Tax Return Project
Based on the information provided, you are to complete the appropriate 2014 individual tax form and any supporting schedules/forms for the Grants. You do not need to prepare a state tax return. You should complete this tax return by hand using the forms available from the IRS website, www.irs.gov. You can use Adobe (or similar program) to type your responses on the forms. You may not use tax return preparation software to assist in preparing the forms. You may find the form instructions helpful in completing this assignment. Please provide a list of assumptions you make, if any. I will grade your return subject to any reasonable assumptions listed. You do not need to calculate AMT.
You are to work on this assignment individually. Working on this assignment or discussing it with others is not permitted. Any collaboration will be considered a violation of the Academic Honesty Policy, which will result in a grade of zero on this assignment and reporting of the violation to the Dean's office.
Please include your name in the paid preparer's box at the bottom of the tax return. You do not need to include a cover page.
Instructions:
Please complete the 2014 federal income tax return for Bob and Melissa Grant. Ignore the requirement to attach the form(s) W-2 to the front page of the Form 1040. If required information is missing, use reasonable assumptions to fill in the gaps.
Bob (age 43) and Melissa Grant (age 43) are married and live in Lexington, Kentucky. The Grants have two children Jared, age 15, and Alese, age 12. The Grants would like to file a joint tax return for the year.
The following information relates to the Grants' tax year:
- Bob's Social Security number is 987-64-6452
- Melissa's Social Security number is 494-37-4893
- Jared's Social Security number is 412-32-5690
- Alese's Social Security number is 412-32-6940
- The Grants' mailing address is 95 Hickory Road, Lexington, Kentucky 40502.
- Jared and Alese are tax dependents for federal tax purposes
Bob Grant's Forms W-2 provided the following wages and withholding for the year:
|
Employer
|
Gross Wages
|
Federal Income Tax Withholding
|
State Income Tax Withholding
|
|
National Storage
|
$67,200
|
$8,500
|
$3,850
|
|
Lexington Little League
|
$2,710
|
0
|
0
|
Melissa Grant's Form W-2 provided the following wages and withholding for the year:
|
Employer
|
Gross Wages
|
Federal Income Tax Withholding
|
State Income Tax Withholding
|
|
Jensen Photography
|
$24,500
|
$2,450
|
$1,225
|
All applicable and appropriate payroll taxes were withheld by the Grants' respective employers. All of the Grant family was covered by minimum essential health insurance during each month in 2014. The insurance was provided by Bob's primary employer, National Storage.
The Grants also received the following during the year:
Interest income from First Kentucky Bank $130
Interest income from City of Lexington, KY Bond $650
Interest income from U.S. Treasury Bond $675
Interest income from Nevada State School Board Bond $150
Workers' compensation payments to Bob $4,350
Disability payments received by Bob on account of injury $3,500
- National Storage paid 100% of the premiums on the policy and included the premium payments in Bob's taxable wages
Melissa received the following payments as a result of a lawsuit she filed for damages sustained in a car accident:
- Medical Expenses for physical injuries $3,500
- Emotional Distress (from having been physically injured) $12,000
- Punitive Damages $10,000
Total $24,500
Eight years ago, Melissa purchased an annuity contract for $88,000. She received her first annuity payment on January 1, 2014. The annuity will pay Melissa $15,000 per year for ten years (beginning with this year). The $15,000 payment was reported to Melissa on Form 1099-R for the current year (box 7 contained an entry of "7" on the form).
The Grants did not own, control or manage any foreign bank accounts nor were they a grantor or beneficiary of a foreign trust during the tax year.
The Grants paid or incurred the following expenses during the year:
Dentist/Orthodontist (unreimbursed by insurance) $10,500
Doctor fees (unreimbursed by insurance) $ 825
Prescriptions (unreimbursed by insurance) $ 380
KY state tax payment made on 4/15/14 for 2013 tax return liability $ 1,350
Real property taxes on residence $ 1,600
Vehicle registration fee based upon age of vehicle $ 250
Mortgage interest on principal residence $ 8,560
Interest paid on borrowed money to purchase the City of
Lexington, KY municipal bonds $ 400
Interest paid on borrowed money to purchase
U.S. Treasury bonds $ 240
Contribution to the Red Cross $ 1,000
Contribution to Senator Rick Hartley's Re-election Campaign $ 2,500
Contribution to First Baptist Church of Kentucky $ 6,000
Fee paid to Jones & Company, CPAs for tax preparation $ 200
In addition, Bob drove 6,750 miles commuting to work and Melissa drove 8,230 miles commuting to work. The Grants have represented to you that they maintained careful logs to support their respective mileage.
The Grants drove 465 miles in total to receive medical treatment at a hospital in April.
The Grants' personal residence was burglarized on October 1. The theft occurred during the day while both the Grants were at work and their children were at school. The Grants had the following personal-use property stolen:
|
Item
|
Purchase Date
|
Fair Value on Date of Theft
|
Tax Basis of Item
|
Insurance Reimbursement Received
|
|
Laptop computer and Printer
|
09/01/2014
|
3,000
|
3,000
|
500
|
|
Rifle
|
03/01/2012
|
2,000
|
2,500
|
500
|
|
TV/Projector
|
03/01/2012
|
5,000
|
13,000
|
1,000
|
|
2007 Honda Pilot
|
07/01/2013
|
4,000
|
6,500
|
500
|
|
Total
|
|
14,000
|
25,000
|
2,500
|
The Grants want to contribute to the Presidential Election Campaign. The Grants would like to receive a refund (if any) of any tax they may have overpaid for the year. Their preferred method of receiving the refund is by check.