Group 4: Comprehensive Problems 1. David And Darlene Jasper ✓ Solved

Group 4 Comprehensive Problems 1 David and Darlene Jasper have One Chi

Group 4: Comprehensive Problems 1 .David and Darlene Jasper have One Chi

Complete the Jaspers’ federal tax return for 2019. Use Form 1040, Schedule 1, Schedule 3, Schedule A, Schedule B, Form 2441, and Form 8880, as needed. Make realistic assumptions about any missing data.

Complete Steve’s federal tax return for 2019. Use Form 1040, Schedule 3, Form 2441, Child Tax Credit Worksheet, Form 8812, EITC Worksheet A, and Schedule EIC.

Sample Paper For Above instruction

Introduction

Tax preparation remains a critical aspect of financial planning for individuals and families. Accurate completion of tax returns like the IRS Form 1040, along with relevant schedules and forms, ensures compliance with tax laws and optimizes tax liabilities or refunds. This paper provides comprehensive solutions to two complex tax scenarios for the year 2019 involving the Jaspers' family and Steve Jackson, illustrating the application of tax rules, credits, deductions, and income calculations.

Case Study 1: The Jaspers’ 2019 Federal Tax Return

Background Information

The Jaspers, David and Darlene, reside in Los Angeles, California. Their income sources, deductions, and personal information are stipulated as follows:

  • David’s employment income from Apple: $26,600 with $800 federal withholding and $1,050 state withholding.
  • Darlene’s employment income from Rose Company: $25,500 with $1,050 federal and $1,000 state withholdings.
  • Interest income from Pine Tree Savings and Loan: $1,900.
  • Other financial data include interest payments on mortgage ($11,312), property taxes ($1,300), state income taxes paid ($1,045), medical and dental expenses ($6,175), medical insurance premiums ($675), income tax return preparation fee ($1,016), and union dues ($225).
  • Additional contributions include an IRA contribution of $1,000 for David.
  • Their son, Sam, aged 6, qualifies as a dependent, with the relevant identification details available; however, specific Social Security numbers are not provided here.
  • Their expenses also include general sales taxes paid of $1,016 and a charitable contribution to church supported by written acknowledgment.

Tax Preparation Approach

The comprehensive tax return involves calculating gross income, adjustments, deductions, and credits, and accurately reporting expenses and income sources. Key forms include:

  • Form 1040: Main form for income and tax calculation.
  • Schedule A: Itemized deductions like mortgage interest, taxes, medical expenses, and charitable contributions.
  • Schedule B: Reporting interest income.
  • Form 2441: Child and dependent care expenses for Sam, including daycare costs.
  • Form 8880: Retirement savings contributions credit (if applicable).

Calculations and Deductions

Adjusted gross income (AGI) considers employment income plus interest income. Schedule A deductions include mortgage interest ($11,312), property taxes ($1,300), medical expenses exceeding 7.5% AGI threshold, and charitable contributions. The standard deduction for 2019 for married filing jointly is $24,400, which may be advantageous compared to itemized deductions.

The child, Sam, qualifies for the Child Tax Credit, which reduces tax liability. The expenses related to daycare, claimed via Form 2441, are factored into the calculation of the Child and Dependent Care Credit. The medical expenses are deductible only to the extent they exceed the applicable AGI threshold.

Final Tax Calculation

Applying the above data and calculations, the Jaspers’ tax liability can be computed, resulting in either a refund or amount owed. This process underscores the importance of meticulously gathering all receipts, statements, and supporting documents, and accurately inputting data into the various forms and schedules.

Case Study 2: Steve Jackson’s 2019 Federal Tax Return

Background Information

  • Steve Jackson, single, residing at 3215 Pacific Dr., Apt. B., Pacific Beach, CA 92109.
  • Age: 52; Social Security number is not shown here for privacy.
  • Income: $21,900 earnings from Ocean View Hotel as a laundry attendant, with $219 federal and $100 state income tax withheld.
  • Family: Janet, 11, from a previous marriage, is his dependent, with Steve providing all her support.
  • Other dependents: His brother Michael, disabled, with care provided by HomeAid at a cost of $1,000.

Tax Preparation Approach

The primary forms involved include:

  • Form 1040: Main tax return form.
  • Schedule 3: Additional credits and payments.
  • Form 2441: Child and dependent care expenses, including payments to HomeAid.
  • Child Tax Credit Worksheet: Calculate credits for Janet.
  • Form 8812: Additional child tax credit calculations if applicable.
  • Schedule EIC: Earned Income Credit, given Steve’s income and dependent status.

Calculations and Deductions

Stepping through the income, adjusted gross income, and allowable deductions, the focus is on qualifying for the Child Tax Credit and Earned Income Credit considering income thresholds. The payments made to HomeAid are potentially deductible as child care expenses, using the limits set by the IRS.

Because Steve has a dependent child supported entirely by him, he qualifies for the Child Tax Credit and possibly additional credits. The disability of Michael introduces considerations for specific taxpayer eligibility criteria and may impact the computation of credits.

Final Tax Calculation

Accurately determining Steve’s tax liability involves applying the appropriate credits, deductions, and income calculations, ensuring compliance with IRS rules. Adjustments for the child and dependent care expenses significantly reduce the tax owed or increase refund prospects.

Conclusion

Both scenarios highlight the importance of diligent data collection, understanding applicable tax credits and deductions, and proper use of tax schedules and forms. Accurate tax filing minimizes liability and ensures compliance with federal laws. Tax professionals and taxpayers alike benefit from comprehensive understanding and meticulous record-keeping to navigate the complexities of tax law effectively.

References

  • Internal Revenue Service. (2019). Publication 17 - Your Federal Income Tax for Individuals.
  • Internal Revenue Service. (2019). Instructions for Form 1040.
  • Internal Revenue Service. (2019). Schedule A (Form 1040) - Itemized Deductions.
  • Internal Revenue Service. (2019). Schedule B (Form 1040) - Interest and Ordinary Dividends.
  • Internal Revenue Service. (2019). Form 2441 - Child and Dependent Care Expenses.
  • Internal Revenue Service. (2019). Form 8880 - Credit for Qualified Retirement Savings Contributions.
  • Internal Revenue Service. (2019). Child Tax Credit and Credit for Other Dependents.
  • IRS Publication 503 - Child and Dependent Care Expenses.
  • IRS Publication 972 - Child Tax Credit.
  • Tax Foundation. (2020). Understanding the U.S. Tax System and Policies.

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