Question -
Meet John and Jane Smith. They have three children: Joseph, Julie, and Jacob (SS# 321-43-6543). Included in the packet is the previous year's return and their W-2's. Mr. Smith works at Insperity PEO Systems and Mrs. Smith works for Marsh & McLellan Agency. The following is a list of all the life events and financial activities for the tax year 2016. The list is in no particular order.
1. Jacob was born in 8/23/16. The total medical bills for the year were $5,700.
2. The Smiths paid $10,305 in mortgage interest, $2,309 in property taxes, and $1,023 in insurance.
3. Mrs. Smith paid $4,310 in student loan repayment, $1,210 was interest.
4. In 2015, Mrs. Smith closed a business. All losses were taken in 2015.
5. The Smiths contributed a $420 car to charity.
6. Mr. Smith had $508 in unreimbursed employment expenses.
7. The Smiths spent $8,000 on child care. All the children are under the age of 5 but none are special needs.
8. Mrs. Smith contributed $3,500 to a Health Saving Account.
Directions: Please create all relevant tax return forms. In addition to the forms, please address in the memo the clients following five questions:
1. Mrs. Smith is thinking about quitting her job and taking care of the kids herself. What is the net tax effect of this choice?
2. What is the tax effect if they contributed the maximum to IRA's (whatever eligible)?
3. The Smiths have been told their house has appreciated greatly. Their basis is $150,000 while a realtor informs them the market value is $300,000. They have lived in the house for 4 years. What would the tax effect be is they sold?
4. Mrs. Smith is also thinking of opening a business. It's a mobile bounce house business. The only assets will be a vehicle to pull a trailer that carries the equipment. What advice do you have for her?
5. Mr. Smith mother is very ill. There is a sizeable life insurance plan that is beneficiary of. He is concerned about any tax consequences from the insurance money when she passes.
Assignment File -
https://www.dropbox.com/s/zhmzfe65cbcmycf/Assignment%20File.rar?dl=0