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Tom and Megan Brown are married with three children, all of whom live at home. The children are ages 1 8 , 1 5 ,
Tom and Megan Brown are married with three children, all of whom live at home. The children are ages
and
a
Tom is a loan officer at First Lubbock Bank and his annual salary is $
Federal withholding
was $
b
First Lubbock provides employees with free group
term life insurance equal to their annual gross
salary, up to $
and free health and accident insurance. Tom
s health and accident insurance
cost First Lubbock $
The bank
s cost of his group
term life insurance coverage is $
The
bank also provides whole life insurance for all officers. The cost of the whole life insurance is
$
c
The company also provides Tom with a membership to Lubbock Golf Club. The dues total $
per year.
d
In June, Tom was recognized for being with the bank for
years Tom received a watch worth $
and $
cash
e
Megan lost her job in January last year. She received unemployment compensation totaling $
f
In October, Tom was in a car accident. He received $
for pain and suffering and $
in
punitive damages.
g
The Brown
s two oldest children are from Megan
s first marriage.
The Browns claim all
children
as dependents.
Megan continues to receive alimony and child support. Alimony totaled $
and
child support totaled $
The divorce was finalized in
h
The Browns received interest income of $
from a savings account, $
from a US Treasury bond
and $
from bond issued by the City of Lubbock.
i
Also during the year, Megan received a cash gift of $
from her parents.
j
The couple sold their home during the year and purchased a new one. The couple had owned and
lived in the home for
years The house sold for $
and their basis in the property was
$
k
Tom won $
at a slot machine in Las Vegas.
l
In the prior tax year, Megan had New Mexico earnings so they had to file a state return. On their
federal tax return, the Browns took a $
deduction for state taxes paid. The Browns did itemize
their deductions that year
itemized deductions equaled
They received a $
refund from
state income tax paid.
m
Megan is a
partner in XYZ partnership. Her share of income was $
She received a
distribution of $
n
Tom purchased
shares of ABC stock at the beginning of the year for $
per share. The stock
is currently trading at $
per share. The shares did pay dividends of $
per share on
December
Income Tax Accounting
Acct
Unit
Tax Return Fact Pattern
o
In May, Megan filed suit against her former employer for wrongful termination. The judge awarded
her $
for lost wages.
p
During the year, the Browns paid $
for qualified medical expenses. Megan submits the receipts
to the medical insurance company and is reimbursed $
q
Deductions for AGI total $
Itemized deductions total $
The Browns qualify for $
in child tax and other dependent credits.
r
The taxpayers paid estimated tax payments of $
Tax Staff,
I have a project for you and your partner. I need you to review the prepared
Form
based on
the included information
fact pattern for our clients Tom and Megan Brown.
I know there are
errors
inaccuracies within the prepared return that I need you to identify. Once they
have been identified, I need you to make corrections and recalculate the correct tax due
refund owed.
Note: The tax liability
tax due
refund owed calculation is incorrect due to the
errors
inaccuracies within
the return; however, it is not included as one of the error
inaccuracies
Please note that you are required to work with a partner
unless you have received previous instructor
approval
on this return.
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