Individual tax return problem 1

Appendix C

Ten additional Comprehensive Tax Return problems—covering individual, corporation, partnership, and S corporation tax returns—can be found in the Connect Library.

INDIVIDUAL TAX RETURN PROBLEM 1 Required:

∙ Use the following information to complete Keith and Jennifer Hamilton’s 2017 federal income tax return. If any information is missing, use reasonable assump- tions to fill in the gaps.

∙ Form 1040, supporting schedules, and instructions to the forms and schedules can be found at the IRS website (www.irs.gov).

Facts:

1. Keith Hamilton is employed as an airline pilot for Flyby Airlines in Las Vegas, Nevada. Jennifer is employed as a teacher’s assistant at Small World Elementary School, in Henderson, Nevada. Keith and Jennifer live in a home they purchased this year. Keith and Jennifer have three children who lived with them all year, Joshua (17), Danielle (14), and Sara (10). Keith and Jennifer provided the following personal information:

∙ Keith and Jennifer do not want to contribute to the presidential election campaign. ∙ Keith and Jennifer do not claim itemized deductions. ∙ Keith and Jennifer live at 3678 Blue Sky Drive, Henderson, Nevada 89052. ∙ Keith’s birthday is 10/12/1972 and his Social Security number is 535-22-4466. ∙ Jennifer’s birthday is 7/16/1975 and her Social Security number is 535-44-2255. ∙ Joshua’s birthday is 6/30/2000 and his Social Security number is 454-54-5454. ∙ Danielle’s birthday is 8/12/2003 and her Social Security number is 343-43-4343. ∙ Sara’s birthday is 5/13/2007 and her Social Security number is 232-32-3232.

Comprehensive Tax Return Problems

spi18394_appc_C-C26_online.indd 3 4/17/18 3:23 PM

Appendix C C-1

2. Keith received the following Form W-2 for 2017 from Flyby Airlines.

3. Jennifer received the following Form W-2 for 2017 from Small World Elementary School.

4. During 2017, Keith and Jennifer received $550 in interest from Las Vegas municipal bonds, $1,070 interest from U.S. Treasury bonds, and $65 from their savings account at SCD Credit Union. Keith and Jennifer are joint owners of the Las Vegas city bonds and the U.S. Treasury bonds. They have a joint savings account at SCD Credit Union.

22222 Void a Employee’s social security number For Official Use Only ▶

OMB No. 1545-0008

b Employer identification number (EIN)

c Employer’s name, address, and ZIP code

d Control number

e Employee’s first name and initial Last name Suff.

f Employee’s address and ZIP code

1 Wages, tips, other compensation 2 Federal income tax withheld

3 Social security wages 4 Social security tax withheld

5 Medicare wages and tips 6 Medicare tax withheld

7 Social security tips 8 Allocated tips

9 Verification code 10 Dependent care benefits

11 Nonqualified plans 12a See instructions for box 12 C o d e

12b C o d e

12c C o d e

12d C o d e

13 Statutory employee

Retirement plan

Third-party sick pay

14 Other

15 State Employer’s state ID number 16 State wages, tips, etc. 17 State income tax 18 Local wages, tips, etc. 19 Local income tax 20 Locality name

Form W-2 Wage and Tax Statement 2017 Copy A For Social Security Administration — Send this entire page with Form W-3 to the Social Security Administration; photocopies are not acceptable.

Department of the Treasury—Internal Revenue Service

For Privacy Act and Paperwork Reduction Act Notice, see the separate instructions.

Cat. No. 10134D

Do Not Cut, Fold, or Staple Forms on This Page

535-44-2255

36,825.00

39,925.00

39,925.00

5,524.00

2,475.35

578.90

Small World Elementary School 333 Tiny Tot Lane Henderson, NV 89053

D 3,100

Jennifer Hamilton 3678 Blue Sky Drive Henderson, NV 89052

NV 123456789 36,825.00 0.00

91-0001003

X

22222 Void a Employee’s social security number For Official Use Only ▶

OMB No. 1545-0008

b Employer identification number (EIN)

c Employer’s name, address, and ZIP code

d Control number

e Employee’s first name and initial Last name Suff.

f Employee’s address and ZIP code

1 Wages, tips, other compensation 2 Federal income tax withheld

3 Social security wages 4 Social security tax withheld

5 Medicare wages and tips 6 Medicare tax withheld

7 Social security tips 8 Allocated tips

9 Verification code 10 Dependent care benefits

11 Nonqualified plans 12a See instructions for box 12 C o d e

12b C o d e

12c C o d e

12d C o d e

13 Statutory employee

Retirement plan

Third-party sick pay

14 Other

15 State Employer’s state ID number 16 State wages, tips, etc. 17 State income tax 18 Local wages, tips, etc. 19 Local income tax 20 Locality name

Form W-2 Wage and Tax Statement 2017 Copy A For Social Security Administration — Send this entire page with Form W-3 to the Social Security Administration; photocopies are not acceptable.

Department of the Treasury—Internal Revenue Service

For Privacy Act and Paperwork Reduction Act Notice, see the separate instructions.

Cat. No. 10134D

Do Not Cut, Fold, or Staple Forms on This Page

535-22-4466

163,645.00

127,200.00

178,645.00

31,000.00

7,886.40

2,590.35

Flyby Airlines 375 West Flight Blvd. Las Vegas, NV 89119

D 15,000

Keith Hamilton 3678 Blue Sky Drive Henderson, NV 89052

NV 987654321 163,645.00 0.00

91-0001002

X

Source: Form W-2, Department of the Treasury - Internal Revenue Service, 2017

Source: Form W-2, Department of the Treasury - Internal Revenue Service, 2017

spi18394_appc_C-C26_online.indd 1 4/17/18 3:23 PM

C-2 Appendix C

5. On January 21, 2017, Jennifer was involved in a car accident. Because the other driver was at fault, the other driver’s insurance company paid Jennifer $1,350 for medical expenses relating to her injuries from the accident and $300 for emotional distress from the accident. She received payment on March 15, 2017.

6. Keith’s father died on November 15, 2016. Keith received a $100,000 death benefit from his father’s life insurance policy on February 8, 2017.

7. On February 15, 2017, Keith hurt his arm on a family skiing trip in Utah and was unable to fly for two weeks. He received $4,000 for disability pay from his disability insurance policy. He received the check on March 2, 2017. Flyby Airlines paid $600 in premiums on this policy during 2017. The disability insurance policy premiums are paid for by Flyby Airlines as a fully taxable fringe benefit to Keith (the premiums paid on his behalf are included in Keith’s compensation amount on his W-2).

8. Jennifer’s grandmother died on March 10, 2017, leaving Jennifer with an inheri- tance of $30,000. (She received the inheritance on May 12, 2017.) Flyby Airlines had space available on its Long Island, New York, flight and provided Keith, Jennifer, and their three children with free flights so they could attend the funeral. The value of the ticket for each passenger was $600.

9. On April 1, 2017, Jennifer slipped in the Small World Elementary lunchroom and injured her back. Jennifer received $1,200 in worker’s compensation benefits because her work-related injury caused her to miss two weeks of work. She also received a $2,645 reimbursement for medical expenses from the health insurance company. Small World Elementary pays the premiums for Jennifer’s health insur- ance policy as a nontaxable fringe benefit.

10. On May 17, 2017, Keith and Jennifer received a federal income tax refund of $975 from their 2016 federal income tax return.

11. On June 5, 2017, Keith and Jennifer sold their home in Henderson, Nevada, for $510,000 (net of commissions). Keith and Jennifer purchased the home 11 years ago for $470,000. On July 12, 2017, they bought a new home for $675,000.

12. On July 25, 2017, Keith’s aunt Beatrice gave Keith $18,000 because she wanted to let everyone know that Keith is her favorite nephew.

13. On September 29, 2017, Jennifer won an iPad valued at $500 in a raffle at the annual fair held at Joshua’s high school.

14. Keith and Jennifer have qualifying insurance for purposes of the the Affordable Care Act (ACA).

INDIVIDUAL TAX RETURN PROBLEM 2 Required:

∙ Use the following information to complete Johnelle and Latoya Henry’s 2017 federal income tax return. If any information is missing, use reasonable assumptions to fill in the gaps.

∙ You may need the following forms to complete the project: Form 1040 and Schedule A. The forms, schedules, and instructions can be found at the IRS website (www.irs.gov). The instructions can be helpful in completing the forms.

Facts:

1. Johnelle Henry is employed as a human resources manager for Toys Unlimited, Inc., and Latoya is a financial planner for her mother’s company, Long-term Investments, Inc., a full-service wealth-planning firm. They provide the follow- ing information:

∙ They both want to contribute to the presidential election campaign. ∙ They live at 9876 Old Waverly, Charleston, South Carolina 29401.