Fill Out A 1040 Schedules A B C D Schedules 123

Fill Out A 1040 Schedules A B C D Schedules 123 With The Foll

Prepare an individual tax return, including Form 1040, Schedules A, B, C, D, 1, 2, and 3, using the provided detailed financial information for Wilbur and Ethel Farnstrom. Attach work papers and calculations to support the entries. The data includes income from employment, business activities, interest, investment transactions, and various deductible expenses such as medical, dental, charitable contributions, and union dues. Consider tax impacts of stock sales, IRA contributions, and the licensed CPA’s fees in your computations. The goal is to accurately compute taxable income and tax liability, applying appropriate deductions and credits, and preparing the complete federal tax return with all supporting schedules and documentation.

Paper For Above instruction

The Farnstrom family’s tax situation involves multiple sources of income, expenses, and investments, making it a comprehensive case study for preparing a detailed federal income tax return. Their combined financial activities include employment wages, business income from a home-based transcription service, interest income, capital transactions, and itemized deductions, all of which must be carefully documented and reported across the appropriate schedules and forms.

The primary income source for Wilbur is his employment as a bank manager, earning $5,400 monthly, with $380 withheld in federal taxes from each paycheck. Ethel’s part-time employment as a receptionist adds additional wage income, with $190 withheld monthly in federal taxes. These amounts will be reported on Form 1040 and Schedule B for interest income. Their combined income from wages and interest is reported and summed to determine gross income.

Additionally, Ethel's home-based transcription business generated $12,500 in income, which must be reported on Schedule C. The related expenses include home office deductions such as mortgage interest ($11,800), property taxes ($5,800), utilities ($184/month), business telephone ($94/month), office supplies ($65/month), and depreciation ($68/month). These expenses contribute to calculating net business income or loss, which will be transferred to Schedule 1 and ultimately to Form 1040.

The couple’s investment activities involve stock transactions. They purchased 700 shares of LOL Inc. at $19 per share (total $13,300) and sold them for $16,500, resulting in a capital loss of $2,800, which must be reported on Schedule D. They also sold 500 shares to Ethel’s sister at a loss of $10 per share, totaling a $5,000 loss, which could be considered a related-party transaction and may have specific tax implications.

Interest income of $201 from savings accounts is reported on Schedule B. They also paid CPA fees for tax preparation at a rate of $250 per hour for five hours, totaling $1,250, which qualifies as a deductible tax preparation expense, subject to certain limitations.

Contributions to traditional IRAs—$300/month for Wilbur and $175/month for Ethel—totaling $5,700—are deductible, subject to income limits. Charitable contributions, including weekly donations of $85 and mileage for travel related to charity totaling 1,610 miles, are itemized deductions, with mileage deductions calculated at IRS standard rates.

Medical and dental expenses total $13,395, comprising $3,767 dental, $9,628 medical, and eyeglasses costing $440. These are deductible expenses exceeding the IRS medical expense threshold (7.5% of AGI). Ethel’s prescription costs and Wilbur’s travel expenses for specialist visits are also relevant; travel miles are deductible at IRS rates for charitable trips.

Union dues are calculated at 1.6% of Wilbur’s gross pay and 1.3% of Ethel’s gross pay. These dues are deductible. The couple also incurs storage fees for a safe deposit box — $28/month, which is deductible if securely related to necessary preservation of tax records and investments.

Finally, their total tax liability calculation includes applying the standard or itemized deductions, credits, and adjusting taxable income for IRA contributions and capital losses. They paid estimated quarterly taxes on their business income, which can be credited against their final tax bill, and the computed tax will be reported on the appropriate lines in Form 1040.

In conclusion, this detailed case involves compiling all sources of income, deductible expenses, investments, and contributions, filling out the corresponding schedules systematically, and ensuring compliance with IRS rules for each deduction, credit, and reporting requirement. The final return will sum all entries to determine total taxable income, total tax owed, and any refund or amount due, properly documented with work papers and calculations.

References

  • Internal Revenue Service. (2023). IRS Publication 529, Miscellaneous Deductions. https://www.irs.gov/publications/p529
  • Internal Revenue Service. (2023). IRS Publication 550, Investment Income and Expenses. https://www.irs.gov/publications/p550
  • Internal Revenue Service. (2023). Publication 946, How to Depreciate Property. https://www.irs.gov/publications/p946
  • IRS. (2023). IRS Schedule C (Form 1040): Profit or Loss from Business. https://www.irs.gov/forms-pubs/about-schedule-c
  • IRS. (2023). Schedule D (Form 1040): Capital Gains and Losses. https://www.irs.gov/forms-pubs/about-schedule-d
  • IRS. (2023). Publication 463, Travel, Gift, and Car Expenses. https://www.irs.gov/publications/p463
  • IRS. (2023). Publication 502, Medical and Dental Expenses. https://www.irs.gov/publications/p502
  • IRS. (2023). Publication 526, Charitable Contributions. https://www.irs.gov/publications/p526
  • United States Department of the Treasury. (2023). Tax Year 2023 Standard Deduction and Additional Deduction. https://www.irs.gov/publications/p15
  • Brooks, C. (2020). Financial accounting & reporting: a comprehensive guide. Wiley.

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