Tax Return Project Instructions and Tips

For your tax return project, you need to prepare a 2013 federal income tax return for Will S. and Mari N. Frost. Their information is located in Appendix E, Problem 1 of the file posted to Canvas. We will have a hands-on session on Thursday, March 5 during class time. Bring the tax return information, your laptop, and your software to that session. Plan to take many notes.

On or by Friday, April 17 at 2PM, you should turn in a physical copy of the following Forms and Schedules for the Frosts, produced with H&R Block home software: Form 1040, Schedules A-D, Form 4562 (just the “depreciation summary” page, not all six pages of this form), Form 8829 (Home expenses), and Form 2106 (unreimbursed …show more content…
Similar to the gain from the like-kind exchange (see #6 above), the gain on the installment sale is also reported on Line 11 of Part II of Schedule D (Form 1040).

8. nonbusiness bad debt

9. worthless securities

11. South Dakota does not have an income tax, so the Frosts should claim a sales tax deduction. Many taxpayers do not save their purchase receipts to document the sales tax they paid during the year, so they compute their sales tax deduction using the Optional Sales Tax Tables in the Schedule A instructions. For the Frosts, this computation yields a sales tax deduction of $1,728. Since they can substantiate $3,200 in sales tax paid during 2013, they should deduct $3,200 on line 5 of Schedule A (Form 1040). Be sure the sales tax box on line 5b is checked.

Extra Credit: Problem 2

A brief summary of the Thomsons tax return for 2013 appears below.

Gross income—
Salary $90,180
Interest Income 600
Taxable Refund 450
Schedule C 230,521
Schedule D (3,000)
Schedule E 618
Other Income – Jury pay 700
Deductions for AGI –
Deductible self-employment tax (10,136)
Line 36 – Jury pay (700)
AGI $309,233
Schedule A - Itemized deductions (deductions from AGI) (59,114)
Personal and dependency exemptions (17,940)
Taxable income $232,179

Computation of tax liability through use of the Schedule D Tax Worksheet yields a liability of $52,932. To this is added AMT of $15,469 (see Form 6251), self-employment tax of $20,272 (see Schedule SE)