3028.1.1 : Tax Planning
The graduate applies knowledge of tax laws for planning and compliance purposes.
3028.1.2 : Multijurisdictional Tax Issues
The graduate analyzes the impact of multijurisdictional taxes including federal, state, local, and international taxes.
3028.1.4 : Federal Taxation of Property Transactions
The graduate determines the proper tax treatment for business transactions such as capital gains, the sale of a residence, and gifts.
3028.1.6 : Tax Return Preparation
The graduate prepares federal tax returns with IRS forms, schedules, and related reporting requirements.
INTRODUCTION
This task will allow you to apply your tax knowledge to a real-world tax scenario. To complete this task, you will generate and submit Form 1040 with all supporting forms, schedules, and statements. The tax forms required to complete this task need to be retrieved using tax software. Intuit ProConnect can be accessed through the “Intuit ProConnect Registration and Log-In” web link.
You may use the “IRS Forms and Publication” web link as a reference.
Please reference the attachment “Intuit ProConnect Tax Software Log-In Instructions” for help creating an Intuit ProConnect account.
SCENARIO
Basic Information
• Jack and Judith Aollinger have hired you to prepare their 2021 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 6/27/1966
• Judith: SSN 543-21-0986; DOB 9/18/1973
Judith’s Income
• 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 2021 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 2021. The K-1 lists the following items:
• Line 1: Ordinary business income: $35,567
• Line 11: Section 179 deduction: $9,000
• Line 13 A: Charitable contributions: $450
• Line 16 A: Post-1986 depreciation adjustment: $9,791
• Line 17 C: Nondeductible expenses: $560
Children
• The Aollingers have three children:
• Janey: SSN 345-67-8901; DOB 7/1/2003
• Johnny: SSN 234-56-7891; DOB 2/4/2011
• Jeremy: SSN 456-78-9012; DOB 9/30/2015
• 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 1 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.
• Ms. Garcia’s SSN is 541-77-7777.
• The Aollingers paid Ms. Garcia $4,500 in 2021.
• The couple also paid their son Johnny $2,000 to watch Jeremy while school was out during the summer.
The Mother
• Judith’s mother, Mary Renault, lived with the family until November 2021.
• 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 25,1935.
• 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.
Health Insurance
• Judith’s employee health insurance plan covered her and the three children.
• The total cost for insurance was $13,000 for the year.
• During 2021, 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 2021 through August 2021.
• 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 2021 through August 2021.
• On September 1, 2021, 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 September, October, November, and December 2021, but it was not listed in his bookkeeping.
Residence
• The couple rents out a former home at 3456 Abbey Road, Key West, FL 33040.
• They purchased the house on November 30, 2005, and lived in it until March 20, 2018, when they began renting the property.
• The property was rented for all of 2021 with a total income of $14,400.
• When the Aollingers purchased the house and land in 2005, they paid $175,000.
• The value of the land at that time was $40,000. At the time the house was rented, the estimated fair market value (FMV) minus the land was $135,000.
• 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, 2018, 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.
Dividends
• Judith received the following dividends from two companies during 2021:
Qualified Ordinary
Whole Pine, Inc.
$140
$140
West Florida Electric Power
$100
$113
• Judith purchased 2,000 shares of Whole Pine Inc. stock on July 31, 2009, at $14 per share. She sold them on June 30, 2021, at $20 per share and paid a $49 transaction fee.
• The couple had a long-term capital loss carryover from their 2020 tax return of $23,000.
• The couple would like to contribute the maximum amount to their HSAs during the year. Additionally, Jack contributes 25% of his Schedule C net earnings to a SEP IRA.
Tax Payments
• 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%.
• See the attachment “Client Organizer Aollinger” for income and expense details.
REQUIREMENTS
Your submission must be your original work. No more than a combined total of 30% of the submission and no more than a 10% match to any one individual source can be directly quoted or closely paraphrased from sources, even if cited correctly. The similarity report that is provided when you submit your task can be used as a guide.
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.
Tasks may not be submitted as cloud links, such as links to Google Docs, Google Slides, OneDrive, etc., unless specified in the task requirements. All other submissions must be file types that are uploaded and submitted as attachments (e.g., .docx, .pdf, .ppt).
A. Complete Form 1040 for the Aollingers’ 2021 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. Provide the dividend information on Form 1040 by doing the following:
a. Complete Line 3a “Qualified dividends” using the correct information.
b. Complete Line 3b “Ordinary dividends” using the correct information.
2. Provide the completed Schedule 1 of Form 1040 by doing the following:
a. Complete Line 3 “Business income or loss” using the correct information.
b. Complete Line 13 “Health savings account deduction” using the correct information.
c. Complete Line 16 “Self-employed SEP, SIMPLE, and qualified plans” using the correct information.
d. Complete Line 17 “Self-employed health insurance deduction” using the correct information.
3. Provide the completed Schedule 2 of Form 1040, Schedule 2 by doing the following:
a. Complete Line 2 “Excess advance premium tax credit repayment” using the correct information.
4. Provide the completed Schedule 3 of Form 1040 by doing the following:
a. Complete Line 13g “Credit for child and dependent care expenses” using the correct information.
b. Complete Line 3 “Education credits” using the correct information.
B. Acknowledge sources, using in-text citations and references, for content that is quoted, paraphrased, or summarized.
C. Demonstrate professional communication in the content and presentation of your submission.
File Restrictions
File name may contain only letters, numbers, spaces, and these symbols: ! – _ . * ‘ ( )
File size limit: 200 MB
File types allowed: doc, docx, rtf, xls, xlsx, ppt, pptx, odt, pdf, csv, txt, qt, mov, mpg, avi, mp3, wav, mp4, wma, flv, asf, mpeg, wmv, m4v, svg, tif, tiff, jpeg, jpg, gif, png, zip, rar, tar, 7z
RUBRIC
A: FORM 1040:
NOT EVIDENT
The Form 1040 is not provided.
APPROACHING COMPETENCE
The Form 1040 is missing 1 or more supporting forms and statements.
COMPETENT
The Form 1040 is complete with all supporting forms and statements.
A1A: LINE 3A:
NOT EVIDENT
Line 3a is not completed.
APPROACHING COMPETENCE
Line 3a is complete but the number provided is incorrect.
COMPETENT
Line 3a is complete and the number provided is correct.
A1B: LINE 3B:
NOT EVIDENT
Line 3b is not completed.
APPROACHING COMPETENCE
Line 3b is complete but the number provided is incorrect.
COMPETENT
Line 3b is complete and the number provided is correct.
A2A: SCHEDULE 1, LINE 3:
NOT EVIDENT
Line 3 on Schedule 1 is not completed.
APPROACHING COMPETENCE
Line 3 on Schedule 1 is complete but the number provided is incorrect.
COMPETENT
Line 3 on Schedule 1 is complete and the number provided is correct.
A2B: FORM 1040, SCHEDULE 1, LINE 13:
NOT EVIDENT
Line 13 on Schedule 1 is not completed.
APPROACHING COMPETENCE
Line 13 on Schedule 1 is complete but the number provided is incorrect.
COMPETENT
Line 13 on Schedule 1 is complete and the number provided is correct.
A2C: FORM 1040, SCHEDULE 1, LINE 16:
NOT EVIDENT
Line 16 on Schedule 1 is not completed.
APPROACHING COMPETENCE
Line 16 on Schedule 1 is complete but the number provided is incorrect.
COMPETENT
Line 16 on Schedule 1 is complete and the number provided is correct.
A2D: FORM 1040, SCHEDULE 1, LINE 17:
NOT EVIDENT
Line 17 on Schedule 1 is not completed.
APPROACHING COMPETENCE
Line 17 on Schedule 1 is complete but the number provided is incorrect.
COMPETENT
Line 17 on Schedule 1 is complete and the number provided is correct.
A3A: FORM 1040, SCHEDULE 2, LINE 2:
NOT EVIDENT
Line 2 on Schedule 2 is not completed.
APPROACHING COMPETENCE
Line 2 on Schedule 2 is complete but the number provided is incorrect.
COMPETENT
Line 2 on Schedule 2 is complete and the number provided is correct.
A4A: FORM 1040, SCHEDULE 3, LINE 13G:
NOT EVIDENT
Line 13g on Schedule 3 is not completed.
APPROACHING COMPETENCE
Line 13g on Schedule 3 is complete but the number provided is incorrect.
COMPETENT
Line 13g on Schedule 3 is complete and the number provided is correct.
A4B: FORM 1040, SCHEDULE 3, LINE 3:
NOT EVIDENT
Line 3 on Schedule 3 is not completed.
APPROACHING COMPETENCE
Line 3 on Schedule 3 is complete but the number provided is incorrect.
COMPETENT
Line 3 on Schedule 3 is complete and the number provided is correct.
B:SOURCES
NOT EVIDENT
The submission does not include both in-text citations and a reference list for sources that are quoted, paraphrased, or summarized.
APPROACHING COMPETENCE
The submission includes in-text citations for sources that are quoted, paraphrased, or summarized and a reference list; however, the citations or reference list is incomplete or inaccurate.
COMPETENT
The submission includes in-text citations for sources that are properly quoted, paraphrased, or summarized and a reference list that accurately identifies the author, date, title, and source location as available.
C:PROFESSIONAL COMMUNICATION
NOT EVIDENT
Content is unstructured, is disjointed, or contains pervasive errors in mechanics, usage, or grammar. Vocabulary or tone is unprofessional or distracts from the topic.
APPROACHING COMPETENCE
Content is poorly organized, is difficult to follow, or contains errors in mechanics, usage, or grammar that cause confusion. Terminology is misused or ineffective.
COMPETENT
Content reflects attention to detail, is organized, and focuses on the main ideas as prescribed in the task or chosen by the candidate. Terminology is pertinent, is used correctly, and effectively conveys the intended meaning. Mechanics, usage, and grammar promote accurate interpretation and understanding.
WEB LINKS
Intuit ProConnect Registration and Log-In
IRS Forms and Publication
For reference only
SUPPORTING DOCUMENTS
Intuit ProConnect Tax Software Login instructions.pdf
Client Organizer Aollinger.xlsx
