INDIVIDUAL TAX RETURN PROBLEM 5 Use the following information to complete Paul a
ID: 2380992 • Letter: I
Question
INDIVIDUAL TAX RETURN PROBLEM 5
Use the following information to complete Paul and Judy Vance's 2012 federal income tax return. If information is missing, use reasonable assumptions to fill in the gaps.
You may need the following forms and schedules to complete the project: Form 1040, Schedule A, Schedule B, Schedule C, Schedule D, Schedule E, Schedule SE, Form 2106-EZ, Form 4562 (for the dental practice), Form 4562 (for the rental property), Form 4797, and Form 8863. The forms, schedules, and instructions can be found at the IRS Web site (www.irs.gov). The instructions can be helpful in completing the forms.
Paul J. and Judy L. Vance are married and file a joint return. Paul is self-employed as a dentist, and Judy is a college professor. Paul and Judy have three children. The oldest is Vince who lives at home. Vince is a law student at the University of Cincinnati and worked part-time during the year, earning $1,500, which he spent for his own support. Paul and Judy provided $6,000 toward Vince's support (including $4,000 for Vince's fall tuition). They also provided over half the support of their daughter, Joan, who is a full-time student at Edgecliff College in Cincinnati. Joan worked part-time as an independent contractor during the year, earning $3,200. Joan lived at home until she was married in December 2011. She filed a joint return with her husband, Patrick, who earned $20,000 during the year. Jennifer is the youngest and lived in the Vances' home for the entire year. The Vances provide you with the following additional information:
Paul and Judy would like to take advantage on their return of any educational expenses paid for their children.
The Vances do not want to contribute to the presidential election campaign.
The Vances live at 621 Franklin Avenue, Cincinnati, OH 45211.
Paul's birthday is 3/5/1957 and his Social Security number is 333-45-6666.
Judy's birthday is 4/24/1960 and her Social Security number is 566-77-8888.
Vince's birthday is 11/6/1988 and his Social Security number is 576-18-7928.
Joan's birthday is 2/1/1992 and her Social Security number is 575-92-4321.
Jennifer's birthday is 12/12/1999 and her Social Security number is 613-97-8465.
The Vances do not have any foreign bank accounts or trusts.
Judy is a lecturer at Xavier University in Cincinnati, where she earned $30,000. The university withheld federal income tax of $3,375, state income tax of $900, Cincinnati city income tax of $375, $1,260 of Social Security tax and $435 of Medicare tax. She also worked part of the year for Delta Airlines. Delta paid her $10,000 in salary, and withheld federal income tax of $1,125, state income tax of $300, Cincinnati city income tax of $125, Social Security tax of $420, and Medicare tax of $145.
The Vances received $800 of interest from State Savings Bank on a joint account. They received interest of $1,000 on City of Cincinnati bonds they bought in January with the proceeds of a loan from Third National Bank of Cincinnati. They paid interest of $1,100 on the loan. Paul received a dividend of $540 on General Bicycle Corporation stock he owns. Judy received a dividend of $390 on Acme Clothing Corporation stock she owns. Paul and Judy received a dividend of $865 on jointly owned stock in Maple Company. All of the dividends received in 2011 are qualified dividends.
Paul practices under the name %u201CPaul J. Vance, DDS.%u201D His business is located at 645 West Avenue, Cincinnati, OH 45211, and his employer identification number is 01-2222222. Paul's gross receipts during the year were $111,000. Paul uses the cash method of accounting for his business. Paul's business expenses are as follows:
Explanation / Answer
Property insurance
$ 500
800
Maintenance
465
Depreciation
(to be computed)
during the year:
Prescription medicine and drugs (net of insurance reimbursement)
$ 376
Doctor and hospital bills (net of insurance reimbursement)
2,468
Penalty for underpayment of last year's state income tax
15
Real estate taxes on personal residence
4,762
Interest on home mortgage (paid to Home State Savings & Loan)
8,250
Interest on credit cards (consumer purchases)
595
Cash contribution to St. Matthew's church
3,080
Payroll deductions for Judy's contributions to the United Way
150
Professional dues (Judy) )
325
Professional Subscriptions (Judy)
245
Fee for preparation of 2010 tax return paid April 14, 2011
500
10. The Vances made timely estimated federal income tax payments of $1,500 each quarter during 20 II. They also maqe estimated state income tax payments of $300 each quarter and estimated city income tax payments of $160 each quarter. The Vances made all fourth-quarter payments on December 31, 2011. They would like to receive a refund for any overpayments.
Property insurance
$ 500
800
Maintenance
465
Depreciation
(to be computed)