TaxSlayer Assignment Two amp; Three Requirements: Complete the Tax Formula (8 points) Using TaxSlayer software prepare the tax returns (4 points)...
TaxSlayer Assignment Two & Three
Requirements:
Complete the Tax Formula (8 points)
Using TaxSlayer software prepare the tax returns (4 points)
Submit both the Tax Formula and complete tax return on Canvas by due date for full credit (12 points)
Remember TaxSlayer is still using 2016 tax numbers.
Client Information:
Mr. and Mrs. Stars have been married 2 years. They have no dependents. Mike Star is an aeronautic engineer and Sheila is attending law school full-time. The following is the information obtained to prepare their 2016 tax return.
| Client’s Social Security Number
| 400-00-4723 |
| Filing Status
| Married Filing Joint |
| Taxpayer’s Date of Birth | 03/01/1964 |
| Spouse’s Date of Birth
Neither Taxpayer nor Spouse is Blind or Deceased
| 01/15/1966 |
| Client’s First Name, Initial, and Last Name | Mike E. Stars |
| Secondary First Name, Initial, and Last Name | Sheila A. Stars |
| Secondary SSN
| 400-00-4714 |
| Street Address | 1492 Ellis Street |
| Zip Code | 30906 (Augusta, Georgia) |
| Daytime Telephone | 706-868-1298 |
| Taxpayer’s Occupation | Aeronautic Engineer |
Health Insurance Information: Taxpayer and spouse all had minimum essential health care coverage for the entire year.
Health coverage was NOT purchased through the marketplace/exchange.
No W-2 information to enter.
W-2 Information
Employer Identification Number 75-9685552
Employer Name/Address Lockheed Martin
2120 Martin Drive
Evans, GA 30809
Wages $189,000
Federal Withholding $47,000
Social Security $7,347
Medicare $2,740.50
State GA
State ID Number 23-2564155
State Withholding $10,000
Form 1099-G
The Stars received a state refund of $13,000 in 2016 for their 2015 state taxes. The Stars took the standard deduction in 2015 for MFJ, $12,400 (Section 1, boxes 1, 2, 3).
Dividend Income, Schedule B Information
Form 1099-INT
The Stars, jointly had interest income from Bank of America in the amount of $500.
Tax-exempt interest from Edward Jones of $1,000
Form 1099-DIV
Payer Name: Edward Jones
Ordinary Dividends (Box 1a): $8,000
Qualified Dividends (Box 1b): $5,000
1099-R Information Mike withdrew from his IRA to help pay for Sheila’s school.
| 1099-R is for the Taxpayer | |
| EIN of Payer: | 58-0974325 |
| Payer’s Name and Address: | Eagle Financial 456 Ronald Reagan Drive Evans, GA 30809 |
| Gross Distribution: | $35,000 |
| Taxable Amount: | $35,000 |
| Federal Tax Withheld: | $3,500 |
| Distribution Code: | 1 Mark the 1099-R as an IRA Distribution |
| Transfer Option to 5329: | Part I Line 1 |
| State: | GA |
| State ID: No State Tax Withheld | 28-3689701 |
The TOTAL AMOUNT of the 1099-R Distribution is excluded from the 10% Early Withdrawal Penalty because the funds were used for HIGHER EDUCATION EXPENSES.
“Other Taxes” – “Tax on Early Distribution” – Form 5329
Schedule D Capital Gains and Losses 2015 Carryover
The Stars’ have a LTCL carryover from 2015 in the amount of $12,500 (Other Capital Gains Data (including Capital Loss Carryover)
Schedule D Capital Gains and Losses 2016 – (There is NO ADJUSTMENT CODE information to enter for any transaction):
6000 Shares Google – Box 3 Shows Basis Reported to IRS - Acquired 03/06/2004 – Sold 08/02/2016 – Sale Price $62,600 – Cost $3,200
1500 Shares ACCO – Box 3 Shows Basis Reported to IRS - Acquired 01/12/2016 – Sold 03/01/2016 – Sale Price $25,000 – Cost $40,000
500 Shares BP Oil – Box 3 Shows Basis Reported to IRS - Acquired 02/13/2001 – Sold 04/02/2016 – Sale Price $32,000 – Cost $25,000
2100 Shares RCS – Box 3 Shows Basis Reported to IRS - Acquired 05/19/2003 – Sold 05/20/2016 – Sale Price $32,000 – Cost $56,000
“Other Income” to “Other Compensation
ScholarshipSheila received a scholarship for $58,000. $20,000 was applied to tuition and books.
Fringe Benefits
Mike received the following benefits from his employer not included in his W2 Wages:
Medical insurance premiums $12,000
Vision insurance premiums 2,000
Dental insurance premiums 4,000
$50,000 group-term life insurance coverage. Premiums paid by employer 500
$500,000 of whole life insurance coverage. Premiums paid by employer 5,000
Country club membership dues paid by employer 10,000
Tickets to the Braves games paid by employer, only given to top executives 6,000
Professional aeronautic journal subscriptions 500
Net Investment Income Tax – “Other Taxes” Form 8960
The net investment income tax must be taken into consideration.
The Stars’ home is paid in full therefore, they will not benefit from itemizing. They choose the standard deduction.
Check Figures
Tax Formula:
Tax Liability $56,080 (based on using 2016 tax rate schedules and preferred rates)
Tax Return:
Tax Liability $58,018 (based on using 2016 tax rate tables and preferred rates)
*** Please note, the software tax calculation is incorrect as they used 28% on LTCG
Hence the reason, I insist you learn the tax formula method. I have notified the publisher.
PREPARATION OF 2016 FEDERAL/STATE FORMS & WORKSHEETS:
FORM 1040
SCHEDULE B (INTEREST & DIVIDENDS)
SCHEDULE D (CAPITAL GAINS & LOSS)
FORM 8949 (SALES OF CAPITAL ASSETS)
FORM 5329 (TAX ON EARLY RETIREMENT DISTRIBUTION)
FORM 8960 (NET INVESTMENT INCOME TAX)
** There may be others, but these are the ones I will grade.
