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Resources read/review the following resources for this activity: Textbook: Chapter 6, 7 File (.pdf): Week 4 Presentation Chapter 6 (in Course Documents) File (.pdf): Week 4 Presentation Chapter 6 (in Course Documents) Link: IRS Introduction You will continue to utilize the IRS website to search for, complete, and save appropriate forms to your computer. Instructions Review the scenario below and determine which IRS tax form is required to complete the task. Visit the IRS website and use the Search field to locate the form, or visit the Forms and Pub area. Please note that the design of the website is subject to change, so use your critical thinking and research skills to navigate the site if needed.

For purposes of this assignment, complete the tax return but ignore attaching the W-2, to the front page of Form 1040. If required information is missing, use reasonable assumptions to fill in the gaps.

Sample Paper For Above instruction

Tax Filing Scenario and Preparation: Complete Form 1040 for Sarah Hamblin

In this comprehensive tax preparation assignment, we focus on accurately completing Form 1040 for Sarah Hamblin, considering her unique financial circumstances for the tax year. Using the provided scenario, we analyze her income, deductions, and credits, ensuring compliance with IRS regulations and maximizing her refundable or non-refundable credits.

Understanding Sarah Hamblin’s Tax Situation

Sarah Hamblin's tax context involves various income sources, deductions, and factors influencing her filing requirements. She is a single filer, having been divorced in March of the tax year, with custody of her minor daughter, Elizabeth. Her income includes wages, interest, and miscellaneous income, while her deductions and credits stem from her personal circumstances. An accurate assessment of these elements is essential for completing her 1040 accurately and efficiently.

Step 1: Identifying Income Sources

Sarah earned $45,000 from her W-2 wages, with $6,950 withheld in federal income taxes. She received $400 interest from a U.S. Treasury Bond, which is taxable. Other interest income from municipal bonds ($250) is tax-exempt at the federal level, and the amount earned from the bank account ($165) is taxable. Her unemployment benefits totaled $1,250, which are taxable and must be included.

Additionally, Sarah received $16,000 in alimony, which, following post-2018 tax law changes, is not taxable for divorces finalized after December 31, 2018. Since she was divorced on March 1, the alimony received is tax-exempt, but it must be reported for informational purposes.

The $8,500 gift from her father is not taxable income for her. The proceeds from life insurance on her mother's death ($45,000) are not taxable income. The winnings of 10 Broadway tickets valued at $200 each ($2,000 total) are considered taxable income, and the fair market value should be included.

Step 2: Determining Deductions and Credits

Sarah's only itemized deductions are limited, with no detailed deductions noted apart from the nominal costs for copies and any applicable standard deduction. She prefers to take the standard deduction, which for 2023 would be $13,850 for single filers, but it may vary based on current IRS tables.

Her employment benefits include a group-term life insurance valued at $50,000 coverage, with a cost to the employer of $150, which is not taxable. Access to the company photocopy machine is a fringe benefit with minimal value and is not taxable.

As Sarah has custody of Elizabeth and pays child support, she can claim the dependent exemption and potentially earned child tax credits. However, because Kevin is permitted to claim the dependency exemption (per the divorce decree) and it's his turn to claim Elizabeth, Sarah should file the necessary form (such as Form 8332) to release her claim if she wants to claim the child exemption or credits herself. The key point is that the dependency status is primarily handled through the divorce decree and IRS rules, with clear rules on who can claim who based on custody and agreement.

Step 3: Completing the Appropriate IRS Form

Given the income and circumstances, Sarah’s primary IRS tax form is Form 1040. She does not need to attach Schedule C unless she has self-employment income. Since she has income from a partnership, she will need Schedule K-1 from the S-corp (BDF) showing her share of income, which should be reflected on Schedule E. Her share of BDF's $22,000 income should be included on Schedule E, along with her 50% ownership.

She is also required to report the taxable winnings ($2,000) as other income. She should also account for the unearned interest income, unemployment benefits, and any applicable credits such as the Child Tax Credit if eligible.

Step 4: Completing the Form

Using tax preparation software or manually, she will input her wages, interest income, unemployment benefits, her share of partnership income, and taxable winnings. She reports her withholding of $6,950 and confirms her filing status as Single (since her divorce is final). The standard deduction is claimed unless she itemizes. She will also verify her eligibility for the Child Tax Credit based on her daughter Elizabeth's age, residency, and dependency status.

Step 5: Final Review and Submission

After entering all details accurately, the form calculates her tax liability. Since she has excess withholding ($6,950), she is eligible for a refund. She prefers the refund via check, which can be specified during e-filing or in mailing instructions.

Once completed, the form is saved, downloaded, and submitted electronically or by mail, ensuring all relevant forms (if necessary) are included. Although the W-2 is not attached in this scenario, all other relevant information is entered into the appropriate fields on Form 1040.

References

• Internal Revenue Service (IRS). (2023). IRS Publication 17: Your Federal Income Tax. IRS.gov
• Internal Revenue Service. (2023). Schedule 1 (Form 1040): Additional Income and Adjustments to Income. IRS.gov
• Internal Revenue Service. (2023). Schedule C (Form 1040): Profit or Loss from Business. IRS.gov
• Tax Foundation. (2023). Standard Deduction. TaxFoundation.org
• Gale, S. (2022). Federal Income Taxation: Principles, Practice, and Policy. Cengage Learning.
• IRS. (2023). Publication 501: Dependents, Standard Deduction, and Filing Information. IRS.gov
• Raphael, D. (2021). Tax Planning and Compliance. Routledge.
• National Tax Journal. (2022). Taxation of Employee Fringe Benefits. NationalTaxJournal.org
• H&R Block. (2023). Understanding Form 1040 and related schedules. HRBlock.com
• Smith, J. (2020). Personal Income Taxation. Pearson Education.

Through this process, we ensure each income source is appropriately reported, deductions are optimized, and credits are maximized based on Sarah's eligibility, resulting in an accurate and compliant tax return.