Write a letter to the Smith's discussing the results of their tax return, remind them of any deduction substantiation rules they need to  follow (receipts, mileage log, etc.), offer suggestions for future tax planning  (retirement planning, tax implications of impending birth of child, college  fund for new child, etc.).
You will need to include hyperlinks to the IRS.gov  tax publications that you recommend to your clients.
They received a $5,332 refund.



Comprehensive Tax Problem
Joseph and Diane Smith
1580 West Street
Chatham, VA  24531
 
Joseph and Diane are both 35 and have no dependents. If your clients receive a refund, they want the full amount refunded to them.  Diane is currently pregnant and will give birth during the next tax year.  
 
Joseph – SSN: 400-20-0100
Diane – SSN: 200-40-8000
 
Joseph works as a salesman and, at the company’s request, maintains an office in his home.  During the current year Joseph earned total compensation from his job of $125,000.  Following are the deductions from his pay.
          Federal Withholding   $20,000
          FICA                       $ 7,347
          Medicare                 $ 1,813
          Virginia Withholding   $ 4,000
 
Diane is a nurse and earned total compensation of $45,400.  Following are the deductions from her pay.
          Federal Withholding   $ 5,000
          FICA                       $ 2,815
          Medicare                 $    658
          Virginia Withholding   $ 2,000
 
Joseph and Diane have investments in stocks and have a saving account at a local bank.  During the current year they earned $1,450 in interest from the Bank of Virginia.  They received qualified stock dividends of $5,950 from GE stock.  They also traded in the stock market during the year and had the following results.
 
          LTCG            $ 4,900
          LTCL             $(3,200)
          STCG            $         0
          STCL             $(7,800)
They have no loss carryover from previous years
 
As a salesman, Joseph travels for his job and incurred the following expenses.  Joseph was reimbursed by his employer according to an accountable plan for $5,080 of the following expenses.   He received $3,560 reimbursement for hotel, tips, and laundry expenses and $1,520 for meals and entertainment expenses.  
 
          Hotel                                $4,200
          Meals                               $   820
          Entertainment of customers $1,080
          Tips                                 $   100
          Laundry and dry cleaning     $   150
               Total                                     $6,350
 
Joseph uses his personal vehicle for traveling for his job.  During the current year he drove the car a total of 38,000 and 32,000 of those miles were for business.  Joseph is reimbursed $0.30 per business mile by his company.  He also had business-related parking fees and tolls totaling $280.  Joseph uses the standard mileage method for deducting auto expenses.  Joseph’s reimbursement for business mileage is $9,600.  
 
Joseph incurred expenses for the business use of his home.  The amount Joseph can report on his Form 2106 Line 4 is $4,265.  Joseph did not receive any reimbursements for these expenses.  
 
Diane incurred the following business expenses in connection with her nursing job.
          Professional Dues               $450
          Professional Journal            $200
          Uniforms                          $350
 
The couple have the following additional expenses for the year
          Health Insurance (after-tax)          $ 4,400
          Doctor bills                                 $    470
          Real estate taxes (entire house)               $  2,200 (10% is allocated to the business)
          Personal property taxes                          $    400
          Mortgage Interest (entire house)    $15,600 (10%  is allocated to the business)
          Charitable contributions – cash                 $  9,000
          Charitable contributions – Stock
              GE stock owed 5 years:
                   FMV              $8,000
                   Adjusted basis   $2,000
          Tax preparation fees                    $     750