Annie Clark lives at 1428 Bleecker Street, New York, NY 10280. Annie, an interior designer, has tried to make life work in Burlington, VT, for the past 10 years, but it has become too difficult to find a job flexible enough to accommodate her family obligations. As such, she found a job in New York, NY, last year to get a fresh start. Annie is a single mother with three kids-Fern, Steven, and Vincent-between the ages of 10 and 24. Annie's husband, Cam, passed away in 2012, which is the main reason she experienced a change in circumstances. While she and her husband always filed a joint income tax return, she is now confused about which filing status is the most beneficial to her. She does know, however, that she would like to receive any tax refund via check. Also, she has informed you that she would like to contribute to the Presidential Election Campaign.
Annie's family information is listed in the below table:
|
Age |
SSN |
| Annie |
42 |
123-45-5678 |
| Fern |
24 |
234-56-7890 |
| Steven |
14 |
345-67-8901 |
| Vincent |
10 |
456-78-9012 |
Annie's oldest child, Fern, is completing her graduate work at New York University (EIN 36-2167817). New York University is located at 50 West 4th Street, New York, NY 10012. Fern finished her undergraduate work at UC Berkeley in 2012, and this is her fifth year as a full time student pursuing higher education. Fern works 10 hours per week at New York University to help support herself. She earned $2,250 (gross) last year and prepared her own taxes. Annie paid for the majority of Fern's support, providing $12,700 for various expenses (tuition, books, clothing, rent, food, medical bills).
Fern's main expenses were the ones she paid to the university for books ($1,000) and tuition ($7,500).
Fern received a Form 1098-T from New York University for the year.
Vincent is in daycare each weekday after school, so Annie is able to work her full-time job. Vincent's care cost $4,500 last year. The daycare, Strange Mercy (EIN 99-6781234), is located at 123 3rd Street, New York, NY 10012.
When Annie moved from Vermont to New York for her job, she had the following expenditures:
Meals on the road $180
Storage of personal effects $3,142
Preliminary trip to find house $1,100
Also, she drove her car the 350 miles from Burlington to Manhattan when she moved. Her new place of employment is exactly 318 miles from her previous residence.
Annie had the following W-2s from 2014:
| Company |
Gross |
Federal Tax Withholding |
State Tax Withholding |
| Interiors-R-Us, Inc |
$48,000 |
$850 |
$625 |
| Aesthetic Marvels, LLC |
$2,885 |
$250 |
$200 |
Both companies properly withheld payroll taxes. Further, between the two companies, Annie's entire family qualified for minimum essential health insurance coverage for the full year.
At the beginning of 2013, Annie began her own interior design business for local businesses and homeowners. This side business has allowed her to earn the extra money she needs to help support Fern, who is away at graduate school. Annie's business is on the cash method, and she did not have any employees or independent contractors in 2014. Annie's design business earned $6,500 of gross receipts last year, and the business spent $430 on custom design software and $1,250 on sample materials.
In addition to her earned income, Annie received the following income during 2014:
Interest income-Wells Fargo $510
Interest income-Shutterfly bond $3,000
Interest income-City of New York Municipal Bond $1,500
Vermont state income tax refund $325
Cash gift from her sister $11,000
Life Insurance Payment (Stratton Oakmont) $140,000
The state tax refund was from taxes Annie paid in a previous year. Annie has always taken itemized deductions, which included all state taxes in previous years.
Annie has no interests in foreign banking account or foreign trusts.
Here are Annie's remaining expenses for 2014:
Contribution to University of Vermont $3,000
Contribution to New York University $500
Contribution to the St. Vincent De Paul Society $500
Contribution to the American Cancer Society $1,000
Real property taxes (main residence) $950
Vehicle registration fee based upon age of vehicle $200
Main residence mortgage interest (Form 1098) $6,845
Ophthalmologist (unreimbursed) $1,500
Physicians (unreimbursed) $475
Pharmacy prescriptions (unreimbursed) $255
Your assignment is to complete and turn in the following items:
(1) Your client's U.S. Individual Income Tax Return. This problem, found on D2L, requires you to complete the 2014 Form 1040 along with all supporting forms and schedules. For purposes of this assignment, you do not need to attach any Forms W-2.
(2) A letter to your client, written and formatted in a professional manner, which explains the positions you took on the return. You should include the things you think a client would need to know in order to understand the results of the return and anything the client might need to know for next year. To aid in professionalism, create a firm name and add your company name/logo to your letterhead.
(3) An Excel spreadsheet, formatted in a professional manner (including letterhead), containing any computations you had to undertake to derive the numbers you used on the return.