Prepare a Tax Return of a client , including the Letter that explains the return and a Spreadsheet of the calculations made.
ACCT 3201– Fall 2021 – Project 2 – Professor Akins Your assignment is to complete and turn in Ms. Amanda Shires’ 2020 Form 1040 along with all required forms and schedules. For purposes of this assignment, you do not need to attach any Forms W-2, 1098, 1099, or K-1. You may work individually or in groups of two or three. You must notify your professor ahead of the due date if you plan to work as part of a group. For each instruction in this document that is not followed, you will receive a 10-percentage point deduction. Due Date This project is due by 6:30pm on Monday, November 8. Assignments will be considered late as of 6:31pm. If a student submits their assignment after the deadline, but before the end of class, they will receive a 10-percentage point deduction. If a student fails to submit their project by the end of class, they will receive a zero on the project. You must turn in your project in both of the following ways: (1) D2L: Upload all required materials to the appropriate assignment dropbox on D2L. (2) Hardcopy: Bring a physical copy of all required materials to our classroom (C-1100). All pages must be stapled or collected in a folder. This project is worth 12% of your final course grade. In addition to being graded on the accuracy of your return positions, you must also abide by the following instructions to avoid losing points: Return, Forms & Schedules (7.5 points – accuracy of positions) · You may use any of the forms, instructions, and materials contained on www.irs.gov. You may also use your textbook for guidance, but keep in mind that you are completing a 2020 return, so it must be prepared using the law in place in 2020 (the book teaches the 2021 law). · You must complete this project without using any online tax preparation software or the aid of any professionals. Each person/group must prepare their own tax return rather than simply copying portions from another source (e.g., another person’s/group’s work). · You must handwrite the tax return. I recommend that you use a pencil. · You must sign your income tax return as a paid preparer. By signing the tax return, for purposes of this class, you are promising that you have complied with the instructions for this project and have not violated the GGC Honor Code in preparing your project. If you work as a group, then each member of the group must sign the return. · You must write your name(s) at the top of the front page of the tax return. · If you believe there is information missing in the client information, you may make reasonable assumptions and fill in the missing information as you feel necessary. Be sure, however, to note your assumptions. Letter (2.5 points – professionalism & completeness) · As an accountant, you only have one thing to sell—your reputation as a professional. That means that all of your correspondences must be grammatically and stylistically flawless. · Your letter must contain enough information to adequately inform your client about the positions you took on the return. You do not need to explain every line on the return, but you should identify at least four positions that you believe your client needs explanation to understand. Remember, you are explaining the return to a non-tax professional, so you need to communicate it in a way that anyone can understand. · Your letter must be an original work product. Each person/group must write their own without copying anything from another source. · You must sign the bottom of your letter and also print your name as part of a signature block. If you are working in a group, all of you must sign/print your names. · The Academic Enhancement Center (AEC) has agreed to conduct one-on-one review sessions to go over your business letter before you submit it to me for a grade. To take advantage of this opportunity, follow these steps: 1) Draft your letter as completely as possible, including adding in your firm’s letterhead, signature block, and any other formatting required to make it look professional. This must be done before contacting the AEC, so they can evaluate a close-to-finished product. 2) Call (678.407.5191) the AEC to schedule an appointment. This must be done far enough ahead of the due date to allow them to make a timely appointment with you (i.e., do not wait until a few days before the project is due). 3) Attend the appointment with the writing tutor and incorporate all of their suggestions and edits into your final draft. 4) Secure written confirmation from the AEC that you attended the appointment. 5) Submit to me (a) a copy of the draft you submitted to the AEC, (b) the final letter (incorporating the revisions), and (c) your signed confirmation that you attended your visit at the AEC. If you go through this process, you will automatically receive full points for your letter (assuming the other requirements of these instructions are satisfied). You will also gain valuable knowledge that you can incorporate outside of this class in your future business communications. Spreadsheet (2 points – professionalism & completeness) · Similar to your client letter, your spreadsheet (i.e., work paper) must be logically organized and professional in appearance. It must have letterhead at the top that matches the letterhead on your letter. This document must show the calculations you undertook to arrive at the positions you put on the return. · You must include your name on the Excel sheet. If you are working in a group, all of you must include your names. 2 Emily Haines – 2020 Federal Income Tax Return Emily Haines lives at 86 Pike Place, Seattle, Washington, 98101. Emily tried to make life work in Lake Saranac, NY, for the past 20 years, but it had become too difficult to find a job flexible enough to accommodate her family obligations. As such, she found a job in Seattle, Washington in 2020 to get a fresh start. Emily is a single mother with three kids—James, Joshua, and Joules. Emily’s husband, Jarrett, passed away in 2018, which is the main reason she experienced a change in circumstances. She has not remarried. While she and her husband always filed a joint income tax return, she is now confused about which filing status is most beneficial to her. She does know, however, that she would like to receive any tax refund via check. She has informed you that she has no interests in foreign bank accounts, foreign trusts, or virtual currencies. Further, she would like to contribute to the Presidential Election Campaign. Emily’s family information is listed in the below table: Name Age SSN Emily 46 123-45-5678 James 23 234-56-7890 Joshua 16 345-67-8901 Joules 11 456-78-9012 Emily’s oldest child, James, is single and is completing his graduate school work at the University of Washington (EIN 36-2167817). The University is located at 975 University Avenue, Seattle, Washington 98112. James finished his undergraduate work at New York University in 2018, and 2020 was his fifth year as a full-time student pursuing higher education. James works 10 hours per week at the University of Washington to help support himself. He earned $3,500 of gross income in 2020 and prepared his own taxes. Emily paid for the majority of James’ support, providing $14,000 for various expenses (tuition, books, clothing, rent, food, medical bills). James’ main expenses were for textbooks he bought on Amazon ($800) and tuition paid to the college ($6,500). James received Form 1098-T from the University of Washington for the year. Emily’s other two children lived with her throughout the year. Joules, her youngest, is in daycare most days after school, which allows Emily to work. Joule’s care cost $4,500 for the year. The daycare, Grow Up & Blow Away, LLC (EIN 72-6781234), is located at 703 Space Needle Drive, Seattle, Washington 98108. Emily had the following Forms W-2 from 2020: Company Gross Income Federal Tax Withholding State Tax Withholding Old World Underground, Inc. $29,500 $750 $315 Dreams So Real, LLC $9,085 $110 $42 Pagans in Vegas, Inc. $12,300 $290 $120 Each company properly withheld payroll taxes. Further, Emily received both Economic Impact Payments in 2020, but she is not eligible for the Recovery Rebate Credit. Also, her entire family qualified for minimum essential health insurance coverage for the full year. Back in 2019, Emily began her own record producing business, which caters to musicians and recording artists throughout the Pacific Northwest. This business has allowed her to earn some of the extra money she needs to support James. Emily’s business is on the cash method of accounting, and she does not have any employees or independent contractors. The business does not own any equipment. Emily’s business earned $17,500 of gross receipts for 2020. The business spent $10,200 to rent space in a studio between May and December, it spent $1,080 on advertising materials, and it spent $400 on professional services. In addition to her earned income, Emily received the following income during the year: · Interest income – First Seattle Bank$1,010 · Interest income – Synthetica, Inc. bond$2,500 · Interest income – City of Tacoma Municipal Bond$190 · Washington state income tax refund$400 · Cash gift from her friend, Colin Meloy$3,100 The state tax refund was from taxes Emily paid in 2019. Emily claimed her itemized deductions in 2019 because they exceeded her standard deduction by $3,200. Her state income taxes made up part of her itemized deductions in that year. Emily also received $145,000 of life insurance proceeds from Stratton Oakmont, Inc., when her grandfather passed away during the year. Emily made the following cash contributions to qualified charities during the year: · Contribution to New York University$1,500 · Contribution to the University of Washington$3,000 · Contribution to the Emmanuel Anglican Church$4,500 · Contribution to the American Cancer Society$4,000 · Contribution to her friend, Benjamin Gibbard$500 Here are Emily’s remaining expenses for the year: · Real property taxes (main residence)$2,000 · Vehicle registration fee (based upon age of car)$220 · Main residence mortgage interest (from Form 1098)$3,200 · Dentist visit (unreimbursed)$100 · Pharmacy prescriptions (unreimbursed)$115 2