Question description<\/p>\n
The Income Tax Return may be prepared manually or using
\nthe PROSERIES (TURBOTAX)
\nsoftware (or some other Federal Income Tax (or Information) software that you
\nmay have access to) that is located on the Network System in the Computer
\nCenter on the Eight floor (South) at the University Of Houston-Downtown Campus
\n(and the second floor classrooms in the Shea Street College Of Business
\nBuilding) (or on the personal computers at UHD-Northwest at Lone Star College-University Park).\u00a0 If you choose
\nto prepare the Income Tax (or Information) Return using the ProSeries
\n(TurboTax) software in the Computer Center (or at UHD-Northwest at Lone Star College-University Park), the following information applies.\u00a0 The ProSeries (TurboTax) software may be
\naccessed from any personal computer in the Computer Center that is connected to
\nthe Network System at the University Of Houston-Downtown Campus (or on the personal
\ncomputers on the personal computers at UHD-Northwest at Lone Star College-University Park).\u00a0 Please bring a
\ndevice\u00a0 to the Computer Center in order
\nto save your data.\u00a0 (Please be sure that
\nthe device is capable of saving your data).\u00a0
\nTo assist you in using the ProSeries (TurboTax) software, an operator’s
\nmanual is available in the Computer Center (or at UHD-Northwest at Lone Star College-University Park).\u00a0 Below is a
\nlisting of basic instructions in operating the software.
\nINSTRUCTIONS
\nClick on START
\nand enter “PROGRAMS” and locate “ProSeries 2014”.\u00a0 Click on “2014 ProSeries”.\u00a0 The software will appear on the screen.
\nCREATING CLIENT\/INPUTTING DATA
\nClick on “New” to create a new
\nclient.\u00a0 The first document that you will
\nenter (automatically appears on the screen) will be the “Federal Information
\nWorksheet”.\u00a0 Complete all necessary
\ninformation on the “Federal Information Worksheet”.\u00a0 To enter specific tax related information,
\nyou must enter the form, schedule or document that relate to the tax related
\ninformation you wish to enter.\u00a0 For example,
\nto enter information for wages earned by the taxpayers, go to “Form
\nW-2” and enter the appropriate information; to enter information for a
\nself-employed person, go to “Schedule C” and enter the appropriate
\ninformation; to enter information regarding rental property, go to
\n“Schedule E” and enter the appropriate information, etc.\u00a0 To go to a specific form or document, you may
\neither click on “Forms” (and then click on \u201cSelect Form\u201d), hit
\nthe “F6” key or hit “Control F” then highlight the desired
\nform, schedule or document (or press the lighted letter(s) and\/or number(s) of
\nthe desired form, schedule or document) and press return (enter).<\/p>\n
WORKSHEETS
\nIn many cases, information may (or must) be entered into
\na worksheet which is automatically transferred to where needed in the
\nrespective Income Tax Returns.\u00a0 This is
\nespecially true for Schedule E (Rental Property) for entering information for
\nRental Property, etc.\u00a0 Accordingly, pay
\nattention to the many worksheets that are available for the Return you are
\npreparing to see if certain information may (or must) be entered through a
\nworksheet instead of directly in the Forms and\/or Schedules of the Income Tax
\nReturn itself.
\nDEPRECIATION
\nTo enter depreciation information, either click on
\n“Forms” (and then click on \u201cSelect Form\u201d), hit the
\n“F6” key or hit “Control F” and enter the “Depr Entry
\nWks”.\u00a0 Enter a description of the
\nasset to be depreciated and press return (enter).\u00a0 Highlight the Form or Schedule the asset
\nrelates to and press return (enter).\u00a0 Complete
\nthe necessary information at the top of the “Asset Entry
\nWorksheet”.\u00a0 The computed
\ndepreciation will automatically be transferred to the appropriate Form or
\nSchedule that the asset relates.\u00a0 (If the
\nForm or Schedule that the asset relates has not been previously created, you
\nwill be asked to create the Form or Schedule at this time).
\nPRINTING
\nTo access the print commands, press “Control
\nP” and click on \u201cTax Returns\u201d then press return (enter) to print the
\nentire Tax Return.\u00a0 If you desire to
\nprint one (1) Form or Schedule at a time, click on the printer on the tool bar
\nwith the red arrow, then click on “Choose” and select the
\ndesired Form or Schedule to print.
\nDEFAULT SETTINGS
\nDO\u00a0 NOT ALTER ANY\u00a0
\nOF THE DEFAULT\u00a0 SETTINGS IN\u00a0 THE SOFTWARE.<\/p>\n
NOTE
\nThis Income Tax Project requires for the preparation of
\na 2014 Federal Income Tax
\nReturn.\u00a0 Therefore, the following
\napplies:
\n1.\u00a0 Standard
\nDeduction for Married Filing Jointly – $12,400.
\n2.\u00a0 Personal And
\nDependency Exemption amount – $3,950.
\n\u00a0 \u00a0
\n3.\u00a0 Standard Mileage Rate – $.56 per business mile.
\n4.\u00a0 The 2014 Tax
\nRates (Please see inside front cover of textbook).
\nINDIVIDUAL INCOME TAXATION
\nFALL SEMESTER 2015
\nINCOME TAX PROJECT
\nFACTS
\nJohn Alan Kelly and Rosalyn Elaine Kelly, a married
\ncouple, live at 3822 Robin Lane Houston, Texas 77049-7236.\u00a0 Their home telephone number is (713)
\n468-9721, home fax number is (713) 591-7014, cell telephone number for John is
\n(832) 921-8427 and cell telephone number for Rosalyn is (832) 366-8122.\u00a0 John, whose social security number is
\n437-29-1297 and date of birth is April 2, 1963, is employed as a Loan Officer
\nwith Houston First National Bank located at 1100 Smith Street Houston, Texas
\n77002-0002 and whose Employer Identification Number is 42-4732689.\u00a0 John’s work telephone number is (713)
\n654-8739 and E-Mail address is kellyj@houstonfirstnationalbank.com.\u00a0 Rosalyn’s social security number is
\n443-63-7289 and her date of birth is January 10, 1965.\u00a0 She is presently a Self-Employed sole owner
\nof a small retail bookstore (ROSALYN’S
\nBOOKSTORE) which she has owned and operated since January 6, 2011.\u00a0 Rosalyn’s Bookstore is located at 2345
\nMarshall Lane Houston, Texas 77044-5943, her work telephone number is (713)
\n434-1275, her fax number is (713) 434-1276 and E-Mail address is kellyr@rosalynbookstore.com.\u00a0 The Employer Identification Number for the
\nbookstore is 76-5678901.\u00a0 The Kellys have
\ntwo (2) children who lived with them for the entire year of 2014 and that they
\nfully supported for the entire year of 2014.\u00a0
\nThe two (2) children are Jocelyn Danielle Kelly (age 17 (date of birth
\nNovember 14, 1997) and social security number 643-28-1863) and Charles Aaron
\nKelly (age 10 (date of birth June 16, 2004) and social security number 623-51-2467).\u00a0 In addition, the Kellys provided in 2014 more
\nthan one-half (1\/2) of the support of Rosalyn Kelly’s mother, Louise Myra
\nAnderson, (age 74 (date of birth May 29, 1940) at the end of 2014 and social
\nsecurity number 440-83-6278) and who lived the entire year of 2014 in her own
\nhome located in Livingston, Texas and her only Gross Income for 2014 was
\nnontaxable Social Security Benefits.
\nThe Kellys, who neither wishes to contribute to the
\nPresidential Election Campaign Fund, have presented you with the following
\ninformation to prepare their 2014 Federal Income Tax Return:
\n(a)\u00a0 John earned a salary from Houston First
\nNational Bank, Inc. of $71,540 (also Social Security Wages and Medicare
\nWages).\u00a0 Federal Income Taxes withheld
\nfrom his pay was $7,832, Social Security Taxes (FICA) withheld was $4,435 and
\nMedicare Taxes withheld was $1,037.\u00a0 John
\nis covered by a retirement pension plan provided by Houston First National
\nBank.
\n(b)\u00a0 The Kellys received Interest on Savings Accounts
\nof $1,200 from Houston First National Bank and Interest of $520 from Harris
\nCounty Bonds that they own.\u00a0 In addition,
\nthe Kellys received Cash Dividends of $442 (all “Qualified Dividends”)
\nfrom Common Stock owned in Bush Corporation.
\n\u00a0
\n(c)\u00a0 Rosalyn uses the Cash Method Of Accounting
\nfor Federal Income Tax purposes for her business, ROSALYN’S BOOKSTORE, and the business code for the business
\nfor Federal Income Tax purposes is 451211.\u00a0
\nRelevant Financial Information for the business for 2014 is as follows:
\n-1-
\n\u00a0 Gross
\nSales\u00a0
\n\u00a0$126,800
\n\u00a0 Less:
\nReturns And Allowances\u00a0 \u00a0 \u00a02,350\u00a0 \u00a0
\n\u00a0 Expenses
\n\u00a0 Accounting
\nServices\u00a0 $
\n1,800\u00a0
\n\u00a0 Advertising\u00a0 \u00a0 \u00a0 \u00a02,500
\n\u00a0 Salaries
\nAnd Wages\u00a0
\n28,720
\n\u00a0 Payroll
\nTaxes\u00a0 \u00a0 2,866
\n\u00a0 Office
\nRent\u00a0
\n\u00a0 \u00a010,800
\n\u00a0 Entertainment
\nOf Customers\u00a0 \u00a0 500
\n\u00a0 Interest
\n(Miscellaneous Debts)\u00a0
\n\u00a0 \u00a0600
\n\u00a0 Seminar
\n(Related To Bookstore Retailers) \u00a0 \u00a0400
\n\u00a0 Supplies\u00a0 \u00a0 1,450
\n\u00a0 Telephone\u00a0 \u00a0 1,600
\n\u00a0 Utilities\u00a0 \u00a0 1,300
\n\u00a0 INVENTORY
\n\u00a0 Beginning
\nInventory January 1, 2014\u00a0 \u00a0 $28,400
\n\u00a0 Ending
\nInventory December 31, 2014\u00a0 \u00a0 \u00a0 16,800<\/p>\n
\u00a0 Purchases
\nIn 2014\u00a0 \u00a0 \u00a0 12,900
\n\u00a0 All
\nInventory is valued at cost.\u00a0 There were
\nno changes in determining quantities, costs or valuations between Opening and
\nClosing Inventory.
\n\u00a0 (All of
\nthe above Revenues, Expenses and Expenditures represent cash transactions
\n\u00a0 \u00a0 \u00a0that
\noccurred during the year of 2014)
\n\u00a0 DEPRECIABLE
\nASSETS\u00a0
\n\u00a0Original
\n\u00a0 Description\u00a0 \u00a0 \u00a0 \u00a0Cost\u00a0 \u00a0 Date Purchased
\n\u00a0 Personal
\nComputer And Printer\u00a0 \u00a0 $1,600.00\u00a0 \u00a0 January 2, 2014
\n\u00a0 (Five-Year
\nProperty)
\n\u00a0 Computer
\nSoftware\u00a0 \u00a0 250.00\u00a0 \u00a0 January 2, 2014
\n\u00a0 (Three-Year
\nProperty)
\n\u00a0 Furniture
\nAnd Fixtures\u00a0 12,000.00\u00a0 \u00a0March 5, 2011
\n\u00a0 \u00a0(Seven-Year Property)
\n\u00a0 (All of
\nthe above assets are used exclusively
\nat Rosalyn’s Bookstore and were
\n\u00a0 \u00a0originally placed in service on the date
\npurchased)
\n\u00a0 Rosalyn
\nelected to take the Section 179 Deduction for all assets acquired during the
\nyear of 2014.\u00a0 Assets acquired before 2014
\nare depreciated using the designated useful life and the Section 179 Deduction
\nwas not elected.\u00a0 (The First Year Additional Depreciation was not
\nelected for any of these assets).
\nRosalyn also drove in 2014 her personal automobile, a 2013
\nBuick Park Avenue, which she acquired on April 28, 2013, a total of 6,000 miles
\n(500 miles per month) for business purposes.\u00a0
\nRosalyn has always used the automobile in her business and drove the
\nautomobile a total of 15,000 miles for the entire year of 2014 including 5,200
\nof commuting miles (Beginning Mileage Reading was 35,000 miles and Ending
\nMileage Reading was 50,000 miles).\u00a0 Rosalyn
\nuses the Standard Mileage Method (Automatic Mileage Method) ($.56 per mile in 2014)
\nto recover the cost of using her automobile for business purposes.\u00a0 In 2014, Rosalyn also paid $200 for parking
\nand toll fees while using the automobile for business purposes and paid a total
\nof $400 of Interest on the loan for the automobile.
\n-2-
\n(d)\u00a0 The Kellys also own a rent home that they
\nrent out (Actively Participate) to people unrelated to them.\u00a0 The rent home (not Low-Income Housing) is
\nlocated at 825 Lincoln Street Houston, Texas 77048-3252.\u00a0 The Kellys originally began to rent this home
\non May 1, 1995 when its depreciable basis was $30,000 (total cost of $37,500
\nless $7,500 allocated to the Land (Straight-Line Depreciation not
\nelected)).\u00a0 Relevant information that
\npertains to the rent home for 2014 is as follows:
\n\u00a0 Total
\nRental Revenues\u00a0 $5,600
\n\u00a0 EXPENSES
\n\u00a0 Insurance\u00a0 \u00a0 760\u00a0
\n\u00a0 Mortgage
\nInterest \u00a0 \u00a01,980\u00a0
\n\u00a0 Repairs\u00a0 \u00a0 460\u00a0
\n\u00a0 Property
\n(Real Estate) Taxes\u00a0 \u00a0 1,020\u00a0
\n\u00a0 Lawn
\nMaintenance\u00a0 \u00a0 \u00a0 \u00a0320\u00a0
\n\u00a0 (All of the above Rental Revenues
\nand Rental Expenses represent Cash transactions\u00a0
\nthat
\n\u00a0 \u00a0occurred\u00a0
\nduring\u00a0 the\u00a0 year\u00a0
\nof\u00a0 2014)
\n\u00a0 In addition to the above, John Kelly
\ndrove in 2014 his personal automobile, a 2011 Chevrolet Caprice, in attending
\nto the rental property a total of 400 miles (33.33 miles per month).\u00a0 Finally, on June 19, 2014, the Kellys
\npurchased new appliances (ie. refrigerator, stove and dishwasher) (five-year
\nproperty) for the Rental Property for a total purchase price of $1,950.
\n(e)\u00a0 John attended a Banking Seminar in San
\nFrancisco, California.\u00a0 He incurred
\nunreimbursed expenses of $1,450 for airfare, lodging and meals ($160 of the $1,450
\nwas for meals).
\n\u00a0
\n\u00a0 In addition, John drove in 2014 his
\npersonal automobile a total of 1,200 miles (100 miles per month) for work
\nrelated purposes.\u00a0 John purchased the car
\non February 3, 2011 and has always used it for work related purposes.\u00a0 He drove the car a total of 12,000 miles in 2014
\nof which 5,200 were commuting miles (average daily round trip commuting
\ndistance of 20 miles per day) (Beginning Mileage Reading was 50,000 miles and
\nEnding Mileage Reading was 62,000 miles).\u00a0
\nJohn has always used the Standard Mileage Method (Automatic Mileage
\nMethod) in recovering the cost of using his automobile for work related
\npurposes.\u00a0
\n-3-
\n(f)\u00a0 The Kellys incurred the following
\npersonal expenses during the year of 2014:
\n\u00a0 Medical
\nExpenses (Unreimbursed) (Various):
\n\u00a0 \u00a0 For Themselves And Their Children\u00a0 \u00a0 \u00a0 $4,500
\n\u00a0 \u00a0 For Rosalyn’s Mother\u00a0 \u00a0 \u00a0
\n900
\n\u00a0 Real
\nEstate Taxes On Personal Residence\u00a0
\n\u00a0 \u00a02,470
\n\u00a0 Home
\nMortgage Interest On Personal Residence \u00a0 \u00a0 \u00a09,600
\n\u00a0 (Jawdat
\nMortgage Company)
\nCredit Card
\nInterest\u00a0 \u00a0 \u00a0 \u00a01,900
\n\u00a0 Interest
\nOn Car Loans\u00a0 \u00a0 \u00a0 \u00a02,400
\n\u00a0 Charitable
\nContributions – (Cash) (Various Charities)\u00a0 \u00a0 \u00a0 \u00a01,600
\n\u00a0 Charitable
\nContributions – (Property \u2013 Clothing, etc.)\u00a0
\n(FMV)\u00a0 \u00a0 \u00a0460 ($1,000 ORIGINAL COST)
\n\u00a0 (Star Of
\nHope 1240 North Main Street Houston, Texas 77001-8877)
\n\u00a0 Income Tax
\nPreparation Fee\u00a0 \u00a0 \u00a0 \u00a0225
\n(g)\u00a0 The Kellys utilizes the Internal Revenue
\nService (IRS) Optional State Sales Tax Table (See page A-14 through page A-15
\nof the Instructions for Schedule A) to compute their Itemized Deduction for
\nGeneral Sales Taxes (Their State General Sales Tax Rate is 6.25% and their
\nLocal General Sales Tax Rate is 2.00% for a Total Sales Tax Rate of 8.25%).
\n(h)\u00a0 The Kellys paid an unrelated
\nhousekeeper\/child caretaker, Shelly R. Baker, (address 3785 Pinkston Street
\nHouston, Texas 77046-2386 and social security number 466-37-3682) and telephone
\nnumber (713) 864-3267, $300 per month during the entire year of 2014 to care
\nfor their youngest child at their home while they were at work.
\n(i)\u00a0 The Kelly’s 2013 Federal Income Tax Liability was $12,420.
\n(j)\u00a0 Rosalyn Kelly made the following Estimated
\nTax Payments for the year of 2014:
\n\u00a0 April
\n15, 2014\u00a0 $2,000
\n\u00a0 June
\n16, 2014\u00a0 \u00a0 3,100
\n\u00a0 September
\n15, 2014\u00a0 \u00a0 1,200
\n\u00a0 January
\n15, 2015\u00a0 \u00a0 2,100
\n(k)\u00a0 The Kellys will file a Joint Federal
\nIncome Tax Return for the year of 2014.
\n(l)\u00a0 If the Kellys will receive a refund for
\ntheir 2014 Federal Income Tax Return, they would like for the refund to be
\nDirect Deposited into their bank account as follows:
\nName Of Financial Institution:\u00a0 Annette Bank Of Texas
\nRouting Number:\u00a0 111000025
\nChecking Account Number:\u00a0 0049637821732\u00a0 <\/p>\n
(m)\u00a0 Everyone
\non the Tax Return was covered by Health Insurance for the entire year.<\/p>\n
NOTE:\u00a0 Visit “www.irs.gov”
\n(Search in top right hand box for “Tax Tables” then click on “2014\u00a0 \u00a0Instruction
\n1040”) for\u00a0 the Tax Table (not
\nthe Tax Rate Schedules) to use to assist in\u00a0 \u00a0determining the Tax Liability on the Taxable
\nIncome (if preparing Income Tax Return\u00a0 manually).
\n-4-
\nREQUIRED FORMS AND SCHEDULES
\nForm 1040\u00a0 \u00a0 Schedule B\u00a0
\n\u00a0 \u00a0Schedule E \u00a0 Form 2106\u00a0 Form 4562
\n(2)
\nSchedule A\u00a0
\nSchedule C\u00a0 \u00a0Schedule
\nSE\u00a0 Form 2441\u00a0 Form 8582
\nThe Income Tax Project is due on DECEMBER 5, 2015.\u00a0 (PLEASE REMEMBER TO PUT YOUR NAME ON THE
\nPROJECT).
\nCHECK FIGURES
\n\u00a0 1.\u00a0 Schedule E total
\nDepreciation (Line 18): $1,480.80. (Also Line 22 \u2013 Form 4562).
\n\u00a0 2.\u00a0 Schedule E Net Income (Loss) (Line 26): ($644.80).
\n\u00a0 3.\u00a0 Schedule C Net Income (Line 31): $40,595.20.
\n\u00a0 4.\u00a0 Schedule A General Sales Taxes Deduction
\n(Line 5): $1,692.24.
\n\u00a0 5.\u00a0 Schedule A total Deduction (Line 29): $15,883.95.
\n\u00a0 6.\u00a0 Adjusted Gross Income (Line 37 and Line
\n38 (Form 1040)): $110,264.44.
\n\u00a0 7.\u00a0 Tax Liability On Taxable Income (Line 44
\nForm 1040): $10,322.30.
\n\u00a0 8.\u00a0 Form 2441 Credit For Child And Dependent Care Expenses (Line 11):
\n$600.<\/p>\n
\u00a0 9.\u00a0 Child Tax Credit (Line 52 (Form 1040): $950.00.
\n10.\u00a0 Tax
\nRefund (Line 75 and Line 76a (Form 1040)): $1,723.78.<\/p>\n
NOTE:
\nTHERE MAY BE SMALL DIFFERENCES FROM THESE CHECK FIGURES DUE TO
\nROUNDING.taxproject.doc<\/p>\n","protected":false},"excerpt":{"rendered":"
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