Question

Coastline Community College

Acct C103, Individual Taxation

Summer 2018

Tax Year 2017 Form 1040 Tax Return Project

Based upon Bill and Susan Minor’s information below, complete a Form 1040 for Tax Year 2017.

You will receive 10 points for each correct figure you list on Lines 7, 8a, 12, 21, 37, 40, 42, 43, 63, and 64.Email your completed Form 1040 to me by August 15, 2018.

-In 2017, Bill and Susan Minor had W-2 Wages totaling $99,000, Federal Tax Withheld of $9,000, and State Tax Withheld of $4,000.

-In 2017, Bill and Susan both had health insurance for the entire year through their employers which met the Minimum Essential Coverage requirements under the Affordable Care Act.

-Bill is an auditor at a hotel and Susan is a high school business teacher.

-Bill and Susan will file Married Filing Joint in 2017.

-In 2017, Bill received interest income of $250 from his 1^st Bank of the Third Best Account.He also cashed in a Certificate of Deposit early and the bank assessed a $25 penalty for early withdrawal of savings.

-In 2017, Bill and Susan spent $3,700 making repairs on their home.The repairs included work on their garage door, replacement of the kitchen flooring, and refurbishing their electrical breaker box.

-The Minor’s took the Standard Deduction on their Form 1040 Tax Return in 2016.They don’t know if they can take the Standard Deduction or not in 2017.They want to take the largest deduction they can in 2017, whether that be the Standard Deduction OR the Itemized Deduction.

-In 2017, Susan received a $6,000 inheritance from the estate of her great-great-grandmother.

-Susan and Bill are both 50 years old and neither one is blind or disabled.

-Their grown children are Porsche and Carmen.The kids are out of the house and have their own jobs and apartments.Porsche, who made $96,000 in 2017, is a poor money manager and Bill gave her $3,800 in 2017.

-In 2017, Susan sent her Mom $1,500 to help her Mom buy medication and medical devices.Susan does not and cannot claim her Mom as a Dependency Exemption.

-The Minor’s took fencing lessons in 2017 that cost $2,400.They said these lessons help them “unwind” after a busy workday. Susan liked fencing so much she bought a foil, epee, and saber costing $2,200.A day after buying the fencing equipment, a thief broke into Susan’s fencing locker at the fencing center and stole the foil and saber worth $1,800.Susan filed a police report, had no insurance on the foil and saber, and the property was not recovered.

-In 2017, Susan paid $850 in union dues to the El Camino Real Teachers, Educators, and Mentors Union.

-Bill owed the IRS $4,600 from his 2015 Federal Income Tax Return.He is paying $212 a month on this debt.In 2017, Bill calculated he paid $2,344 in tax and $200 in interest to the IRS.

-Susan helped her friend start a business.The friend plans on paying Susan $4,950 for all the work

she did.This payment will be made in December 2018.

-Susan decided in 2017 to become a self-employed tutor/teacher.She taught 2 kids business planning and

was paid $400.Her ONLY business expenses as a self-employed tutor/teacher were $50 for business cards and $75 for paper, pencils, and supplies.Susan also tells you she paid “Mystic Maria the World’s   7^th Best and Inexpensive Fortune Teller” $540 to predict Susan’s success.Maria reported that Susan would be wildly successful in her tutoring/teaching business and would gross approximately $500 in 2018.

-In 2017, Bill and Susan owned a rental property and calculated Total Rental Real Estate Income on Line 26, Schedule E, of $6,820.

-In 2017, Bill won a $470 cash prize for a contest he entered.Bill said he did NOT get a W-2 or a Form 1099 for the $470 he won.

-The Minor’s received a State Tax Refund of $630 in April 2017 from the State of California.This refund was for Tax Year 2016.

-Bill stated he contributed $2,000 to his Roth IRA in 2017.

-Bill and Susan are members of their local Elks Lodge, which is a non-profit organization, involved in charitable work, and a Qualifying Charitable Organization.The Minor’s pay $140 a year for dues and their only activity with the Elks is going to eat Sunday breakfast, attending dances, and buying drinks at the bar.

-The Minor’s paid $9,850 in Home Mortgage Interest in 2017.They paid a property tax bill of $3,700 in 2017.

-In 2017, Bill drove his personal auto 3,900 miles as a volunteer meal deliverer for Let’s Feed All of the Hungry, a Qualifying Charitable Organization.   

-In 2017, Bill donated 150 hours of time to Goodwill, a Qualifying Charitable Organization. He figures his time is worth $40 an hour.

-Susan has AB- blood type. When the Red Cross Bloodmobile stops by her work, Susan donated blood. In 2017, she donated 6 pints of blood. The local hospital charges $300 a pint for patients who receive AB- Blood.

-In 2017, Bill incurred $2,900 in gambling losses at Lost Wages Casino. In 2017, he won $4,100 in the California Super Big Lotto.

-Bill and Susan calculated they had 6,000 commuting miles to their W-2 jobs in 2017.

-The Minor’s donated $1,600 to Let’s Feed the Whales and Save the Children Fund in 2017. Bill’s friend Dante said the fund was is a scam. Bill went on the IRS Website and found that the fund was a Qualifying Charitable Organization.

- In 2017, Susan sold stock she had in The Coffee Grind Company. Susan’s friend, Alma Cabrera, an Enrolled Agent, and calculated that Susan had a Short-Term Capital Gain of $5,300 from the sale of the stock.

-In 2017, Susan decided to run for the city council. She paid a $255 filing fee and borrowed $15,000 from the local bank to finance her campaign. Susan lost the election.

-In 2017, Bill and Susan paid homeowner’s association dues of $1,400 on their personal residence.

-In 2017, Bill paid a dental bill of $7,500 for removal of 16 of his bad teeth and the filling of 16 of his other teeth.

In 2017, Bill paid $580 for DMV registration fees for his 2002 Chevy S-10 Pickup Truck and Susan’s 2007 Yaris. Bill has determined these DMV fees are deductible on a Schedule A.

In 2017, Susan’s sister, who is a well-known, successful, and highly paid entertainer, gave Susan a Tesla Model S Automobile with a Fair Market Value of $80,000. Susan uses the car to commute to her job and paid $900 in DMV registration fees that she has determined are deductible on a Schedule A.

In 2017, Bill was ticketed for driving his car without a valid registration and no proof of insurance. He paid a fine of $350, which included court costs.

-In 2017, Susan found a gold and diamond ring near hear house. She turned it into the police department and after 30 days, the police gave the property back to Susan since no one claimed it. In November 2017, Susan had the ring appraised and found out the fair market value of this found property was $6,200.

-In 2017, Susan paid a researcher $300 to trace her family history. The researcher reported to Susan she may be the rightful owner of a small farm in Germany worth $1,000,000. Susan has made plans to see if she owns the land, she has set aside $2,500 in a savings account for a title and legal search, and she will hire an attorney in December 2018 to determine her ownership rights.

Answer 1

i) Joint Income tax return-

In form 1040 there is option to file the joint return. Married couple may choose to file the return jointly. In such a case the income tax details of individual and his /her spouse will be submitted jointly. Thus the income, deductions , credits etc of the individual and his /her spouse will be added and will be shown together i.e the aggregate value will be shown in one return. In these cases both are responsible for each other's income tax.

Steps to be followed while filling return -

As the Kings follow cash basis, the income of both Mr and Mrs. Kings, which have been earned in current year as well as received during current and also the income which relates to another year which have been received during the current year will be added. (As they follow cash basis).

Then the necessary adjustments will be made for all deductions.

ii)Contribution to Presidential Election Campaign Fund -

It is voluntary contribution. Under this , the interested individual willing to contribute will have to check the box . The amount of contribution is $3 for individual and in case of joint return it's $6. KIngs may choose not to contribute as it is a voluntary contribution.

iv) Refund of tax liability-

Refund is available where a person has paid excess tax than he is actually liable for. However, in case where a person has not paid any tax then also he may get a efund on the basis of his credits.