Ashworth College- Tax Preparation- FORM 1040 Project for the Smith family

Tax Preparation- FORM 1040 Project for the Smith family

Tax Preparation Project In order to complete the requirements of this project, you will prepare a tax return (form 1040) for the Smith family. They have a fairly complicated 2017 return, but your program has prepared you to accurately complete this tax return. The information you will need for the tax return is listed below. You will find all the forms and tax tables you need for this project at the IRS website ( Depending on when you complete your project, you may need to locate the forms under the heading of the prior year (

Tax Preparation- FORM 1040 Project for the Smith family

Note, in any case, you will not be penalized if you need to use the form 1040 and tables for a more recent tax year. Just make sure that the forms, instructions, and tables are consistent for one tax year. Project Details: The Smith Family David and Hope Smith are married and have two children, Katelyn and Cory. They all live at 134 Crystal Lake Road, New Hope, PA 18938. The Smith family had health care coverage provided by David’s employer for the entire year of 2017. Their Social Security numbers and other pertinent information are listed below: Name Social Birthday Occupation Time Income Security Lived Parents David J. Smith 123-45-6789 04/05/1971 Engineer Hope K. Smith 234-56-7890 07/04/1973 Analyst Dependent Children Katelyn Smith (F) 423-45-6789 05/12/1997 Student 12 Months $0 Cory Smith (M) 334-56-7890 06/08/2000 Student 12 Months $0 Earnings • David’s earnings and tax withholdings for 2017 can be found on his W-2. • Hope’s earnings and tax withholdings for 2017 can also be found on her W-2. • Hope was laid off in 2017 and received $27,755 in unemployment benefits and had $2,793 Federal income tax withheld.

Tax Preparation- FORM 1040 Project for the Smith family

SMALL BUSINESS CLIENTS AND RETURNS FILING 31 Federal income tax withheld • Hope also started a small consulting business in 2017. The business classification is “Other Finance and Investment Activities.” The 2017 gross income and expenses for the business are listed below: Gross Receipts $3,427 Expenses Office Expense 495 Lodging 434 Baggage 50 Parking 45 Hope also drove 225 business miles and 15,000 personal miles. Dividends and Interest Income David and Hope received $316 in the certificate of deposit interest income from Prudential and $3,328 of dividend income from Fidelity Brokerage Services, of which $2,698 was qualifying dividend income. In addition, there was $53 of capital gain distributions and $60 in foreign taxes withheld. A copy of David and Hope’s 2017 1099 INT and 1099 DIV can be found in the tax documents section below. Note: Neither David nor Hope has any interest or signatory authority over a foreign bank account. Be sure to check the correct boxes on the bottom of your Schedule B to ensure compliance. Retirement Distributions Hope directly rolled over $87,769.45 into a qualified IRA. A copy of her 1099-R can be found in the tax documents section. Schedule A—Itemized deductions The Smith family has the following itemized deductions: • State and Local Income Taxes—This information can be found on their W-2s. In addition, David and Hope paid an additional $172 in state taxes in 2017 for their 2016 state tax liability. • Real Estate Taxes paid in 2017—$3,296 • Home Mortgage Interest for 2017—$4,116 (reported on Form 1098) • Cash Contributions for 2017—$825 • Non-cash Contributions for 2017—Thrift Store Value $2,625. The following information is what you will need to fill out the form for non-cash contributions. • The contribution was 8-12-2017 32. Form 1040Tax Preparation- FORM 1040 Project for the Smith family

Form 1040 SMALL BUSINESS CLIENTS AND RETURNS FILING • Date acquired—various • How acquired—purchased • Donor’s cost—adjusted basis—N/A Schedule D—Capital Gains and Losses The Smith family had a short term capital loss carryover of $2,169 from 2016. Hint: Remember to also look at the Capital Gains Dividend on Schedule 1099 DIV for 2017. Schedule E—Rental Property The Smiths purchased an investment rental property in 2017. Details relating to the property transaction can be found in the tax documents section. The depreciation schedule needed to calculate depreciation can be found in the tax documents section. Note: Remember to complete 8582 Passive Activity Loss Limitations. Tax Calculation Hint: When calculating the tax liability on line 44 of 1040, be sure to take into consideration the qualified dividends. When you complete this project, your tax refund should be $3,754. Best of luck and be proud of what you have achieved. Tax Documents David & Hope Smith Rental Property 542 Route 247 New Hope, PA 18938 2017 The Smiths purchased a rental property on 5-15-17. The property was placed into service on 7-1-17. All of the property’s expenses are listed below. You will need to break the expenses down into capitalized costs which need to be added to the basis of the house and depreciated and regular expenses. All expenses are already pro-rated to only include the portion attributable to 2017. 

Tax Preparation- FORM 1040 Project for the Smith family

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