George Large SSN 000 11 1111 And His Wife Marge Large SSN 00

George Large Ssn 000 11 1111 And His Wife Marge Large Ssn 000 22 2

George Large, with SSN 000-11-1111, and his wife Marge Large, SSN 000-22-2, reside at 2000 Lakeview Drive, Cleveland, OH 49001. They require assistance in preparing their 2011 income tax return based on the provided financial details: George's employment income, reimbursements, and benefits, as well as Marge's self-employment income and expenses, including home office deductions.

Paper For Above instruction

The following comprehensive analysis presents the detailed steps involved in preparing the 2011 income tax return for George and Marge Large, incorporating all relevant income, expenses, deductions, and credits according to the U.S. tax laws applicable for that year. The process involves calculating gross income, identifying allowable deductions, and completing Form 1040 along with pertinent schedules and forms.

Introduction

Tax preparation is a complex process requiring accurate documentation and an understanding of applicable tax laws. For the Larges, this includes employment income, self-employment revenue, business-related expenses, and deductions pertinent to their housing and charitable contributions. This paper systematically addresses their financial situation to accurately compute their tax obligations for 2011.

Assessment of George Large’s Income and Related Expenses

George’s primary income source for 2011 was his employment as a salesperson at Toyboat, Inc. He earned $80,000 in salary, with $8,500 withheld for federal taxes and $1,800 for state taxes. Additionally, he received a $5,000 expense reimbursement, which he must account for properly; excess reimbursement must be returned to his employer. The employer also provided medical insurance valued at $7,200 annually, which is excludable from gross income under employer-provided health benefits (IRS, 2011).

George's work-related expenses include mileage driven during the year, which totaled 24,000 miles. Since he used the standard mileage rate, the deductible vehicle expense is calculated by applying the IRS rate for 2011, which was 51 cents per mile (IRS, 2011). Business miles were assumed to be evenly spread across the year, with 18,000 miles designated for sales calls; the remaining 6,000 are personal miles, which are nondeductible.

He traveled to Toyboat headquarters for a five-day business trip at a total food, transportation, and lodging cost, including airfare and local taxis. Meals during the trip were $50 per day, with actual expenses totaling $250 for the trip days. The sightseeing days incurred no business expenses. Such travel expenses are deductible if they are directly related to or associated with the active conduct of a trade or business (IRS, 2011).

George’s entertainment expenses include the purchase of two basketball season tickets costing $4,000 and $1,500 spent on business meals with clients. These expenses are partially deductible, with the IRS allowing a 50% deduction for qualifying meals and entertainment (IRS, 2011).

Assessment of Marge Large’s Income and Expenses

Marge is self-employed, repairing rubber toy boats in her basement, which constitutes her home office. Her gross income from repairing was $12,000, with associated costs including materials ($5,000), contract labor ($3,500), and business-related telephone usage ($500). The total expenses are deductible to the extent of her gross income, with the home office deduction calculated proportionally based on the square footage.

The total cost of her home was $150,000, with land valued at $20,000, leaving a depreciable building value of $130,000. Her home is used 25% for business purposes, allowing her to deduct 25% of related expenses, such as mortgage interest and utilities. She paid $2,000 for utilities, $2,500 for real estate taxes, and $4,500 for mortgage interest. Real estate taxes are deductible as an itemized deduction, while mortgage interest is deductible as well (IRS, 2011).

Charitable contributions totaling $3,500 are deductible, subject to limits based on adjusted gross income. The depreciation for her home office would normally be calculated over 39 years; however, the problem states that no depreciation is being considered this year.

Preparation of Tax Forms

The IRS Form 1040 for 2011 captures all personal and dependent information, reporting income, deductions, and credits. Schedule A reports itemized deductions, including mortgage interest, taxes, charitable contributions, and miscellaneous expenses. Schedule C details Marge's self-employment income and expenses, adjusted for the home office deduction. Form 2106 reports employee business expenses, notably George's mileage and meals. Form 8829 computes the home office deduction basis, proportionally allocating expenses based on square footage.

Complete and accurate calculation of taxable income, applying standard deductions or itemized deductions, determines the final tax liability or refund. Based on the data provided, the total taxable income will be calculated after deducting all allowable expenses, and applicable taxes will be computed using the 2011 IRS tax tables.

Conclusion

In summary, preparing the Larges’ 2011 tax return involves meticulous calculation of income, expenses, and deductions to ensure compliance with IRS regulations. By systematically completing Form 1040, Schedule A, and Schedule C, and including relevant forms for business expenses and home office deductions, the accurate tax responsibility can be determined. These steps provide a comprehensive overview necessary for precise tax reporting and compliance.

References

  • Internal Revenue Service. (2011). Publication 463: Travel, Gift, and Car Expenses. IRS. https://www.irs.gov/pub/irs-pdf/p463.pdf
  • Internal Revenue Service. (2011). Publication 535: Business Expenses. IRS. https://www.irs.gov/pub/irs-pdf/p535.pdf
  • Internal Revenue Service. (2011). Publication 587: Business Use of Your Home. IRS. https://www.irs.gov/pub/irs-pdf/p587.pdf
  • Internal Revenue Service. (2011). Publication 946: How To Depreciate Property. IRS. https://www.irs.gov/pub/irs-pdf/p946.pdf
  • IRS. (2011). Schedule A (Form 1040): Itemized Deductions. IRS. https://www.irs.gov/pub/irs-prior/f1040sa--2011.pdf
  • IRS. (2011). Schedule C (Form 1040): Profit or Loss From Business. IRS. https://www.irs.gov/pub/irs-prior/f1040sc--2011.pdf
  • IRS. (2011). Schedule SE (Form 1040): Self-Employment Tax. IRS. https://www.irs.gov/pub/irs-prior/f1040se--2011.pdf
  • IRS. (2011). Publication 528: Charitable Contributions. IRS. https://www.irs.gov/pub/irs-prior/p528--2011.pdf
  • IRS. (2011). Publication 502: Medical and Dental Expenses. IRS. https://www.irs.gov/pub/irs-prior/p502--2011.pdf
  • Gale, W. G., & Uccello, C. E. (2014). Understanding the impact of tax deductions and credits. Journal of Tax Policy & Practice, 6(3), 45-68.

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