Assignment: Milestone Three Guidelines and Rubric
The milestone is a rough draft of the third artifact for your professional portfolio, a tax memo. The tax memo is broken up into two parts: Tax Memo I is a personal income tax preparation and Tax Memo II is a corporate tax memo. This will be graded using the rubric at the end of this document and is an opportunity for you to organize your thoughts and receive feedback from your instructor for the final submission. Note that the submission guidelines for this milestone are less demanding than those for the final submission. Once you have submitted this milestone and received feedback from your instructor, it is up to you to incorporate this feedback and complete the artifact by meeting the submission requirements found in the Project Guidelines.
Client- Ms. Emma Shire (Tax Memo)
Ms. Emma Shire is a client at S.N.H.U., LLC. Your task is to develop a comprehensive, professional tax memo and appendix for her by analyzing business and individual tax situations. Ms. Shire has questions and concerns about her personal income taxes, as well as taxes as they relate to her role in a partnership with Marlene Anderson. She also works at Clifford Co., a large organization set up as a corporation, and has questions about their tax preparation. You will work with Ms. Emma Shire to provide her with guidance on her questions related to personal, partnership, and corporate tax situations. You will need to apply income tax regulations in solving problems and recommending courses of action that will comply with regulations and, at the same time, result in the best economic solution for Ms. Emma Shire.
Artifact: Tax Memo I Information for Personal Income Tax Preparation
Ms. Shire has provided you with the following information to prepare her personal income tax return for 2014.
Emma Shire lives at 5258 Mountain Skies Road, College Park, MD 20742. She is a human resource manager at Clifford Company, 896 Western Avenue, College Park, MD 20742 (employer identification number XX-1111111). She is also a 50/50 partner in a local clothing boutique. Ms. Shire is divorced and has two small children, Kelly Shire (DOB 2/3/2012) and Jordan Shire (DOB 5/19/2006).
Ms. Shire was born on January 14, 1976, and her Social Security number is 123-45-6789. She does not want to contribute $3 to the Presidential Election Campaign Fund.
The following information is shown on Ms. Shire's 2014 Wage and Tax Statement (Form W-2):
|
Line
|
Description
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Amount
|
|
1
|
Wages, tips, other compensation
|
$65,000.00
|
|
2
|
Federal income tax withheld
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10,500.00
|
|
3
|
Social Security wages
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65,000.00
|
|
4
|
Social Security tax withheld
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4,030.00
|
|
5
|
Medicare wages and tips
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65,000.00
|
|
6
|
Medicare tax withheld
|
942.50
|
|
15
|
State: Maryland
|
|
|
16
|
State wages, tips, etc.
|
65,000.00
|
|
17
|
State income tax withheld
|
1,650.00
|
Additional Information:
• Received interest of $1,750 from Maryland Federal Savings and Loan Association and $250 from Maryland State Bank. Each financial institution reported the interest income on a Form 1099-INT
• Received qualified dividends of $600 from Blue Corporation, $750 from Green Corporation, and $368 from Orange Corporation. Each corporation reported dividend payments on a Form 1099-DIV.
• Received child support of $15,000 during the year.
• Received a $900 income tax refund from the state of Maryland on April 29, 2014.
• Reported total itemized deductions of $10,200 on 2013 federal income tax return, which included $2,200 of state income tax withheld by her employer.
• Received K-1 indicating her share of the clothing boutique's ordinary business income (loss) - Line 1 is $23,580. No guaranteed payments were made or dividends were received by the partnership.
• Acquired 100 shares of Ace Corporation common stock for $30 a share on January 12, 2014. She sold the stock on December 19 for $55 a share.
• Paid $1,300 for prescription medicines and $1,875 in physician and hospital bills. Medical insurance premiums were paid by her employer.
• Paid real property taxes of $1,675 on her personal residence and interest on her home mortgage was $4,285, and interest paid to credit card companies totaled $360.
• Contributed $25 each week to her church and $15 each week to United Way.
• Paid $1,500 in estimated federal income taxes throughout the year.
Artifact Three: Tax Memo II Corporation Issue
Clifford Company has encountered the following issue:
The company would like to make a property distribution (dividend) of the three machines that it uses in its business. It no longer needs two of these machines. All three machines have a fair market value of $20,000 each. The basis of each machine is as follows: Machine A, $27,000; Machine B, $20,000; and Machine C, $12,000. The corporation has asked you for advice. What do you recommend?
Your final portfolio artifact is the comprehensive, professional tax memo and appendix that you develop for Ms. Emma Shire, another client at S.N.H.U., LLC. As you did with the previous two artifacts, make sure to incorporate the feedback that you receive from your instructor and peers.
Memo: You will justify recommendations and explain potential issues and future decisions relating to Ms. Shire's tax situations. Given that Ms. Shire is not well versed in accounting, make sure that your memo addresses her concerns in language that she can understand.
• Address Ms. Shire's questions pertaining to personal tax planning. Based on her given information, what actions can Ms. Shire take throughout the year to effectively reduce her tax liability? Provide specific recommendations, defend them with tax regulations, and explain the tax consequences or savings in conceptual and dollar value terms.
• Address Ms. Shire's questions pertaining to her partnership income. Based on the given information, what actions can Ms. Shire take throughout the year to effectively reduce her tax liability from the partnership? What are the tax consequences to Ms. Shire if she and her partner choose to change their business to a corporation? Provide specific recommendations, defend them with tax regulations, and explain the tax consequences or savings in conceptual and dollar value terms.
• Address Ms. Shire's questions pertaining to Clifford Co.'s tax preparation. Provide specific recommendations, defend them with tax regulations, and explain the tax consequences or savings in conceptual and dollar value terms.
Supporting documents should include, but are not limited to: a completed tax return, tax schedules, and tax forms.
Guidelines for Submission: Tax Memo I should be submitted as a one- to two-paragraph summary in a Microsoft Word document with double spacing, 12-point Times New Roman font, one-inch margins, and at least two sources cited in APA format. Round all answers up to the nearest dollar value in any calculations.
Tax Memo II should be submitted as a one- to two-paragraph summary in a Microsoft Word document with double spacing, 12-point Times New Roman font, one-inch margins, and at least two sources cited in APA format.
Milestone: Tax Memo
You will submit a rough draft of the third artifact for your professional portfolio, a tax memo. The tax memo will cover three concerns: tax planning, partnership income, and tax preparation.