masters level tax return
Jack and Judith Aollinger have hired you to prepare their 2018 federal income tax return. Jack is a self-employed artist with a studio at the Aollinger’s home, address: 1234 Main St., Key West, FL 33040. Jack has provided the spreadsheet titled “Artist Studio” for his business in the “Client Organizer Aollinger” attachment. Jack properly accounted for all art income in his bookkeeping system. As you help the Aollingers with their taxes, use tax methods that minimize taxable income. Jack and Judith’s Social Security numbers (SSN) and date of birth (DOB) are as follows: • Jack: SSN 500-00-1003; DOB 6/27/1963 • Judith: SSN 543-21-0986; DOB 9/18/1970 The Aollingers have three children: • Janey: SSN 345-67-8901; DOB 7/1/2000 • Johnny: SSN 234-56-7890; DOB 2/4/2008 • Jeremy: SSN 456-78-9012; DOB 9/30/2012 Judith works full time for Imelda Company, an architectural firm and S corporation. She owns 20% of the company and her basis in stock is zero. Imelda Company’s tax ID is 12-3456789 and is located at 4801 South Commercial, Key West, FL 33040. Judith’s W-2 for 2018 listed her earnings as $78,000 in wages, of which $19,500 was withheld for federal income tax, $4,836 for Social Security tax, and $1,131 for Medicare tax. She also received a K-1 from the company for 2018. The K-1 lists the following items: • Line 1: Ordinary business income: $35,567 • Line 11: Section 179 deduction: $9,000 • Line 12 A: Charitable contributions: $450 • Line 15 A: Post-1986 depreciation adjustment: $9,791 • Line 16 C: Nondeductible expenses: $560 Janey is a full-time student at a local college, Strime Institute. Strime Institute’s EIN is 12-3458888 and the address is 1 Florida Orange Lane, Sunshine, FL 33040. Janey is a dependent of her parents, so she received a Form 1098-T with a Box 2 amount of $4,800. Jeremy goes to a day care after school at Ms. Sophia Garcia’s home located at 123 Balmy Drive, Key West, FL 33040. Her SSN is 541-77-7777. The Aollingers paid Ms. Garcia $4,500 in 2018. The couple also paid their son Johnny $2,000 to watch Jeremy while school was out during the summer. Judith’s mother, Mary Renault, lived with the family until November 2018. Mary’s income was a $112 monthly pension and $660 in Social Security benefits, after deductions for full Medicare health insurance coverage. Her SSN is 123-12-4567, and her DOB is June 25, 1932. Mary’s social security benefits were deposited directly to a savings account, which she did not spend. Mary spent her pension income as she chose and did not reimburse Judith for any of the costs associated with her stay. Judith paid more than 50% of Mary’s support for the year. Judith’s employee health insurance plan covered her and the three children. The total cost for insurance was $13,000 for the year. During 2018, Judith paid $3,400 in medical expenses through her health savings account (HSA). Jack enrolled in a Health Insurance Marketplace high-deductible health insurance plan and paid $1,385 per month from January 2018 through August 2018. Jack’s 1095-A reflects a marketplace identifier of 500001003FL, his marketplace assigned policy number is 500001003FLJ and his policy issuer’s name is Alliah. He also received an advance payment of premium tax credit in the amount of $1,454 per month from January to August. When he signed up through the Marketplace, Jack underestimated his income and therefore received too large of a subsidy from January 2018 through August 2018. On October 1, 2018, Jack changed to a private high-deductible health insurance plan that covered him for the rest of the year. This private plan cost $1,385 per month for October, November, and December 2018, but it was not listed in his bookkeeping. The couple rents out a former home at 3456 Abbey Road, Key West, FL 33040. They purchased the house on November 30, 2003, and lived in it until March 20, 2015, when they began renting the property. The property was rented for all of 2018 with a total income of $14,400. When the Aollingers purchased the house and land in 2013, they paid $175,000. They believe the value of the land at that time was $40,000. The home is 1,330 square feet. The mortgage interest is $5,850, and real estate taxes are $3,200 for the year. The current family home was purchased on March 21, 2015, for $320,000 for the house and land combined. They believe the land was worth $90,000 at that time. The home is 2,850 square feet with a sunroom Jack uses as his studio. The sunroom is 320 square feet. The Aollingers received Form 1098: Mortgage Interest Statement from the Bank of Southern Savannah with a Box 1 amount of $14,400. Real estate taxes on the home were $4,100. Judith received qualified dividends from two companies during 2018: $140 from Whole Pine Inc. and $113 from West Florida Electric Power. Judith purchased 2,000 shares of Whole Pine Inc. stock on July 31, 2009, at $14 per share. She sold them on June 30, 2018, at $20 per share and paid a $49 transaction fee. The couple had a long-term capital loss carryover from their 2017 tax return of $23,000. The couple would like to contribute the maximum amount to their HSAs and to each of their Roth IRAs during the year. Additionally, Jack contributes 25% of his Schedule C net earnings to a SEP IRA. For his art studio, Jack made estimated tax payments of $300 per quarter. All tax payments were made on time. The Florida sales tax rate is 6%, and the local sales tax rate for Key West is 1.5%. The other paid expenses are listed in the attached “Client Organizer Aollinger.” REQUIREMENTS You must use the rubric to direct the creation of your submission because it provides detailed criteria that will be used to evaluate your work. Each requirement below may be evaluated by more than one rubric aspect. The rubric aspect titles may contain hyperlinks to relevant portions of the course. A. Complete Form 1040 for the Aollingers’ 2018 federal income tax return, using the information from the scenario and the attached “Client Organizer Aollinger” spreadsheet. Include all supporting forms and statements. Note: Please save the entire return as a pdf file and submit that file.Worksheets are not included in the IRS submission and therefore do not need to be included. 1. Complete Form 1040, including the correct number for each of the following lines: • Line 3a “Qualified dividends” • Line 3b “Ordinary dividends” • Line 6 “Total income” • Line 15 “Total tax” 2. Complete Schedule 1 on the Form 1040, including the correct number for each of the following lines: • Line 12 “Business income or (loss)” • Line 22 • Line 25 “Health savings account deduction” • Line 28 “Self-employed SEP, SIMPLE, and qualified plans” • Line 29 “Self-employed health insurance” • Line 36 3. Complete Schedules 2–5 of Form 1040 and include the correct number for each of the following lines: • Line 46 “Excess advance premium tax credit repayment” in Schedule 2 • Line 49 “Credit for child and dependent care expenses” in Schedule 3 • Line 50 “Education credits” in Schedule 3 • Line 55 in Schedule 3 • Line 64 in Schedule 4 • Line 75 in Schedule 5