Tax Return Project: can be done individually or in groups of 2 or 3 Due Date: submit one copy per group in person on 4/25/2022 (Tuesday of last week of classes) Deliverables: Form 1040, Schedule 1, Sch. A, Sch. C, Sch. D, Form 4797 (in this order) Milestone Dates: You must use the time given in class effectively. Go through the items in the order they are listed and complete the below items by the given dates: No questions on # 1-2h are allowed after 4/6 No questions on #2i-4 are allowed after 4/13 No questions on # 5-7 are allowed after 4/20 Information: Julie and David Day are married taxpayers who file jointly. Their addresses and social security numbers have been pre-populated into the forms. They also have 3 dependent children: two children who live at home (under 17) and one 20-year old who is a full time student at a state university. Their names and social security numbers have also been pre-populated. David Day works as a claims adjuster for the insurance company with a gecko as its mascot. Julie is self- employed as a life coach. 1. David received the following 2022 earnings statement from his employer. Description Amount Gross Pay $100,000 401(k) contribution (5,000) Pretax health insurance premiums (2,000) Federal income tax withheld (6,000) FICA - Social Security and Medicare (7,650) State income tax withheld (3,000) $76,350 Net Pay 2. Self-employment income: Julie operates her life coaching business as a sole proprietorship and uses the cash method for tax purposes. Some information on Schedule C has been pre-populated. Use the information below to fill out the rest of Schedule C. Note that some of the items may be reported elsewhere on the tax return (i.e., not all of them go directly on the Schedule C). a. Cash receipts of $90,000 during 2022. She also performed a one-week seminar at the end of 2022 for which she received a $5,000 payment on January 10, 2023. b. For financial reporting purposes, she recorded $48,000 of labor costs related to her assistant during 2022. She didn't give the final $4,000 paycheck to her assistant until the first week of 2023. c. Paid $3,650 for the employer portion of FICA taxes for her assistant's wages. d. Paid $3,000 of property taxes on her office building. e. Julie paid $1,400 for utilities and another $400 for office supplies that were completely used by the end of the year. f. Julie prepaid $6,000 of insurance for a 12-month period beginning July of 2022. g. Julie prepaid interest of $600 on a business loan for the six-month period Oct. 2022-March 2023. h. Julie spent $1,000 on business meals at restaurants during 2022. i. Depreciation: Calculate the amount of depreciation on the below assets. You do not need to complete Form 4562. Assume Julie took 50% bonus depreciation on the tangible personal property in the year she placed the asset into service. Also, recall that you must adjust the full year depreciation rate when an asset is sold during the year. Description Life Cost Basis Computer 5 2,000 Furniture 7 Office Building 39 4,000 120,000 Purchase Date January 2017 Sale Date N/A Convention Half-year December 2018 N/A Mid-quarter Mid-month September 2018 July 2022 j. Sale of the office building: Julie sold the office building in July of 2022. The amount realized on the sale is $135,000. Assume the adjusted basis at the date of the sale is $100,000 (cost basis 120,000 -20,000 of accumulated depreciation). 1. Calculate the gain or loss on the asset sale, and then report it in Part Ill of Form 4797. Line 32 on the second page of the form eventually transfers to the first page of the form. Julie has $6,000 of nonrecaptured net $1231 losses from two years ago. Report accordingly on page 1 of the Form 4797. o Finish completing Form 4797, and you will find that a portion of the gain ends up on Schedule D Line 11, and a portion of the gain ends up on Line 4 of Schedule 1. k. Record the total net profit from the complete Schedule C on the applicable line of the Form 1040. Julie made estimated tax payments of $5,000 related to her coaching business. Report the amount directly on Line 26 of Form 1040. m. Julie contributed $6,000 to a SEP IRA. 3. Self-employment taxes: Calculate the amount of self-employment taxes related to Julie's self- employment income and report on the relevant lines of the Form 1040. You do not need to complete Form SE or Schedule 2, but it may help to look at the Form SE to double-check your calculation. 4. Qualified business income deduction: Calculate the qualified business income deduction and enter on Line 13 of Form 1040. Recall that QBI is net income from self-employment less the deductible component of self-employment taxes (i.e., take your Schedule C net income number and subtract the deduction for self-employment taxes you calculated above). Note that the Days do not have enough taxable income to worry about either excluded services or the wage limitations. 5. Interest and Dividends: The Days received the below payments related to interest and dividends for the year. Report the taxable amounts on the correct lines of the Form 1040. $200 interest on an original issue corporate bond, discount amortization for the year is $50 $125 interest on a corporate bond, premium amortization for the year is $25 $200 interest on a city of Sugar Land bond . $2,000 of qualified dividends and $1,000 of nonqualifying dividends