Accounting (Taxes)

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Scenario:

The Park family consists of the following:

  • Jackie O. Park; age 40;  SSN: 123-45-6789; business analyst; single; unmarried
  • Leslie T. Park; age 16;  SSN: 234-56-7890; daughter; high-school student; lives at home
  • Alex K. Park; age 12;  SSN: 345-67-8901; son; middle-school student; lives at home

Pertinent information:

  • Address: 132 Oakbrook Drive, Houston, Texas 77091
  • The Parks do not want to contribute to the presidential election campaign
  • Jackie does not receive child support. She pays all of the household expenses including the upkeep of Leslie and Alex. Only Jackie can claim Leslie and Alex as dependents.
  • Her income tax rate is 13.05%. (Note that this rate is different from the self-employment tax rate.) 
  • Jackie also operates a realty company on a part-time basis. Her income from this business is from real estate sales during the year. She is a sole proprietor and her company’s name is Jaleal Realty Company. Jackie rents a small office to operate this business.

Jackie had the following earnings on her W-2:

  • Wages: $55,159
  • Federal tax withheld: $7,460
  • Social Security tax withheld: $3,420
  • Medicare tax withheld: $800

Jackie had the following income (as shown on Form 1099) and expenses from her business:

  • Total income reported on Form 1099 was $23,000 and came from the real estate commissions earned from home sales.

Expenses:

Rent

7,200

Travel expenses

2,200

Advertising

2,345

Supplies

955

Office expenses

750

Telephone

720

Internet expense

540

Broker license

75

Legal and professional

1,000

Miscellaneous

150

 

Other tax data:

  • Texas state’s general sales tax deduction allowed is $924.
  • Jackie received $610 of interest income from her bank.
  • She donated $230 in cash to her church during the year.
  • Real estate taxes paid on her residence were $1,980, and the mortgage interest paid to her bank in New York, NY on the primary residence for the year was $16,000.
  • Medical expenses for the family were as follows:
    • medical insurance premium $3,244
    • payments for doctor’s visits $1,760
    • $850 was paid for dentists
    • $230 for prescription drugs

Assignment Guidelines

To prepare Jackie O. Park’s tax return without the aid of Tax preparation software, complete the following steps:

  1. Ensure that you have an Adobe Reader http://get.adobe.com/reader/ installed on your computer to open and use the downloadable IRS forms.
  2. Determine which forms are necessary for Jackie O. Park’s tax return.
  3. Go to the IRS Web site and download the fill-in tax forms that you will need to complete: Form 1040 and the appropriate schedules.
  4. Complete all necessary downloaded fill-in forms on the computer and save.
  5. Save your completed forms as PDFs and upload for grading.

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