. The apartment building is not used for personal purposes by either the Andersons or members of their family. Mr. Anderson actively participates in the operation of the building. They received biweekly cheques of $2,000 in 2022 . The tenant also promised to do the The Anderson Family: Family Tax Filing Federal Income Tax project Fall Term 2022 ACCT-43000 Individual Income Taxation Due: December 18th2022 Sina Rahimi apartment plumbing service, equivalent to $650. The parking was rented out separately to their neighbour, $200 per month. Their expenses are as follows: - cleaning and maintenance, $2,500; - mortgage interest, $4,000; - repairs, \$1050; - advertising, $50 - insurance, $5,000 for a 5 year contract starting July 1st2022 until June 30th2026. - real estate taxes, $1,250. The current depreciation figure, taken from the work papers (not reproduced) is $3,000. Form 2441 During 2022, their daughter, Ruth, attended two childcare centers. They were: Happy Day Care, 4210 W. Maple, Chicago, Illinois 60699 , whose identification number is 36-0987654; and Greenfields Day Care, 901 N. Ash, Chicago, Illinois 60699 , whose identification number is 36 1234567. The Andersons paid \$3,720 to Happy Day Care and \$1,860 to Greenfields Day Care. The Andersons did not receive employer-provided dependent care benefits. Business Income: Form 1040, Schedule C Mr. Anderson operated Interiors Unlimited, selling home furnishings at retail, as a sole proprietor during the entire year. The business address is 45 Boswell Blvd., Villa Park, Illinois 60181. His employer identification number is 36-3456789. The business code is 442200 . In order to clearly show business income, Mr. Anderson maintains an inventory at cost and he uses the accrual method of accounting for his sales and purchases. Total gross receipts of the business were $127,250 and returns and allowances amounted to $1,500. The business accounting records showed the following information: - Inventory at beginning of year (valued at cost) $35,000 - Merchandise purchased. $70,000 - Inventory at end of year .$22,000 - Truck expenses .$550 - Other interest . $300 - Rent (property) $7,800 Form 1040, Schedule F Mr. Anderson owned and operated a farm in Illinois. The Principal Agricultural Activity Code for this farm is 112111 , and the principal product raised is beef cattle. He utilizes the cash basis to report farm income and expenses. His books and records show the following information: The Anderson Family: Family Tax Filing Assume that his basis in the livestock sold during 2022 was $19,500. Form 8936 The family finally decided to buy an Electrical vehicle. They have two options: Form 8936 The family finally decided to buy an Electrical vehicle. They have two options: Tesla Model Y vs. Lucid Air Sedan. As their Tax consultant (and for Tax incentive eligibility) which one would you recommend and why? Choose the car make, model, VIN etc. And fill in the appropriate form. ASSIGNMENT: You are asked to: 1- Prepare and file the Anderson family's 2022 Tax Return, including Schedules A, B, C, D, E, and F and Forms 2106, and any other form which you think is appropriate. 2- Submit the online (paper) Tax return application 3- Illustrate and explain decisions and assumptions made regarding income inclusions, income types, rates, deductions, credits, Tax statutes etc. The Anderson Family: Family Tax Filing Federal Income Tax project Fall Term 2022 ACCT-43000 Individual Income Taxation Due: December 18th2022 Sina Rahimi The Andersons are one big happy family who are living happily ever after. But there is just one problem, they don't know how to do their taxes. They come to you as their Accounting savior and ask you to help them out with their tax return. Mr. Anderson is 66 and the Mrs. is 50 years old, both have good eyesight, and live with their three children, Eddie, Dennis and Ruth, at 789 N.Code Drive, Chicago, Illinois 60699, (312) 679-9999. Mrs. Anderson is a dual citizen, she has a Canadian passport but has not visited or resided over the last 10 years. Mr. Anderson wants to contribute $500 of his income tax for Election Campaign Fund purposes. Mrs. Anderson elects not to contribute. Eddie, is a junior in college and he is 20 years old. He worked during the summer and earned $4,000. Their other son, Dennis, is a 17 -year old high school student. He earned $3,600 during the summer and worked part-time during the remainder of the year. Neither son had any additional income. Their daughter, Ruth, is 6 years old and an elementary school student. She had \$ 10,000 earned and \$ 10,000 unearned income from an investment portfolio setup and ,managed for her by her parents during the year. In August, the Anderson's paid $6,000 in tuition for their son, Eddie, for the Fall semester. The Anderson's claim Mrs. Anderson's mother, Bonnie Taylor, as a dependent under a multiplesupport agreement. The total support of Mrs. Taylor is $6,000, received from the following three sources: (1) $3,000 from Mary, (2) $1,000 from another daughter, Annie Taylor, and (3) $2,000 in social security benefits. Mrs. Bonnie Taylor lived with the Andersons during all of 2022. Her social security number is 40044-0004. Annie Taylor provides the Andersons with a written, signed statement, that she will not claim her mother as a dependent in 2022. Annie Taylor lives at 1425S.62 nd Street, Chicago, IL 60699 , and her social security number is 500550005. General income and expenses During 2022, Mrs. Anderson was employed as a salesperson by a publishing company. Her Form W-2 for 2022 reports the following: - Box 1. Wages, tips and other compensation $75,000 - Box 2. Federal income tax withheld $4,950 - Box 4. Social security tax withheld $4,650 - Box 6. Medicare tax withheld $1,088 - Box 17. State income tax $2,250 Mrs. Anderson is not covered by her employers retirement plan. In addition, other arm's (non arm's) length transactions occurred between her and the employer: - Her employer bought her a shopping gift card in the value of $350. - While the market interest (short term federal) rate was 2.5% she was given a $100,000 one year loan to pay for her children's tuition costs at 3.5%. - During her office hours she had free access to the printing machine, coffee brewer and the vending machine. Mr. Anderson is a self-employed individual. Mrs. Anderson made a $1,500 contribution to a traditional IRA and a $2,000 contribution to a Roth IRA in 2022. Mr. Anderson decided against making a contribution to a traditional IRA. The Andersons received a $600 state income tax refund. They itemized in the prior year and elected to take the state income tax as a deduction. Andersons also received a $20 federal income tax refund. Form 1040, Schedule A: The Andersons made federal estimated tax payments of $2,000 for 2022. The Andersons incurred the following medical expenses during 2022: prescription drugs, S1,000; Doctor fees, $3,550; Clinical bills, $1,750; Meal during sickness, $1,000; transportation, $100; and eyeglasses, $700. In addition, Mr. Anderson, who is self-employed, paid $5,750 in premiums for health insurance coverage for himself and his family. The Andersons paid their 2021 real estate taxes of $1,810 due on July 1, 2022. In addition, they sold their residence on September 13, 2022. They allowed the buyer a credit equal to 70% of the estimated real estate taxes of $2,000 for 2022 . The real estate taxes on the new property they purchased on May 1, 2022, are nt payable until 2022. They sold their prior primary residence, but don't know if they have tax liabilities on it or not. Mr. and Mrs. Anderson paid $5,500 in deductible home mortgage interest to a bank. They also paid $3,000 in points when they purchased their new home. The Anderson Family: Family Tax Filing They paid the following personal interest in 2022: $600 to finance Mrs. Andersons car, and $400 in credit card interest charges and fees. The Andersons gave $1,500 in cash for charitable causes to organizations; all charities sent acknowledgments (email confirmations) of the contribution. Mrs Anderson purchased Amazon Christmas gift cards worth $500 for each of her children. Mrs. Anderson incurred employee business expenses in connection with her occupation as salesperson for the publishing company. On January 3, 2022, she purchased a new car that was used primarily for business reasons. The car cost $19,500, and she paid $500 in sales tax. During 2022, the car was driven a total of 20,000 miles by Mrs. Anderson. Of those miles, 16,600 were business related. Mrs. Anderson drove 1,250 miles while commuting (five-mile daily round trip commute), and 2,150 miles for personal purposes. Mrs. Anderson depreciates the car using a five-year MACRS recovery period, the 200% decliningbalance method, and the half-year convention. However, it should be noted that depreciation on the car is limited because of the listed property rules. Mrs. Andersons gasoline, oil and insurance expenses on the car amounted to $4,750. She paid $600 in interest on the installment loan incurred to purchase the car. She also paid $50 for business parking fees and $75 for a car rental while away from home. Mrs. Anderson elects to claim the actual automobile-related expenses. Mrs. Anderson elected not to claim any Code Sec. 179 deduction or additional bonus depreciation on the car in 2022. Mrs. Anderson incurred the following other business expenses: - Meals and entertainment, $1,500; - Airfare, $1333 - Gifts to potential clients, $150; and - Business Conference attendance, $150. Mrs. Anderson received $5,000 as a car expense reimbursement from her employer under a plan that required her to account for the expenses. The $5,000 was not reported on her Form W-2. Mrs. Anderson was not reimbursed for her other business expenses. The Andersons paid $500 for the preparation of their 2021 tax return (including $200 for the preparation of Schedule C, Profit or Loss from Business for Andy's furniture business), $50 for the rental of a safe deposit box where they stored their securities, and $350 for investment publications. During 2022, the Andersons received: - $500 in interest from the Heartland National Bank - and $150 as nominees from the Third National Savings and Loan. - They received $2,000 in interest from the Public Library facilities bonds program, issued by FairFax county, Virginia. They also received the following qualified dividends: - $1,400 from Walmart. (Board meeting date: August 1sl, Record date: September 1st, Payment date: November 3rd, Cash receipt date: January 5th,2022 ) - \$1,500 from Exxon, (Board meeting date: August 15ht, Record date: September 15th, Payment date: January 15th2022, Cash receipt date: January 25th,2022 ) - $250 from Fidelity Investments. (Board meeting date: December 12th, Record date: February 21st2022, Payment date: March 1st2022, Cash receipt date: March 1st,2022) In addition, the Andersons received $1,400 in non-qualified foreign corporation dividends from Suncor Energy and paid foreign taxes of $250 to various countries in connection with this investment. Form 1040, Schedule D: During 2022, the Andersons hold \& sold the following capital assets: (1) During 2022 they held Alphabet Inc. shares. They had been purchased on November 12,2010 for $2,500, plus $100 brokerage fees. (2) On November 5th2022,200 shares of A Inc. were sold for $5,000. They had been purchased on November 1st,2022 for $2,000, plus $50 trading fees. (3) On December 5th,10 shares of Netflix were sold for $6,803. They had been purchased on January 4th,2020 for $4,000 through the zero trading and commission fee app, Robinhood LLC. (4) On December 10th200 shares of Chime banking shares were sold for $5,000. They had been purchased on September 5, 2005 for $12,000. (5) On January 25th2022, a number of gold coins were sold for $4,000. The coins had been purchased (5) On January 25th2022, a number of gold coins were sold for $4,000. The coins had been purchased on October 15,2004 for $3,000, plus a $70 selling and transaction cost. Form 1040, Schedule E: Mr. and Mrs. Anderson own and rent a brick two-flat apartment building located at 12 West 5th Ave., Chicago, Illinois 60626. The apartment building is not used for personal purposes by either the Andersons or members of their family. Mr. Anderson actively participates in the operation of the building. They received biweekly cheques of $2,000 in 2022 . The tenant also promised to do the The Anderson Family: Family Tax Filing Federal Income Tax project Fall Term 2022 ACCT-43000 Individual Income Taxation Due: December 18th2022 Sina Rahimi apartment plumbing service, equivalent to $650. The parking was rented out separately to their neighbour, $200 per month. Their expenses are as follows: - cleaning and maintenance, $2,500; - mortgage interest, $4,000; - repairs, \$1050; - advertising, $50 - insurance, $5,000 for a 5 year contract starting July 1st2022 until June 30th2026. - real estate taxes, $1,250. The current depreciation figure, taken from the work papers (not reproduced) is $3,000. Form 2441 During 2022, their daughter, Ruth, attended two childcare centers. They were: Happy Day Care, 4210 W. Maple, Chicago, Illinois 60699 , whose identification number is 36-0987654; and Greenfields Day Care, 901 N. Ash, Chicago, Illinois 60699 , whose identification number is 36 1234567. The Andersons paid \$3,720 to Happy Day Care and \$1,860 to Greenfields Day Care. The Andersons did not receive employer-provided dependent care benefits. Business Income: Form 1040, Schedule C Mr. Anderson operated Interiors Unlimited, selling home furnishings at retail, as a sole proprietor during the entire year. The business address is 45 Boswell Blvd., Villa Park, Illinois 60181. His employer identification number is 36-3456789. The business code is 442200 . In order to clearly show business income, Mr. Anderson maintains an inventory at cost and he uses the accrual method of accounting for his sales and purchases. Total gross receipts of the business were $127,250 and returns and allowances amounted to $1,500. The business accounting records showed the following information: - Inventory at beginning of year (valued at cost) $35,000 - Merchandise purchased. $70,000 - Inventory at end of year .$22,000 - Truck expenses .$550 - Other interest . $300 - Rent (property) $7,800 Form 1040, Schedule F Mr. Anderson owned and operated a farm in Illinois. The Principal Agricultural Activity Code for this farm is 112111 , and the principal product raised is beef cattle. He utilizes the cash basis to report farm income and expenses. His books and records show the following information: The Anderson Family: Family Tax Filing Assume that his basis in the livestock sold during 2022 was $19,500. Form 8936 The family finally decided to buy an Electrical vehicle. They have two options: Form 8936 The family finally decided to buy an Electrical vehicle. They have two options: Tesla Model Y vs. Lucid Air Sedan. As their Tax consultant (and for Tax incentive eligibility) which one would you recommend and why? Choose the car make, model, VIN etc. And fill in the appropriate form. ASSIGNMENT: You are asked to: 1- Prepare and file the Anderson family's 2022 Tax Return, including Schedules A, B, C, D, E, and F and Forms 2106, and any other form which you think is appropriate. 2- Submit the online (paper) Tax return application 3- Illustrate and explain decisions and assumptions made regarding income inclusions, income types, rates, deductions, credits, Tax statutes etc