tax individual income tax return project 239342

Federal Tax I Fall 2012 Individual Income Tax Return Project You are a CPA in New Jersey and a client of yours asked for a meeting to discuss tax issues and to have you prepare their 2011 Individual Federal Income tax return (Prepare a tax return for Adam & Mary only…not the kids). The information you gathered is as follows: Personal & Family Information: Taxpayer: Adam Smith Spouse: Mary Smith Age 52 Age: 48 Occupation: Manager Occupation: Self Employed Architect The Smith’s have 4 children that they provide over 50% support for.All are US citizens and all live at home: Paul Single, age 25, Graduate school student, 2011 Gross income of $ 4,000 John Single age 20, Full time college student, 2011 Gross income of $ 6,200 George Single, age 16, High School student, 2011 interest income of $ 900 Ringo Single, age 13, Junior High school student, no income Income Information: Adam Smith – 2011 W-2 information: Taxable Salary $85,000 Federal Income Tax Withholdings $20,000 NJ State Income Tax Withholdings $2,800 Mary Smith – self employed (cash basis): Business Name:Mary Smith Designs Address:12 George Street New Brunswick, NJ Income & receipts: 2011 Billings to customers for services $ 235,000 2011 Payments received from customers $ 212,000 Expenses & disbursements: Advertising $4,000 Bus tickets for Mary to commute to office $1,250 Business liability insurance premiums paid $2,600 (policy period 7/1/11 – 6/30/12) Accounting fees $1,500 Office supplies $ 12,500 Office rent $ 26,400 Fine paid to City for failure to recycle paper $600 Rental of copy machine $1,800 Telephone & Utilities $2,000 Maintenance & office cleaning $400 Salary of office worker $ 48,000 Employer share of Payroll taxes for employee $3,800 Client meals and entertainment $1,200 Continuing education $2,150 Business dresses and attire $2,800 Interest income (Joint accounts of John & Mary): Wells Fargo Bank $ 1,600 US Treasury Note $800 Municipal Bond Interest – City of Newark $ 3,900 Dividend Income: Exxon Corporation (Stock owned for 5 years) $750 Microsoft (stock owned for 15 days) $200 Mary received a 10% stock dividend on her 200 shares of XYZ corporation stock.XYZ announced this pro rata stock dividend to all holders of its common stock on 5/1/11 when the stock was trading at $ 35 per share.She received the 20 new shares on 8/1/11 when the stock was trading for $ 30 per share. Rental Income: Adam & Mary own a plot of land in New Brunswick.They lease this lot to Quick Check, who uses the land as a parking lot for its customers.Quick Check paid the Smith’s $ 30,000 in rental income in 2011.The Smith’s paid $ 8,200 in real estate taxes, $ 2,150 in insurance, and $ 2,400 in maintenance costs. Property transactions: 1. On 6/30/2011 Mary sold 200 shares of Microsoft, receiving $ 5,900 ($ 6,000 sales price less a $ 100 brokerage commission).Mary purchased these 200 shares on 6/15/2011 for $ 6,000. 2. On 9/15/2011 Adam sold 140 shares of Google Stock for $ 72,000 before a brokerage commission of $ 250.Adam inherited this stock on 3/12/2011 due to the death of his Uncle.The value of Google stock on the date of death was $ 500 per share.Adam’s Uncle purchased the 140 shares on 7/12/2004 for $ 40,000. 3. Mary sold 300 shares of BP inc on 1/3/2011 to a neighbor for $12,900 (its fair market value).Mary purchased the shares on 5/18/2008 for 13,250. 4. Mary sold 50 shares of Apple stock on 9/15/2011 for $ 15,000.Her broker did not charge a commission.Mary received this stock as a gift from her sister on 5/1/2008.The value of the stock on 5/1/2008 was $ 12,000.Mary’s sister paid $ 10,000 for the stock on 4/10/2005. 5. On 10/15/11 Mary sold some personal jewelry that her mother gave to her.Mary sold a bracelet for $ 2,000.Mary’s mother purchased the bracelet at a flea market for $ 2,500 on 11/20/08.The bracelet was appraised at $ 3,000 on 12/24/08 when the bracelet was given to Mary. Other Taxpayer Income Items: 1. Adam received $ 50 for Jury duty services during 2011. 2. Mary received a cash gift from her mother of $ 15,000. 3. Besides the Google stock that Adam inherited (see 2 above), he also received $ 100,000 cash on 3/15/2011 as beneficiary to a life insurance policy owned by his uncle naming Adam as beneficiary. The Smiths also gave you the following information pertaining to 2011: Adam contributed $ 300 per month to his traditional IRA in 2011, Mary contributed $ 5,000 to her traditional IRA on 11/12/2011.Both Adam and Mary are not covered by qualified retirement plans through employers. Mary paid $ 6,000 per quarter ($ 24,000 total) in 2011 Federal Estimated Tax Payments – all paid in 2011. Unreimbursed medical & dental expenses paid in 2011 totaled $ 3,660 NJ State Income taxes paid in on 4/15/11 for 2010 tax return totaled $ 400 Real estate taxes paid totaled $7,800 Condo maintenance fees paid in 2011 totaled $ 2,400 Mortgage Interest paid on their condo totaled $ 6,200 Interest paid on auto loans totaled $ 680 Credit card interest paid was $ 130 Gifts to charities for 2011 totaled $ 2,300 Gifts to family members totaled $ 3,600 Gifts to Political parties totaled $ 1,000 Gifts to an unemployed member of Mary’s church totaled $ 1,200 Adam’s gambling losses totaled $ 800 in 2011. Tax preparation fees paid during 2011 totaled $ 600 ASSIGNMENT INSTRUCTIONS: 1. Prepare the 2011 Federal Individual Income Tax return for Adam & Mary Smith, based on the information supplied above.You may use tax software, OR you may manually prepare the return using the correct IRS forms for 2011.Forms are available for download at irs.gov.You will need the following forms: ? Form 1040 (page 1&2) ? Schedule A (Itemized Deductions) ? Schedule B (Interest & Dividends) ? Schedule C (Profit or Loss from Business) ? Schedule D (Capital Gains & Losses) – You may put totals for all Short term items on line 1, and Long term items on Line 8.No need to use lines 2, 3, 9 & 10… ? Schedule 8949 (or a schedule of short term and long term capital gains and losses) to support entries on Schedule D. ? Schedule E (Supplemental Income and Loss – Rental Real Estate) ? Schedule SE (Self Employment Tax) Be sure to follow IRS Form Instructions, especially when calculating the tax on 1040, page 2, line 44. 2. Please understand your tax return submission MUST be your own original work, This IS NOT a group project. 3. You MUST, sign and date the return as preparer on page 2 of form 1040.Also print your name in that section. 4.You must staple the following to the front of your return – NO EXCEPTIONS: ————————————————————————————————————————————————————————— I certify that the attached Income Tax Return for Adam and Mary Smith is my own original work. I attest that I have not cheated on this assignment, that I have read the Rutgers Business School Honor Code located at: (http://academicintegrity.rutgers.edu/integrity.shtml) RBS Honor Code pledge: “I pledge, on my honor, that I have neither received nor given any unauthorized assistance on this assignment.” Signed: ___________________________ Date: ____________ Print Name: ________________________

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