1. Dona S. Parson (SSN 456-37-7685; DOB 5-7-1971) is a single mom who works full-time as a financial analyst at Trell Corp. Her daughter, Carla P. Gaffney (SSN 456-96-0756; DOB 1-22- 2002) is a full-time student at the University of Houston. Both Dona and Carla live at 8311 Fairview Lane, Houston, TX 77077. The phone number Dona wishes to show on her tax return is her daytime work number of 713-555-6654.

2. Both Donna and Carla were covered by health insurance from Blue Cross Blue Shield for 12 months of the year, as reported on their Forms 1095-B.

3. Dona wants to contribute $3 to the Presidential Election Campaign Fund.

4. Dona received a Form W-2 from her employer, Trell Corp., 8375 West Drive, Houston TX 77204 (EIN 89-4658910) which reported the following items:

Box 1: Gross wages and taxable benefits $92,000

Box 2: Federal income tax withheld 5,000

Box 3: Social security wages 92,000

Box 4: Social Security withheld 5,704

Box 5: Medicare wages 92,000

Box 6: Medicare tax withheld 1,334

5. Dona received Forms 1099-INT reporting in box 1 (regular or OID interest) the following interest income during the year:

Chance Bank (savings account) $2,000

Whitemore Corp. (corporate bonds) 1,000

Safe Logistics, Inc. (corporate bonds) 1,500

6. Dona has neither a foreign financial account nor a foreign trust, and she did not receive any distributions from a foreign trust during the year.

7. Dona received a Form 1099-MISC from Fleet State Title Co. (EIN 83-6941581) which reported $900 in box 3 (other income). Dona was a member of a class-action lawsuit and the $900 represents her share of punitive damages assessed by the court against Fleet State Title Co. Dona incurred no direct legal expenses related to the settlement.

8. As a hobby, Dona paints abstract portraits. During the year, she sold one of her paintings at an art show for $100. She also incurred expenses of $500 for painting supplies.

9. Dona paid $14,000 of alimony to her former husband, Ned Gaffney (SSN: 451-84-1324). The written divorce decree is dated July 15, 2015.

10. Dona incurred and paid the following personal expenses during the year:

Taxes:

Sales tax rate (State 6.25%; Local 2.00%) 8.25%

Sales tax on new car (cost $32,870; 8.25% tax rate) 2,712

Real estate property tax on home (reported by Chance Bank on Form

1098 - see interest, below) 9,000

Automobile registration (based on weight and horsepower) 150

Interest:

Mortgage used to purchase home (principal balance $300,000;

origination date July 15, 2015; reported by Chance Bank on Form 1098 -

see taxes, above) 13,800

Credit cards 600

Auto loan 2,800

Cash contributions (all substantiated):

Museum of Fine Arts 500

Red Cross 800

University of Houston 3400

Democratic Party 250

Other:

Losing lottery tickets 100

11. Carla graduated from Memorial City High School in May and attended the University of Houston on a full-time basis from August to December 2020. In August, Dona paid $7,500 in qualified tuition for Carla's first semester. In December, Dona paid another $7,500 in qualified tuition for Carla’s second semester beginning in January 2021. Carla received a

Form 1098-T from the University of Houston, 5000 Gulf Freeway, Houston 77004 (EIN 74-6001399) reporting payments received for qualified tuition and related expenses of $15,000 in box 1. Box 8 was check marked to indicate that Carla is at least a half-time student. Carla has not been convicted of a felony for possessing or distributing a controlled substance.

12. If preparing the return with TaxAct Professional 2020 or similar professional tax preparation software, complete form 8867 (Paid Preparer’s Due Diligence Checklist). Assume you have interviewed Dona and asked the appropriate questions and obtained appropriate documentation to support the income, deductions, and credits claimed on the return, including Dona’s filing status.

13. If you are using ProSeries 2020, please select “non-paid preparer” on part V (Return Preparer and Third Party Designee Information) of the Information Worksheet. This will eliminate error messages regarding the preparer and preparer’s code, as well as avoid messages regarding form 8867 (Paid Preparer’s Due Diligence Checklist).

14. If you are using ProSeries 2020, please do not attempt to change the preparer name. To remove the name of the University of Houston as the preparer, please see item 13, above.

15. Below are check figures to help you when preparing the return: Total income $97,500 AGI 83,500

Assignment
Complete Dona Parson's Federal income tax return for 2020. Assume that Dona is filing her return on time (before May 17, 2021). Allow her tax refund to be mailed to her rather than using electronic direct deposit. In preparing the return, you will need to use forms 1040 and 8863, and schedules 1, 3, A and B. If you are preparing the return as a tax professional, you will also need to include form 8867. The total tax return is 9 to 11 pages plus any statements supporting tax items that you wish to include.

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