Use the following information to prepare the various schedules/forms for Susan and Martin that are indicated on the class schedule of assignments. You will also use this information (and the information from the various schedules that you will have prepared) to prepare a federal form 1040 for Susan and Martin for 2014. Be sure to include all necessary forms and schedules to complete the tax return even if they were not prepared for the earlier individual assignments. Also, please put all forms for your completed Form 1040 in the proper order per the IRS attachment instructions. You may obtain the necessary forms and instructions from the IRS website: www.irs.gov which has a forms and publications tab.
Special instructions for your initial submission of Schedule A:
**Note: these instructions only apply to the schedule that will be submitted before the final return is due.
For purposes of the initial Schedule A, use $100,000 as the Adjusted Gross Income amount. (For the final Schedule you will use your computer AGI amount, so you will need to revise the Schedule A to reflect the computed AGI before you turn it in with your final tax return.)
Special instructions for your initial submission of Schedule C:
**Note: these instructions only apply to the schedule that will be submitted before the final return is due.
For purposes of the initial Schedule C, use $1,000 as the depreciation amount. (For the final Schedule C you will use your computer depreciation amount, so you will need to revise the Schedule C to reflect the computed depreciation before you turn it in with your final tax return.)
Any questions, post to the discussion forum for this project and e-mail me that you have posted a question to the discussion forum.
Martin Parks, born June 15, 1958, Social Security number 359-45-6789, is a self-employed business consultant. His gross income for 2014 was $200,500. In 2014, he paid estimated taxes of $48,000. His wife, Susan, born October 29, 1965, Social Security number 248-59-8765, is a Registered Nurse working for a large hospital. Her W-2 earnings were $99,200. She had $21,650 withheld in federal tax.
Martin and Susan's son, Jason, born December 28, 1991, Social Security number 385-68-4321, graduated from the University of Washington in May of 2014 but still lives at home. His W-2 earnings were $20,572; he had $2,580 withheld in federal taxes. He saved almost his entire net pay from his earnings to pay for graduate school at the University of Iowa, which he hopes to attend beginning in Fall 2015.
Their daughter, Jennifer, born May 25, 1997, Social Security number 484-56-7654, is in high school and had income of $9,000 from a modeling job. Her parents insist that she deposit 90% of her earnings in an investment account for her future.
Susan's mother, Helen Sharpe, born July 4, 1943, Social Security number 364-56-7896, has lived with the family since 2013, except for eleven weeks in 2014, when she was convalescing in a nursing home from a hip fracture. She receives $12,890 from Social Security. Helen also receives a taxable pension, reported as $7,500 on her 1099-R. Helen saves most of her income, which she invests in deferred annuities, which will be payable to Jason and Jennifer in the event of her death.
Martin has a few business expenses, which he paid in 2014. (He uses the cash method of accounting.) They include:
$4,100 on office supplies.
$248 for professional journals related to business
$1,350 for work he subcontracted to Smith & Company (Employer Identification Number 38-123456), 305 S.W. 36th Avenue, Gainesville, Florida, as an independent contractor/nonemployee. (Martin intends to file any necessary paperwork re this payment.)
$2,460 (a $205 monthly flat rate) for his cell phone, which is used 83% for business.
$1,400 a year for an Internet connection that he uses daily in his business and is available for use on the other computers in the house.
$426 for long distance business phone calls placed on his home phone.
$3,300 for various tickets to football and basketball games that he took his clients to. He kept contemporaneous records and business was discussed before, during or after each game.
$4,750 for country club dues. He entertains clients at the club and his business use is approximately 35% of the total use by the family. He also spent $3,600 for golf at the club with clients (business was discussed each time and he has records). Business meals at the club totaled $5, 780. He kept contemporaneous records and business was discussed, before, during or after each business meal.
Martin also incurred the following business expenses to attend several business conferences during the tax year. All conferences were in the United States.
Airfare $4,240
Hotel 1,900
Meals 4,350
Transportation 530
Tips 50
Conference fees 2,000
He uses one 11' x 10' room of the house as his only office (the total square footage of his house is 2,820). He occasionally lets Jennifer and her friends watch TV in the room when he's not home. Jason also reads or works on his creative writing in this room. In addition, the Parks use the room as a guest bedroom when relatives come to visit. The family purchased the home and lot on August 3, 2012 for $350,000 ($138,000 was allocable to the lot) There are 5 bedrooms and 3 bathrooms. Some of the expenses related to this room (not including real estate taxes, mortgage interest and depreciation) include
Utilities (total for the house) 4,700
Insurance (total for the house) 1,550
Maid service (total for the house) 1,300
Painting of his office 400
In 2012 Martin decided to update his office and on September 17, 2014 Martin purchased the following assets for use in his business. (He disposed of some of the assets he had been using in his office. These assets, as well as the assets he kept, had been purchased a number of years ago and were either expensed or completely depreciated before this year.) All the recently purchased assets are used 100% for business. Because he anticipates his income increasing substantially next year, he does not wish to expense any of the purchases nor claim any additional first-year depreciation he might be eligible for.
File Cabinet 2,480
Bookcases 4,750
Computer 4,800
Printer/Copier 2,030
Martin has carefully kept a log of his 9,833 miles spent driving to clients and returning home each day. He visits only one client on any given day. He drives a 2009 Cadillac STS, which he purchased on July 7, 2009 for $56,000. He drove 4,247 miles for strictly personal purposes during the year. He kept no gas, maintenance or any other auto-expense receipts.
Susan completed her MBA degree in 2014, having decided that the advanced degree would improve her work skills, as well as increase her marketability. She started the program in Fall 2012 following a promotion to nursing supervisor in June 2012. For 2014, she fully paid the tuition of $12,590 and books and supplies of $1,280.
Susan also subscribes to the Wall Street Journal ($145) and 2 medical journals ($515). She feels they all help her improve her skills at work and make her a better employee.
Susan likes to bake and make jams and jellies in her spare time. She had gross receipts of $7,250 from this activity for 2014. The cost of the goods sold was 2,783; other miscellaneous expenses totaled $985. This is the first year that Susan has attempted to sell her baked goods, jams and jellies. Since she feels she was successful, she plans to continue this activity into the future as a part-time business.
In May of 2014, Martin and Susan took out a home equity loan of $100,000. Of that sum, they spent $42,045 on a new Mercedes-Benz C 300 for Susan, for which they also paid $3,994 in sales tax. They used $22,000 to pay Helen's nursing-home and doctors' bills. They paid $1,819 in interest on the home equity loan.
Other information:
Martin and Susan earned taxable interest of $1,387 from First National Bank.
Susan had $501 in interest from an interest-bearing checking account at Chase Bank.
Martin had $385 in interest from an interest-bearing checking account at Second National Bank.
Martin received $5,740 in interest from U.S. Treasury Bonds.
Susan received $4,780 in interest from State of Georgia bonds.
Susan received $2,400 in ordinary dividends (of which 2,400 were qualifying dividends) from General Electric stock she held individually
Susan and Martin received $85 in ordinary dividends ($55 in qualifying and $30 in non-qualifying dividends) from Ford stock they owned jointly
Jason received $212 in interest from an interest-bearing checking account at PDQ Bank.
Jennifer received $1,360 in ordinary (1,200 in qualifying dividends and 160 in non-qualifying dividends) from her investment account at TD Ameritrade. These dividends were reinvested in the account.
Martin received $2,440 in ordinary (2,000 in qualifying and 440 in non-qualifying) dividends from Intel stock he held individually.
They paid $3,599 in real estate taxes and $11,615 in interest on their original mortgage.
They made charitable contributions of $16,850 in cash and have receipts. They also gave 3 boxes of old clothes and household items to the Salvation Army, 1010 4th Ave. S., Seattle, Washington. (They had purchased these items for $1,000 at various times and their thrift shop worth at the time of the donation on February 4, 2014 was $425.) Martin also donated 2 hours of consulting services, for which he normally charges $400, to Seattle Yacht Club Junior Sailing, a 501(c)(3) charitable organization, to be auctioned off in its annual fundraising event. The winning bid on these services was $150.
Martin and Susan and their children had $4,794 of medical expenses, $1,520 of vision expenses and $3,400 of dental expenses that were not covered by insurance. They also spent $160 on over the counter medicines and $250 on vitamins and supplements during 2014. (The family's insurance is provided by Susan's employer as a part of her fringe benefit package. The value of the insurance premiums for 2014 is $14,500)
The Parks family lives in Washington and has no state or local income tax payments.
Their address is 2900 South Court Street, Seattle, Washington 98144; it is located in King County.
The Parks had a garage sale this year and made $3,382. They sold old clothes, old children's toys, used furniture, and other used household goods.
Martin received a $25,000 gift from his parents during the year.
Susan's Great Uncle Thomas Stevens died on July 10, 2014 and she received $10,000 as a beneficiary from a life insurance policy her great uncle had purchased.
During 2014, Susan and Martin had the following stock sales:
|
Stock
|
# Shares sold
|
|
Date Sold
|
Amount Realized
|
|
PepsiCo
|
200
|
|
12/31/2014
|
$13,386
|
|
Ford
|
400
|
|
12/31/2014
|
$4,552
|
|
Intel
|
500
|
|
2/24//2014
|
$13,025
|
|
Apple
|
500
|
|
11/20/2014
|
$285,455
|
Susan had purchased 200 shares of PepsiCo on 2/27/2009 for $9,828. They had jointly purchased 200 shares of Ford on 10/20/2009 for $1,766 and 300 shares of Ford on 3/20/2014 for $4,017. Martin had purchased 500 shares of Intel on 4/18/2013 for $10,015. Susan had inherited the 500 shares of Apple from her Great Uncle Thomas's estate. The Apple stock was valued at $621.70 per share as of her great uncle's date of death on 7/10/2014. (Thomas had purchased the Apple stock on March 12, 1990 for $4,200)