Write a tax memo on information provided below

Blake's Blues reported business meals and entertainment. In the client memo, remind Blake of the changes in tax laws related to entertainment (not deductible). Also, inform him of the 50% deductibility limit on meals. Inform Blake that the country club and Admiral Club dues are deemed entertainment and are not deductible. Additionally, point out to the client that certain fines and politician contributions are not deductible as they are deemed against public policy. The refund of state income taxes is generally included in income if the TP reported itemized deductions as opposed to taking the standard deduction in the previous tax year. As the notes indicated, the client itemized the previous year and deducted state income taxes withheld as well as estimated state income taxes paid. Therefore, the refund of state income taxes is includable in this year's income. Refer to the Tax Benefit Rule to determine how much, or if all, of the refund is required to be reported in income. Hint: the entire amount must be included in gross income. Speaking of itemized deductions, be aware of the new deductibility limits on (SALT) state and local income taxes. The maximum amount of taxes allowed as an itemized deduction is limited to $10,000. The $10,000 deductible limit on taxes and the increased standard deduction may change the couple's need to itemize. I am aware that they have charitable deductions and substantial medical expenses due to their daughter's illness. Both of these types of deductions may boost their itemized deductions in excess of the standard deduction. Keep in mind, medical expenses are subject to 10% of AGI floor. If their itemized deductions do not exceed the standard deduction, they are limited to the standard deduction, the greater amount of the two. I would include this information in the client memo. This fact may impact their tax planning in future years. Unfortunately, Miranda's employer does not provide a retirement plan of any type. She may be eligible to contribute to a deductible IRA, subject to AGI limits. The $6,000 investment interest expense is from borrowing funds to invest in the tax-exempt bonds. Remember, investment interest expense generated from tax exempt investments is not tax deductible. Deductible interest expense is limited to investment interest income. Excess interest expense not deducted due to the limitation of interest income can be carried forward (indefinitely) to future years. The life insurance proceeds from Granny's policy was a lump-sum death benefit upon Granny's death. The policy was not considered an investment. They elected to receive the entire death benefit as a lump sum amount. The couple did not receive any interest income. Inform the couple that the new tax laws eliminated the miscellaneous itemized deductions subject to 2% of AGI. Therefore, investment expenses (except investment interest expense) are no longer deductible. This limitation also dictates that Miranda's unreimbursed employee business expenses are no longer deductible. From a tax planning perspective, the couple should reconsider these expenditures. The client memo should be an overview highlighting significant items, changes, etc. Here are a few suggestions: 1. The memo should have a brief introduction and salutation. Something personal and benign and not controversial. 2. The memo should not be a detail, item by item, discussion. I would provide a summary of their tax situation by highlighting significant subtotals such as, income, AGI, taxable income, total tax, taxes paid, and any refund or payment due. A small table would set this information off nicely. Hopefully, with proper tax planning they do not owe additional taxes. I would incorporate the suggestions from the points listed above in the body of this document. The client memo should be professional and well written. Judgment should be used as to the level of technical information (I would recommend not quoting IRC sections) imparted as well as information that would be vital to the client. 4. Lastly, remind them of their required estimated payments (amounts and schedule). Since you have this year's AGI and tax liability You can tell them how much their quarterly payments will be for next year by using the last year's safe harbor of 100% or 110% if AGI exceeds $150,000. Amount 85.000 3.000 Enter---> $ 275,000 C C enter data enter data Entr---> 12000 1.700 Gross Receipts: Expenses: Advertising Insurance Office Expenses orrie Rent Repairs & Maint Travel Meals -- ->nler here Wages Employer PR taxes Employee SEP IRA contribution Auto expenses (business miles, parking. 157482 6.000 Calculated Calculated Wages Compensation Interest Income Tat- empt Orinary Dividends Qualified dividends Taxable round of state taxes Alimony received Business income or loss) Capital gain or loss) Other gains or (bosses) IRA distributions Pansion and annuities Rental real estate, royalties, tal Farmincome or loss Unemployment compensation Social Security Oher income Gross Income Entr----> 5,000 3,500 2.000 10,000 12.000 3,000 5.000 2,500 52.000 3,978 10,400 13,140 117,518 Enter---> Enter -> Total Expenses Business income Loss) S 157.482 $157,482 Scheduk SE (short) Net profitor boss) Sch.C NetSelf-employed Income Social secuity-cap $132,900 x .124 Medicare Net SE earning x 029 Total Self-employment tax 16,480 4,218 20.697 Educator Expenses Reservist performing artista Health savings deduction Moviny Expenses Deductible portion of SE tax Self-employed SEP, Simple and qualified Self-employed health insurance Penalty on early withdrawal of savings Alimony paid 10349 Calculated IRA deduction oc determine dedecey Studentboan interest deduction Here Deductible Total deductions for AGI AGI 600 AGI Itemized Deductions Qualified Business Deduction Taxable income 33849 231333 231333 100.171 17.305 108,530 14404 Calculated Calculated Calculated Calculated Calculated Calculated Calculated Calculated Calculated 6,800 25,000 33,024 9,891 Deductible in excess of 10%of AGI Tax SchedukA: Medical Mileage (add miles x mileage rate) Meals Prescriptions doctor bills/medical&dental premiums Costof medical equipment Total medical Tas: State Income Tax (withholding & Estimated) Real Estates Personal Proprety Total Taxes Charity: Mileage (add miles x mileage rate) Black tie dinner tickets Pubic Charity Total Charity 1.500 17,000 700 32,800 10.000 1,200 Calculated 280 2,000 30,000 4,000 ALT Min Investment Interest Tax Foreign tax credit Credit for houscold and dependent care Education credits Retirement savings contribution credit Child tax credit Residential energy credit Oher credits Total Credits Subtotal Self-employment tax-FICA Unreported SS and Medicare tex Addtl tax on TRAs, other qualified plans Household employment taxes First-time home buyer credit payment Health care individual responsibility Other taxes Total Tax Federal Income Tax withheld Estimated tax payments EIC Calculated Calculated Calculatod Calculated Calculated Calculated 5200 9204 20.697 Misc Other: No longer deductible 48,000 48,000 Interest: Home Mortgage/HELOC Investment interest Total Temired Deductions 100.171 Pweds Bass Gain. LOS) Shortor Long Term 29.901 12.000 50.000 Calculatod enter C Capital Gains/(Losses): Schedule D Collectible Stock Transactions LTCL carryover NetCGACL) NA-Tech Income enfer (negative) Calculated Amountpaid wex lension Total payments 62.000 Calculated 32.099 If Total Payments exceeds Tool Tax Refund If Total Tax exceeds Total Payments: Tax Due 90,530 Taxed at preferential rate for both regular and AMT. Calculated Calculated Alternate Minimum Tax (AMT) Taxable income exclude dividends & LTCG Preference items other State Income Tax Real Personal Property Tax Refund of state income taxes 10,000 (1,700) Qualified dividends Capital Gain (LTCG) Ordinary income/STCG Total Income 12,000 6.000 90,530 108,530 1,800 900 1 1634 14,334 15% Prefrate Calculated 15% Prefrake Calculated .. . AMTI Exemption (add exemption amount) ALT Min Tax Base Tax Rate Tonative Min Tax Regular Tax - Ordinary income fin 88,830 111.700 phase-out if AMTI Over $1,020,500 (22,870) 026 Over $194 800 excess bixed at 28% (5,946) 11,634 State Income Tax /Real/Personal Property Tax Refund of state income taxes 10,000 (1,700) ualified dividends apital Gains (LTCG) rdinary income/STCG otal Income 12,000 6,000 90,530 108,530 Tax 1,800 15% Pref rate Calculated 900 15% Pref rate Calculated 11,634 $ 275,000 C C enter data enter data Entr---> 12000 1.700 Gross Receipts: Expenses: Advertising Insurance Office Expenses orrie Rent Repairs & Maint Travel Meals -- ->nler here Wages Employer PR taxes Employee SEP IRA contribution Auto expenses (business miles, parking. 157482 6.000 Calculated Calculated Wages Compensation Interest Income Tat- empt Orinary Dividends Qualified dividends Taxable round of state taxes Alimony received Business income or loss) Capital gain or loss) Other gains or (bosses) IRA distributions Pansion and annuities Rental real estate, royalties, tal Farmincome or loss Unemployment compensation Social Security Oher income Gross Income Entr----> 5,000 3,500 2.000 10,000 12.000 3,000 5.000 2,500 52.000 3,978 10,400 13,140 117,518 Enter---> Enter -> Total Expenses Business income Loss) S 157.482 $157,482 Scheduk SE (short) Net profitor boss) Sch.C NetSelf-employed Income Social secuity-cap $132,900 x .124 Medicare Net SE earning x 029 Total Self-employment tax 16,480 4,218 20.697 Educator Expenses Reservist performing artista Health savings deduction Moviny Expenses Deductible portion of SE tax Self-employed SEP, Simple and qualified Self-employed health insurance Penalty on early withdrawal of savings Alimony paid 10349 Calculated IRA deduction oc determine dedecey Studentboan interest deduction Here Deductible Total deductions for AGI AGI 600 AGI Itemized Deductions Qualified Business Deduction Taxable income 33849 231333 231333 100.171 17.305 108,530 14404 Calculated Calculated Calculated Calculated Calculated Calculated Calculated Calculated Calculated 6,800 25,000 33,024 9,891 Deductible in excess of 10%of AGI Tax SchedukA: Medical Mileage (add miles x mileage rate) Meals Prescriptions doctor bills/medical&dental premiums Costof medical equipment Total medical Tas: State Income Tax (withholding & Estimated) Real Estates Personal Proprety Total Taxes Charity: Mileage (add miles x mileage rate) Black tie dinner tickets Pubic Charity Total Charity 1.500 17,000 700 32,800 10.000 1,200 Calculated 280 2,000 30,000 4,000 ALT Min Investment Interest Tax Foreign tax credit Credit for houscold and dependent care Education credits Retirement savings contribution credit Child tax credit Residential energy credit Oher credits Total Credits Subtotal Self-employment tax-FICA Unreported SS and Medicare tex Addtl tax on TRAs, other qualified plans Household employment taxes First-time home buyer credit payment Health care individual responsibility Other taxes Total Tax Federal Income Tax withheld Estimated tax payments EIC Calculated Calculated Calculatod Calculated Calculated Calculated 5200 9204 20.697 Misc Other: No longer deductible 48,000 48,000 Interest: Home Mortgage/HELOC Investment interest Total Temired Deductions 100.171 Pweds Bass Gain. LOS) Shortor Long Term 29.901 12.000 50.000 Calculatod enter C Capital Gains/(Losses): Schedule D Collectible Stock Transactions LTCL carryover NetCGACL) NA-Tech Income enfer (negative) Calculated Amountpaid wex lension Total payments 62.000 Calculated 32.099 If Total Payments exceeds Tool Tax Refund If Total Tax exceeds Total Payments: Tax Due 90,530 Taxed at preferential rate for both regular and AMT. Calculated Calculated Alternate Minimum Tax (AMT) Taxable income exclude dividends & LTCG Preference items other State Income Tax Real Personal Property Tax Refund of state income taxes 10,000 (1,700) Qualified dividends Capital Gain (LTCG) Ordinary income/STCG Total Income 12,000 6.000 90,530 108,530 1,800 900 1 1634 14,334 15% Prefrate Calculated 15% Prefrake Calculated .. . AMTI Exemption (add exemption amount) ALT Min Tax Base Tax Rate Tonative Min Tax Regular Tax - Ordinary income fin 88,830 111.700 phase-out if AMTI Over $1,020,500 (22,870) 026 Over $194 800 excess bixed at 28% (5,946) 11,634 State Income Tax /Real/Personal Property Tax Refund of state income taxes 10,000 (1,700) ualified dividends apital Gains (LTCG) rdinary income/STCG otal Income 12,000 6,000 90,530 108,530 Tax 1,800 15% Pref rate Calculated 900 15% Pref rate Calculated 11,634