Part 1 of your assignment is to prepare the couples federal income tax return, Form 1040 for
Question:
- Part 1 of your assignment is to prepare the couple’s federal income tax return, Form 1040 for the year ended December 31, 2020 plus any additional schedules necessary. Please utilize the facts and the information included in the Smithfield Family Tax Documents (both below) to complete this assignment. We will be using the 2020 federal income tax forms, rates, and laws. For any information not provided, please use reasonable assumptions.
- Part 2 of your assignment is to write a short memo explaining what you would advise them to do in order to save more for retirement and pay fewer taxes or any other ideas.
Scenario Information
You have new clients coming into your accounting firm today. They are Benjamin and his wife Carmen Smithfield who will file a joint return for income tax purposes.
Benjamin and Carmen are U.S. citizens and lived in the U.S. for the entire year. Neither Benjamin or Carmen are the qualifying child or dependent of anyone else.
They have four children.
- Chastity is currently living at home. She is a freshman at a local college.
- Paul and is a sophomore in high school.
- Mary and Markie are their two children attending seventh grade.
Taxpayer Information
| Name | Benjamin Smithfield |
|---|---|
| SSN | 023-11-1115 |
| Date of Birth | 09-17-1975 |
| Occupation | Registered Nurse |
| Name | Carmen Smithfield |
|---|---|
| SSN | 023-11-1114 |
| Date of Birth | 05-01-1978 |
| Occupation | Nutritionist |
Address: 55 Cedar Crest Lane in Middletown, PA 17057.
Dependent Information
| Name | Chastity Smithfield (daughter) |
|---|---|
| SSN | 023-11-1113 |
| Date of Birth | 12-16-2002 |
| Name | Paul Smithfield (son) |
|---|---|
| SSN | 023-11-1113 |
| Date of Birth | 06-12-2005 |
| Name | Mary and Markie Smithfield (daughters) |
|---|---|
| SSN | 023-11-1111 and 023-11-1112 |
| Dates of Birth | 07-04-2012 |
Income
Benjamin works as a registered nurse at the VA hospital. Carmen is a nutritionist for UPMC.
Landscaping Business
Benjamin also has a small landscaping business where he does simple things like mulch, cut grass, and trim bushes for friends and people who he knows from his church. He says last year he made about $15,000 from his landscaping business.
| John Deere Lawnmower | $1,899.00 |
|---|---|
| Gardening Gloves | $ 35.00 |
| Electric Tree Trimmer | $ 495.00 |
| Hedge Clippers | $ 145.00 |
| Weed Wacker | $ 75.00 |
| Composters | $ 299.85 |
| Total Landscaping Expenses | $2,948.85 |
Rental Properties
They also own several rental properties which Carmen manages. Carmen has no other experience in real estate. The first property at 55 Oak Terrace in Middletown PA was purchased for $75,000 fifteen years ago. That property had $10,800 in rent last year. The second property is located at 25 Spruce Street in Middletown PA and has two apartments in it, each one is rented out for $600 a month. It was rented the full year. That property was bought for $120,000 five years ago.
In 2020 Benjamin and Carmen purchased a new 2020 Ford 150 to use exclusively for the rental business so they could do repairs and maintenance on the properties easier themselves. The Ford 150 cost $40,000. The oil, gas, insurance, and maintenance of the truck cost them $7,892. The business-related mileage was 5,498 miles.
The real estate taxes for the rental properties were $3,100 and $3,500. The property taxes for their home was $4,200. The mortgage interest for the properties is provided in the attached documents.
| Oak Terrace Taxes | $ 3,100.00 |
|---|---|
| Oak Terrace Repairs | $ 495.00 |
| Oak Terrace Property Insurance | $ 540.00 |
| Total Expenses | $ 4,135.00 |
| Spruce Street Taxes | $ 3,500.00 |
|---|---|
| Spruce Street Repairs | $ 900.00 |
| Spruce Street Property Insurance | $ 735.00 |
| Spuce Street Municipal Fine for Uncut Grass | $ 250.00 |
| Total Expenses | $ 5,385.00 |
| Gas | $ 6,642.00 |
|---|---|
| Oil & Filters | $ 195.00 |
| Tires | $ 1,055.00 |
| Total Expenses | $ 7,892.00 |
| F150 Mileage | 5,498 |
Miscellaneous Deductions
Benjamin is a member of a nurses association at his job. His union dues for this association were $1,250 last year. He also buys his own nurse's uniform scrubs and a stethoscope which cost him $1,550.
They donated $3,750 to their church last year and donated $500 to the Sierra Conservation Organization.
They spent $2,500 on dental braces for Chastity last year. Miscellaneous doctors' bills totaled $6,325. Cosmetic surgery for Chastity cost $900 after she fell down some steps and broke her nose. They spent $1,750 for a chiropractor for Benjamin's back, because he works very hard, and $1,500 for an optometrist for Carmen so she can see better. Prescription drugs cost $4,850 and vitamins cost them $1,250.
Carmen's job offers her a 401K. However, Carmen and Benjamin don't like having money taken out of her paychecks because they like to contribute the maximum possible to their Roth IRA. They would like your advice on ways they can save the most money for retirement and pay the least amount of taxes.
Tax Documents
The Smithfield family provided the following documents: Smithfield Family Tax Documents
Requirements
Complete the 2020 Federal Income Tax Return for the Smithfield family. Attach all supplemental schedules to complete your federal income tax return. Please utilize the tax rates found in the Tax Return Project Fact Pattern file.
Files and Forms
1040, Schedule 1,A,B,C,D, E, form 8949
Expert Answer:
2020 Form 1040 for Benjamin and Carmen Smithfield Filing Status Married Filing Jointly Exemptions 6 Benjamin Carmen Chastity Paul Mary and Markie Income Wages salaries and tips Benjamin 110000 Wages s... View the full answer
