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tax problems

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Question;2013 income tax information;David P. and Karen;M. Stevens are married and file a joint income tax return. Their social;security numbers;are 133-99-4444 and 144-33-3333, respectively. They have two children, a;son named Paul A.;Stevens, age 14, social security number 132-99-6565 and a daughter;Anne M. Stevens;age 10, social security number 132-88-5656. David and Karen have;been married for;16 years and purchased their current home in 2003. The family lives at 1075;Jackson Drive in;Coastal City, GA 31133.;Karen is a college;professor employed by a university. David is a pediatrician. He is self-;employed and;leases office space in a medical building near the local hospital. David and;Karen report their;income using the cash method.;Karen is covered;by a qualified retirement plan through her work. She partcipates in a group;health insurance;plan that covers all four members of the family. The health insurance plan;for David's;medical practice covers only the full-time receptionist.;Income and;expense information;Karen's salary;(reportable W-2 amount);96,000;David's medical;practice;Gross receipts;287,000;Interest income on;business account **;789;Expenses on office;books;Attorney's fees;1,000;Business license;400;Contract labor;2,200;Country club dues;paid by practice;4,200;County property;taxes on office furnishings, computer;system, and other;equipment;600;Depreciation on;office furnishings & equipment;4,615;Health insurance;for receptionist;5,275;Malpractice;insurance;26,000;Payroll taxes;2,988;Professional;journals and literature;2,160;Receptionist's;salary;31,000;Rent - office;24,000;Repairs and;maintenance;1,400;Utilities;9,650;Contribution to lobbying;group representing doctors;1,450;**report interest;on the schedule for interest Income;Other income and;deductions;Dividends reported;by brokerage account at Merrill Jones.;Total ordinary;dividends of $4,640, of which $4,400 are qualified;The dividends were;paid by U.S. corporations operating domestically.;Sale of land held;for investment;Sold: 9/30/2013;Sales price;102,000;Acquired;08/15/2006 Cost;99,600;The land was not;used in a trade or business by the taxpayers.;The sales was;reported on a Form 1099-B that does not disclose;the basis of the;property.;Sale of stock in;ABC Bank, Inc.;Sold: 03/03/2013;Sales price;14,000;Acquired;09/30/2005 Cost;15,750;Form 1099-B;reported the sales proceeds also discloses the basis.;There is a;short-term loss of $2,970 carried over from the 2012 return.;Interest income on;family savings account at My Bank, Inc.;1,820;Medical expenses;incurred during 2013 that were not reimbursed;by insurance;Doctors and;dentists;6,210;Hospital;12,085;Contact lenses and;glasses;820;Real estate taxes;on personal residence;5,070;Home mortgage;interest expense;13,760;Charitable;contributions paid by check;Church;8,800;United Way;400;Red Cross;200;Individual;retirement acccount contribution - David;5,000;Contribution is;made to a traditional IRA.;Accounting fees;paid in April 2013 for the preparation of;the couple's 2012;income tax returns. 65% of the fees;are attributable;to David's medical practice.;1,400;Income taxes paid;Karen had the;following 2013 income taxes withheld from her salary.;Federal;17,800;State;3,000;The balance due on;the couple's state income tax return for 2012;was $720. The;balance was paid in April of 2013 when the return;was filed.;Federal;State;2013 estimated;taxes paid by David;4/15/2013;9,300;1,000;6/15/2013;9,300;1,000;9/15/2013;9,300;1,000;1/15/2014;9,300;1,000;Other;information;Assume that David;and Karen are not subject to alternative minimum tax.;Do not prepare;Form 6251 as part of the return.;David and Karen's;2012 federal tax was $54,000. They should not be subject to;penalty for;underpayment of estimated tax, even if additional tax is owed with;the return.;David's office;address: 1600 Hospital Bouldvard, Suite 550;Coastal City, GA;31133;David's business;employer identification number;58-4443355;Business name;Psychiatric Clinic;You are not;required to complete Form 4562 (depreciation expense form) for;the medical;practice. Form 4562 is not required if there are no assets placed in;service during the;current taxable year. You may enter the depreciation expense;for continuing;assets on the forms reporting the medical practice income.;The tax problem should be completed using;2013 individual income tax forms and rate;schedules. The forms and the instructions;can be accessed through the website of the Internal;Revenue Service, www. IRS.gov. Prepare the;federal return only. Do NOT prepare the state;income tax return.;The group will submit one complete return;through a dropbox for the group. The pdf tax forms;obtained from the IRS website should be;filled in and saved in pdf format.;All of the applicable information and;questions on the forms should be answered. Be very;careful in completing the forms, as points;are awarded for properly completing informational;blanks as well as the numbers on the lines;of the tax forms. Also complete the preparer;information using a firm name indicating;your group number.;The completed problem should be turned in;through the group dropbox in GeorgiaVIEW by 10;PM on Thursday, November 20, 2014. (This;date has been changed from the November 18th;deadline published at the beginning of the;semester.) The completed return should include;Form 1040 and the other IRS forms that are;applicable. For example, if there is net income;from self-employment, Schedule C should be;attached detailing the income and expenses of;the business. A cover sheet will be;provided that should be completed and submitted with the;return.;My recommendation is that each group member;should work on the return individually. Then;the group can collaborate to reconcile any;differences. You may find it helpful to work on;income and become satisfied with the;group?s determination of adjusted gross income before;progressing to itemized deductions and;personal exemptions. You should recall from earlier;chapters that the net income from a sole;proprietorship is determined on Schedule C and;carried forward to page 1 of Form 1040.;You should familiarize yourself with Form;1040 before beginning the problem. You will note;that pages 1 and 2 of Form 1040 function as;a summary sheet to bring together information;from other forms. For example, you will;note that line 13 on Form 1040, Capital gain of (loss);has a notation to attached Schedule D if;required. The 21040 and other forms will generally;lead you to the necessary forms. Carefully;read all lines of a form when you are attempting to;complete it. There will be some items on;the return that we have not yet studied, particularly with respect to estimated;taxes. You should be able to figure out what you need to know by;reading the directions/instructions to;estimated taxes. You should be able to figure out what you need to know by;reading the directions/instructions to the;applicable forms.;Do not wait until the last few days before;the deadline to being the problem. You may contact;me to ask questions as your work;progresses. However, my availability will be limited as the;deadline approaches. If you contact me, you;should have specific questions, not just general;comments ?fishing? for direction. I will;provide general guidance but I will not answer;questions about specific numbers on the;return. Do not ask me to review your amounts to see;if your work is ?on the right track?.;Students should consult with group members before;contacting me with questions.;The key to completing the problem;successfully is organization. You should organize your work;before starting to enter information on the;government forms. For example, I recommend that;you prepare a schedule and calculate the;net income from the sole proprietorship;(unincorporated business) before entering;amounts on the form for profit or loss from a;business. I also recommend that you;carefully review the examples of completed tax forms;that are provided throughout the text and;in the appendix.;This is an opportunity for students to earn;a good grade. In previous semesters, many students;have earned high grades on the problem. If;a mistake occurs, I recalculate subsequent items in;the return to see if your calculations are;correct, considering the earlier mistake. A mistake;counts off at the point at which it was;made but does not cause subsequent related calculations;to be counted as incorrect.;The return submitted by the group should be;typed on the government forms and submitted in;pdf format.;The tax forms problem is a group project.;All members of the group must participate in order;to earn the credit for the problem. Each;group member will be asked to assess the;contributions of the team members. The work;must be submitted on a timely basis. Allow for;internet problems and other interruptions;in planning your schedule. The base score for the;group will be increased or decreased, as;appropriate, for members based upon the evaluation;of fellow group members.;There is a separate document describing;tools available in GeorgiaVIEW for the group to use in;working on the tax forms. I look forward to;working with you on the project!

 

Paper#39183 | Written in 18-Jul-2015

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