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Tax return project
The Income Tax Return may be prepared manually or usingthe PROSERIES (TURBOTAX)software (or some other Federal Income Tax (or Information) software that youmay have access to) that is located on the Network System in the ComputerCenter on the Eight floor (South) at the University Of Houston-Downtown Campus(and the second floor classrooms in the Shea Street College Of BusinessBuilding) (or on the personal computers at UHD-Northwest at Lone Star College-University Park). If you chooseto prepare the Income Tax (or Information) Return using the ProSeries(TurboTax) software in the Computer Center (or at UHD-Northwest at Lone Star College-University Park), the following information applies. The ProSeries (TurboTax) software may beaccessed from any personal computer in the Computer Center that is connected tothe Network System at the University Of Houston-Downtown Campus (or on the personalcomputers on the personal computers at UHD-Northwest at Lone Star College-University Park). Please bring adevice to the Computer Center in orderto save your data. (Please be sure thatthe device is capable of saving your data). To assist you in using the ProSeries (TurboTax) software, an operator'smanual is available in the Computer Center (or at UHD-Northwest at Lone Star College-University Park). Below is alisting of basic instructions in operating the software.
Click on STARTand enter "PROGRAMS" and locate "ProSeries 2014". Click on "2014 ProSeries". The software will appear on the screen.
CREATING CLIENT/INPUTTING DATA
Click on "New" to create a newclient. The first document that you willenter (automatically appears on the screen) will be the "Federal InformationWorksheet". Complete all necessaryinformation on the "Federal Information Worksheet". To enter specific tax related information,you must enter the form, schedule or document that relate to the tax relatedinformation you wish to enter. For example,to enter information for wages earned by the taxpayers, go to "FormW-2" and enter the appropriate information; to enter information for aself-employed person, go to "Schedule C" and enter the appropriateinformation; to enter information regarding rental property, go to"Schedule E" and enter the appropriate information, etc. To go to a specific form or document, you mayeither click on "Forms" (and then click on “Select Form”), hitthe "F6" key or hit "Control F" then highlight the desiredform, schedule or document (or press the lighted letter(s) and/or number(s) ofthe desired form, schedule or document) and press return (enter).
In many cases, information may (or must) be entered intoa worksheet which is automatically transferred to where needed in therespective Income Tax Returns. This isespecially true for Schedule E (Rental Property) for entering information forRental Property, etc. Accordingly, payattention to the many worksheets that are available for the Return you arepreparing to see if certain information may (or must) be entered through aworksheet instead of directly in the Forms and/or Schedules of the Income TaxReturn itself.
To enter depreciation information, either click on"Forms" (and then click on “Select Form”), hit the"F6" key or hit "Control F" and enter the "Depr EntryWks". Enter a description of theasset to be depreciated and press return (enter). Highlight the Form or Schedule the assetrelates to and press return (enter). Completethe necessary information at the top of the "Asset EntryWorksheet". The computeddepreciation will automatically be transferred to the appropriate Form orSchedule that the asset relates. (If theForm or Schedule that the asset relates has not been previously created, youwill be asked to create the Form or Schedule at this time).
To access the print commands, press "ControlP" and click on “Tax Returns” then press return (enter) to print theentire Tax Return. If you desire toprint one (1) Form or Schedule at a time, click on the printer on the tool barwith the red arrow, then click on "Choose" and select thedesired Form or Schedule to print.
DO NOT ALTER ANY OF THE DEFAULT SETTINGS IN THE SOFTWARE.
This Income Tax Project requires for the preparation ofa 2014 Federal Income TaxReturn. Therefore, the followingapplies:
1. StandardDeduction for Married Filing Jointly - $12,400.
2. Personal AndDependency Exemption amount - $3,950.
3. Standard Mileage Rate - $.56 per business mile.
4. The 2014 TaxRates (Please see inside front cover of textbook).
INDIVIDUAL INCOME TAXATION
FALL SEMESTER 2015
INCOME TAX PROJECT
John Alan Kelly and Rosalyn Elaine Kelly, a marriedcouple, live at 3822 Robin Lane Houston, Texas 77049-7236. Their home telephone number is (713)468-9721, home fax number is (713) 591-7014, cell telephone number for John is(832) 921-8427 and cell telephone number for Rosalyn is (832) 366-8122. John, whose social security number is437-29-1297 and date of birth is April 2, 1963, is employed as a Loan Officerwith Houston First National Bank located at 1100 Smith Street Houston, Texas77002-0002 and whose Employer Identification Number is 42-4732689. John's work telephone number is (713)654-8739 and E-Mail address is [email protected] Rosalyn's social security number is443-63-7289 and her date of birth is January 10, 1965. She is presently a Self-Employed sole ownerof a small retail bookstore (ROSALYN'SBOOKSTORE) which she has owned and operated since January 6, 2011. Rosalyn's Bookstore is located at 2345Marshall Lane Houston, Texas 77044-5943, her work telephone number is (713)434-1275, her fax number is (713) 434-1276 and E-Mail address is [email protected] The Employer Identification Number for thebookstore is 76-5678901. The Kellys havetwo (2) children who lived with them for the entire year of 2014 and that theyfully supported for the entire year of 2014. The two (2) children are Jocelyn Danielle Kelly (age 17 (date of birthNovember 14, 1997) and social security number 643-28-1863) and Charles AaronKelly (age 10 (date of birth June 16, 2004) and social security number 623-51-2467). In addition, the Kellys provided in 2014 morethan one-half (1/2) of the support of Rosalyn Kelly's mother, Louise MyraAnderson, (age 74 (date of birth May 29, 1940) at the end of 2014 and socialsecurity number 440-83-6278) and who lived the entire year of 2014 in her ownhome located in Livingston, Texas and her only Gross Income for 2014 wasnontaxable Social Security Benefits.
The Kellys, who neither wishes to contribute to thePresidential Election Campaign Fund, have presented you with the followinginformation to prepare their 2014 Federal Income Tax Return:
(a) John earned a salary from Houston FirstNational Bank, Inc. of $71,540 (also Social Security Wages and MedicareWages). Federal Income Taxes withheldfrom his pay was $7,832, Social Security Taxes (FICA) withheld was $4,435 andMedicare Taxes withheld was $1,037. Johnis covered by a retirement pension plan provided by Houston First NationalBank.
(b) The Kellys received Interest on Savings Accountsof $1,200 from Houston First National Bank and Interest of $520 from HarrisCounty Bonds that they own. In addition,the Kellys received Cash Dividends of $442 (all "Qualified Dividends")from Common Stock owned in Bush Corporation.
(c) Rosalyn uses the Cash Method Of Accountingfor Federal Income Tax purposes for her business, ROSALYN'S BOOKSTORE, and the business code for the businessfor Federal Income Tax purposes is 451211. Relevant Financial Information for the business for 2014 is as follows:
Less:Returns And Allowances 2,350
SalariesAnd Wages 28,720
EntertainmentOf Customers 500
Interest(Miscellaneous Debts) 600
Seminar(Related To Bookstore Retailers) 400
BeginningInventory January 1, 2014 $28,400
EndingInventory December 31, 2014 16,800
PurchasesIn 2014 12,900
AllInventory is valued at cost. There wereno changes in determining quantities, costs or valuations between Opening andClosing Inventory.
(All ofthe above Revenues, Expenses and Expenditures represent cash transactions
thatoccurred during the year of 2014)
Description Cost Date Purchased
PersonalComputer And Printer $1,600.00 January 2, 2014
ComputerSoftware 250.00 January 2, 2014
FurnitureAnd Fixtures 12,000.00 March 5, 2011
(All ofthe above assets are used exclusivelyat Rosalyn's Bookstore and were
originally placed in service on the datepurchased)
Rosalynelected to take the Section 179 Deduction for all assets acquired during theyear of 2014. Assets acquired before 2014are depreciated using the designated useful life and the Section 179 Deductionwas not elected. (The First Year Additional Depreciation was notelected for any of these assets).
Rosalyn also drove in 2014 her personal automobile, a 2013Buick Park Avenue, which she acquired on April 28, 2013, a total of 6,000 miles(500 miles per month) for business purposes. Rosalyn has always used the automobile in her business and drove theautomobile a total of 15,000 miles for the entire year of 2014 including 5,200of commuting miles (Beginning Mileage Reading was 35,000 miles and EndingMileage Reading was 50,000 miles). Rosalynuses the Standard Mileage Method (Automatic Mileage Method) ($.56 per mile in 2014)to recover the cost of using her automobile for business purposes. In 2014, Rosalyn also paid $200 for parkingand toll fees while using the automobile for business purposes and paid a totalof $400 of Interest on the loan for the automobile.
(d) The Kellys also own a rent home that theyrent out (Actively Participate) to people unrelated to them. The rent home (not Low-Income Housing) islocated at 825 Lincoln Street Houston, Texas 77048-3252. The Kellys originally began to rent this homeon May 1, 1995 when its depreciable basis was $30,000 (total cost of $37,500less $7,500 allocated to the Land (Straight-Line Depreciation notelected)). Relevant information thatpertains to the rent home for 2014 is as follows:
TotalRental Revenues $5,600
Property(Real Estate) Taxes 1,020
(All of the above Rental Revenuesand Rental Expenses represent Cash transactions that
occurred during the year of 2014)
In addition to the above, John Kellydrove in 2014 his personal automobile, a 2011 Chevrolet Caprice, in attendingto the rental property a total of 400 miles (33.33 miles per month). Finally, on June 19, 2014, the Kellyspurchased new appliances (ie. refrigerator, stove and dishwasher) (five-yearproperty) for the Rental Property for a total purchase price of $1,950.
(e) John attended a Banking Seminar in SanFrancisco, California. He incurredunreimbursed expenses of $1,450 for airfare, lodging and meals ($160 of the $1,450was for meals).
In addition, John drove in 2014 hispersonal automobile a total of 1,200 miles (100 miles per month) for workrelated purposes. John purchased the caron February 3, 2011 and has always used it for work related purposes. He drove the car a total of 12,000 miles in 2014of which 5,200 were commuting miles (average daily round trip commutingdistance of 20 miles per day) (Beginning Mileage Reading was 50,000 miles andEnding Mileage Reading was 62,000 miles). John has always used the Standard Mileage Method (Automatic MileageMethod) in recovering the cost of using his automobile for work relatedpurposes.
(f) The Kellys incurred the followingpersonal expenses during the year of 2014:
MedicalExpenses (Unreimbursed) (Various):
For Themselves And Their Children $4,500
For Rosalyn's Mother 900
RealEstate Taxes On Personal Residence 2,470
HomeMortgage Interest On Personal Residence 9,600
Credit CardInterest 1,900
InterestOn Car Loans 2,400
CharitableContributions - (Cash) (Various Charities) 1,600
CharitableContributions - (Property – Clothing, etc.) (FMV) 460 ($1,000 ORIGINAL COST)
(Star OfHope 1240 North Main Street Houston, Texas 77001-8877)
Income TaxPreparation Fee 225
(g) The Kellys utilizes the Internal RevenueService (IRS) Optional State Sales Tax Table (See page A-14 through page A-15of the Instructions for Schedule A) to compute their Itemized Deduction forGeneral Sales Taxes (Their State General Sales Tax Rate is 6.25% and theirLocal General Sales Tax Rate is 2.00% for a Total Sales Tax Rate of 8.25%).
(h) The Kellys paid an unrelatedhousekeeper/child caretaker, Shelly R. Baker, (address 3785 Pinkston StreetHouston, Texas 77046-2386 and social security number 466-37-3682) and telephonenumber (713) 864-3267, $300 per month during the entire year of 2014 to carefor their youngest child at their home while they were at work.
(i) The Kelly's 2013 Federal Income Tax Liability was $12,420.
(j) Rosalyn Kelly made the following EstimatedTax Payments for the year of 2014:
April15, 2014 $2,000
June16, 2014 3,100
September15, 2014 1,200
January15, 2015 2,100
(k) The Kellys will file a Joint FederalIncome Tax Return for the year of 2014.
(l) If the Kellys will receive a refund fortheir 2014 Federal Income Tax Return, they would like for the refund to beDirect Deposited into their bank account as follows:
Name Of Financial Institution: Annette Bank Of Texas
Routing Number: 111000025
Checking Account Number: 0049637821732
(m) Everyoneon the Tax Return was covered by Health Insurance for the entire year.
NOTE: Visit "www.irs.gov"(Search in top right hand box for "Tax Tables" then click on "2014 Instruction1040") for the Tax Table (notthe Tax Rate Schedules) to use to assist in determining the Tax Liability on the TaxableIncome (if preparing Income Tax Return manually).
REQUIRED FORMS AND SCHEDULES
Form 1040 Schedule B Schedule E Form 2106 Form 4562(2)
Schedule A Schedule C ScheduleSE Form 2441 Form 8582
The Income Tax Project is due on DECEMBER 5, 2015. (PLEASE REMEMBER TO PUT YOUR NAME ON THEPROJECT).
1. Schedule E totalDepreciation (Line 18): $1,480.80. (Also Line 22 – Form 4562).
2. Schedule E Net Income (Loss) (Line 26): ($644.80).
3. Schedule C Net Income (Line 31): $40,595.20.
4. Schedule A General Sales Taxes Deduction(Line 5): $1,692.24.
5. Schedule A total Deduction (Line 29): $15,883.95.
6. Adjusted Gross Income (Line 37 and Line38 (Form 1040)): $110,264.44.
7. Tax Liability On Taxable Income (Line 44Form 1040): $10,322.30.
8. Form 2441 Credit For Child And Dependent Care Expenses (Line 11):$600.
9. Child Tax Credit (Line 52 (Form 1040): $950.00.
10. TaxRefund (Line 75 and Line 76a (Form 1040)): $1,723.78.
THERE MAY BE SMALL DIFFERENCES FROM THESE CHECK FIGURES DUE TOROUNDING.