Tax return

Topics: Taxation in the United States, Insurance, Taxation Pages: 7 (1260 words) Published: March 15, 2014
Income Tax Return Assignment

You have your own CPA tax practice and you are greeted with new clients: Albert and Jenny Cunningham and their two children. You meet with them and they give you the information shown below. They would like you to prepare their tax return for 2013. They would like to file married filing jointly. NOTE: Reference to the “current tax year” below for the taxpayers, Albert and Jenny, it is for the calendar year 2013. Albert and Jenny Cunningham (both 42 years old) are married and have 2 children. Their son, Michael is 8 and their daughter, Ashley, is 3. They live at 151 32nd Avenue Texas, TX 12345. The following table summarizes the birthdates, etc. for the family members:

Social Security Number
Date of Birth
Albert
523-33-3456
May 12
Jenny
454-66-1654
March 15
Michael
523-45-7890
September 16
Ashley
523-50-6423
November 3

Jenny sells cosmetics for Maxim Company. Albert is Vice Principal at the local high school and he works independently as a repair/handyman. Their income from their full time jobs is as follows:

Salary
Federal Tax Withheld
State Tax Withheld
Jenny
$85,000
$10,500
$5,400
Albert
$45,000
$6,100
$3,150

NOTE: the above income is before considering the following items: 1. Maxim has a cafeteria benefits plan that lets employees select benefits equal to as much as 10% of their annual salary or receive the cash equivalent. Jenny selects the max of 10% of her salary and chooses dental insurance, $40,000 in group term life insurance, disability insurance, and company-provided day care. The total cost to Maxim of those benefits is $6,600. Jenny takes the remaining benefits of $1,900 to which she is entitled in cash. 2. Because Maxim does not have an employee pension plan, Albert and Jenny each contribute $5,500 to their individual retirement accounts. 3. The school district gives Albert medical insurance and group term life insurance equal to 100% of his annual salary. He pays an additional $125 a month to cover Jenny and the children under his medical plan and this is deducted after tax from his salary. 4. The school district also has a qualified contributory pension plan to which it contributes 5% of Albert’s annual salary. Albert is required to contribute 3% of his salary. Albert is allowed to make additional contributions of up to 2% of his salary, and he contributes the maximum.

In addition to the life insurance coverage provided by their employers. Albert and Jenny purchase $100,000 in whole life insurance on each other, along with a disability insurance policy for Albert. The checkbook analysis table that follows shows the costs that they paid for each of these policies. Jenny's Job requires her to travel throughout her five-state region. Maxim has an accountable reimbursement plan from which Jenny receives $8,500 for the following expenses: Airplane transportation and auto expenses

$4,330
Lodging
2,350
Incidentals
400
Note: She has used her Honda Civic in her work for Maxim Company. During 2013, she properly documented 6,000 business miles of which she was reimbursed in the above amount list. Jenny elects to use the standard mileage method to calculate her car expenses. She spent $45 on tolls and $135 on parking related to her cosmetic sales.

In May,Jenny and Albert go to the Gulf Stream Casino with Jenny's client Beth and her husband. After wagering $320 without winning, Jenny wins $2,600 on the blackjack table. The casino withholds $780 for federal income tax and $260 for Colorado income taxes.

Albert hires his students to help him in his summer repair/handyman business. This year, he is able to hire 7 students. Albert shuttles between sites, supervising the job talking to prospective clients and helping. He treats the students as independent contractors. His business generates the following income and expenses. Revenues

$112,000
Supplies
33,100
Other material
6,100
Insurance...
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