Federal income tax | Accounting homework help


Read/review the following resources for this activity:

You will continue to utilize the IRS website to search for, complete, and save appropriate forms to your computer.

Review the scenario below and determine which IRS tax form is required to complete the task. Visit the IRS website and use the Search field to locate the form, or visit the Forms and Pub area. Please note that the design of the website is subject to change, so use your critical thinking and research skills to navigate the site if needed.

For purposes of this assignment, complete the tax return but ignore attaching the W-2, to the front page of Form 1040. If required information is missing, use reasonable assumptions to fill in the gaps.

Tax Scenario

Sarah Hamblin is your client. Sarah and her now ex-husband Kevin were legally divorced on March 1 of the year for which you are completing the tax return. As of the end of year, Sarah was single. Sarah and Kevin had one child, an 11-year-old girl named Elizabeth. As part of the divorce decree, Sarah was given custody of Elizabeth and Kevin was required to pay child support for Elizabeth’s care as well as alimony to Sarah until she remarries or dies. Because Kevin would be making child support payments, the divorce decree stated that Kevin would be permitted to claim the tax dependency exemption for Elizabeth until she no longer qualifies as a tax dependent of her parents. The decree obligates Sarah to sign and/or file any required forms to cause this result to occur.

Sarah rents a home (separate from Kevin) that she pays for herself. Elizabeth lives with Sarah most of the time but she visits and stays with her father every other weekend and most holidays. During the year, Elizabeth stayed at Kevin’s house a total of 74 nights.

The following information relates to Sarah’s tax year:

  • Sarah’s social security number is 123-43-4321
  • Elizabeth’s social security number is 123-34-1234
  • Sarah’s mailing address is 1245 Rose Petal Drive, Madison, Wisconsin 53562
  • Elizabeth is a U.S .citizen

Sarah Hamblin received the following income during the year:

Gross Wages from a W-2 – $45,000

Federal Income Tax Withholding – $6,950

All applicable and appropriate payroll taxes were withheld by the employer.

During the year, Sarah also received the following:

  • Child Support Payment from Kevin Hamblin: $12,000
  • Alimony Payment from Kevin Hamblin: $16,000
  • Gift from her father to help with legal bills: $8,500
  • Interest income on U.S. Treasury Bond: $400
  • Interest income of Madison City Bond (municipal): $250
  • Interest income from First Bank of Madison: $165
  • Life insurance proceeds on the death of her mother: $45,000

Sarah is a 50% owner in a friend’s company, Bright Day Flowers (“BDF”). BDF is a Subchapter S corporation. The company reported ordinary business income for the year of $22,000. Sarah acquired the stock several years ago. BDF’s employer identification number is 56-3535353.

Sarah won 10 tickets through a radio contest to the touring Broadway-style production of Wholesome. The value of the tickets was $200 each. Sarah took her friends from work to the production.

Sarah lost her job with Central Wisconsin Heating and Air on November 15 because of a reduction in work force. She collected $1,250 in unemployment benefits. She is currently looking for another job.

Sarah did not own, control or manage any foreign bank accounts nor was she a grantor or beneficiary of a foreign trust during the tax year.

Through work, Sarah was provided with certain benefits as part of her employment:

  • Group-term life insurance coverage of $50,000. Cost to cover Sarah for the company for the tax year is $150.
  • Access to the company photocopy machine. Sarah estimates she made $40 worth of copies during the year primarily for use with her church group activities.

Sarah reported no itemized deductions other than any described above.

Sarah does not want to contribute to the Presidential Election Campaign. She would like to receive a refund (if any) of any taxes she may have overpaid for the year. Her preferred method of receiving the refund is by check.

When you are finished with the form, download it, save it to your computer or flash drive, and then submit it in Moodle.

Grading and Assessment
This assignment will be graded by your instructor for accuracy.

Course Learning Outcome(s): 1, 2, 3
1. Articulate the rules of the Taxation System.
2. Identify taxability of items.
3. Prepare a comprehensive income tax return with tax software.

Due Date: By 11:55 pm ET on Sunday

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