1040 Frazer Case Study Facts: Return Information

Frazer Case Study Facts: Introduction

Taxpayer Information

1. Select Quick Track > Basic Return Data.
2. Verify the taxpayer information is correct for Thomas and Deborah Frazer:

   Name	Thomas Frazer	Deborah Frazer
   Address	3304 Kingbridge Drive Atlanta, GA 99999
   Occupation	Professional	Graphic Artist
   SSN	111-22-3333	333-22-1111
   Date of Birth	12/31/1988	03/01/1990
   Phone	Home (813) 578-3626 Work (813) 822-8521 Fax (813) 897-9101
   Contribute to Presidential Campaign Fund?	No	No

3. After verifying this information, click the Quick Track button at the top of your screen to return to the Quick Track menu.

Dependent Information

1. Select Quick Track > Dependent Information.
2. Verify the two children’s information. The children lived with them the entire year.

   Name	Mike A. Frazer	Warren S. Frazer
   SSN	222-22-2222	333-33-3333
   Date of birth	02/14/2013	03/11/2014

3. The Frazers paid child care expenses of $1250 for Mike and Warren to:

   Name	Tot Care, Inc.
   Address	555 Peachtree Avenue South Atlanta, GA
   ID Number	02-5033487

4. In addition to their two children, they became foster parents and have kept the foster child for eight (8) months. Select Dependents > Dependent Input > Add new First Name and Initial, and enter the following:

   Name	Jessica P. Martin
   SSN	666-22-3333
   Date of birth	01/10/2016

5. Deborah’s mom also moved in with them in January 2019. Select Dependents > Dependent Input > Add new First Name and Initial, and enter the following:

   Name	Ester Mayberry
   SSN	305-44-4808
   Date of birth	07/23/1950

6. Select the Taxpayer option for all dependents.

W-2 Information

1. Select Quick Track > W-2 Wages & Salaries.
2. Enter the amounts for Thomas who worked for the Planter Corporation:

   	Wages	Federal W/H	State W/H	Medicare W/H
   Federal and Medicare	$120,000	$25,779	$6,000	$1,740
   Social Security Wages	$ 132,900
   Social Security W/H	$ 8,240

Interest Income

1. Select Quick Track > 1099-INT Interest.
2. Enter the interest information:

   Institution	Amount
   EFCU Savings of Georgia	$800
   US Bond interest through Smith Barney	$150

3. They also had State Municipal Bond Interest. Scroll to Tax Exempt Interest, and enter the tax-exempt interest information:

   State Municipal Bond	Amount
   Muni-Bond from Georgia	$100
   * Muni-Bond from New York	$200

   New York Muni-Bond is taxable for Georgia.

4. Click the State Allocation of Tax Exempt Interest button.
5. Select U.S. Bond Interest through Smith Barney from the drop-down box at the top of the screen.
6. Under State Allocations, select Georgia, and enter 1.0 for 100%.
7. In addition, the Frazers sold a piece of land and financed the mortgage. Select the Income > Interest Income > Seller-Financed Mortgage\Tax Exempt Interest tab, and verify the buyer’s information:

   Name	James S. Mathers
   Address	1426 Lago Vista Marshville, NC
   SSN	661-11-1111

8. Enter $950.

Dividend Income

1. Select Quick Track > 1099-DIV Dividends.
2. Enter the dividend information:

   	Foreign Company Funds	AMD Corporation
   Ownership	Joint	Spouse
   Ordinary Dividends	$3,000	$2,500
   Capital Gain Distribution		$500
   Foreign Tax Paid	$200

3. Add a new dividend. Select Source Document > 1099-DIV > Add new 1099-DIV Payer.
4. Enter Securities Mutual, and click OK.
5. Enter the following dividend information. The Frazers received $7,900 in dividends from Securities Mutual:

   Ordinary Dividends	$7,300
   Capital Gain Dividends	$600
   Federal Tax W/H	$400

Business Income (Schedule C and Office-In-Home)

Deborah is a full-time, self-employed graphic artist. She has a studio in the Frazers’ residence which meets the office-in-home qualifications. The studio occupies 250 square feet of the Frazers’ 4,000 square foot home.

The name of Deborah’s business is Frazer Graphics. She uses the accrual method of accounting. Her inventory is valued at cost.

1. Select Quick Track > Business Income.
2. Verify the following information:

   Business Name	Frazer Graphics
   Business Address	3304 Kingbridge Drive Atlanta, GA
   Principal Business	Graphic Production
   Principal Business Code	541400
   Employer ID	55-5555555

3. Scroll down to verify that Taxpayer materially participates is selected in the Income Type box and the activity is considered All at Risk.
4. In the Miscellaneous Information section, enter $1,500 in the SE health insurance premium field.
   
   

   Form 1040, Page 1, line 29 will contain 100% of the self-employed health insurance deduction.

5. Click the Sch C Inc/Exp tab to enter income and expenses.
6. Enter the income for the business: $52,000.
7. Under Cost of Goods Sold, enter:

   Beginning Inventory	$500
   Purchases	$4,000
   Ending Inventory	$600

8. Under Expenses, enter:

   Advertising	$100
   Office Expenses	$200
   Supplies	$300
   Legal and Professional	$200

Property and Equipment

The business has several assets that were purchased in 2018. Deborah sold the Office Furniture purchased on 06/01/2018 for $450 on 05/01/2019.

1. Under the Frazer Graphics folder, select Depreciation and Amortization > Asset Detail > Office Furniture.
2. Click the Retirement/Disposal tab.
3. Check the Retire asset box (click the field). To record the sale of the asset:
4. Select the Bulk Sale Identifier field.
5. Click 1245 Property from the Type of Sale drop-down list.
6. Enter the date sold and the gross sales price.

In addition, the business purchased a new asset.

1. Under the Frazer Graphics folder, select Depreciation and Amortization > Asset Detail > Add new Asset. Enter the asset information:

   Asset	Graphic Equipment
   Date of Purchase	05/01/2019
   Cost	$5,000
   Life	5 Year MACRS

2. Deborah also conducts business from her home. Add the (new) Home asset information:

   Asset	Home
   Date of Purchase	03/09/2019
   Cost	$600,000
   Life	27.5 Year MACRS

3. Scroll to Vehicle and Home Depreciation. For Asset Classification, select Home depreciation (Form 8829).
   
   

   Deborah elected not to utilize special depreciation allowances for assets purchased in the current year. A footnote has been added to reflect this election.

On September 4, 2019, Deborah sold her computer (used 90% for Frazer Graphics business) to a neighbor for $700 and purchased a new computer.

1. To retire the old computer, under the Frazer Graphics folder, select Depreciation and Amortization > Asset Detail > Computer.
2. Scroll down to enter that business use is 90%. If 100%, you do not have to enter a percentage.
3. Verify that Listed is selected in the Property Type box.
4. Verify that Office-in-Home Depreciation is selected as the Asset Classification in the Vehicle and Home Depreciation drop-down box.
5. Click the Retirement/Disposal tab at the top of the screen.
6. Check the Retire asset box (click the field).
7. To record the sale of the asset, select the Bulk Sale Identifier field.
8. Click 1245 Property from the Type of Sale drop-down list.
9. Enter the date sold and the gross sales price.
10. Now add the new computer. Click Previous.
11. Click the Asset Detail drop-down list, and select Add New Asset. Enter the following:

    Asset	Lenovo Computer
    Date of Purchase	09/04/2019
    Cost	$2,700
    Business Use	90% business/10% personal

12. Now enter the additional information by scrolling down:
    1. Enter 5 Yr MACRS, business use is 90 percent.
    2. Property Type is Listed.
    3. Asset Classification is Office-in-Home depreciation.
13. Depreciation for the two computers appears on Form 8829 under Other Expenses. Home depreciation and land value will appear on Part III.
14. Before entering Deborah’s office-in-home expenses, compute the return. The return must compute for the property to carry in to Office-in-home from Schedule C.

Office in Home

Enter Deborah’s expenses for her office-in-home.

1. Under the Frazer Graphics folder, select Office-in-Home.
2. Verify that the Office-in-home check box is checked. This is a mandatory field.
3. Enter the square footage data in the Office-in-Home box.
   
   Notice the square footage changed from last year because the Frazers bought a new house. The studio occupies 250 square feet of the Frazers’ 4,000 square foot home.
4. Select the OIH-Inc and Exp tab, and enter expenses on the entire house as indirect expenses:

   Mortgage interest	$9,930
   Real estate taxes	$3,000
   Utility bills	$5,000

5. Enter other expenses related directly to the business. The phone bill was directly related to the business.
6. Scroll to Other Expenses, and enter the phone bill: $600.
   
   

   The system will allocate interest and tax to the business and carry the remainder to Schedule A.

Scroll to the bottom of the screen. Land for the new Frazer home is valued at $5,000.

Rental Property

The Frazers have a rental property and actively participate in the management and maintenance of the property.

1. Select Quick Track > Rental Income.
2. Verify the following information on the Activities Information tab:

   Rental Name	Rental Property
   Property Type	Single Family Residence
   Location of Property	5333 Foster Drive Atlanta, GA

3. Click the Rent/Roy Inc. and Exp. tab.
4. Enter $7,500 for rental income.
5. Under the Expenses section, enter the following expenses:

   Advertising	$ 500
   Cleaning and Maintenance	$ 600
   Insurance	$ 500
   Legal and Professional	$ 700
   Repairs	$ 800
   Supplies	$ 200
   Utilities	$ 400

Suspended Losses

1. Click the Pass Loss Carryovers tab.
2. Enter suspended operating losses:

   Federal Regular Tax	$ 1,939
   Federal Alt. Min. Tax	$ 1,122

3. Override the state suspended losses:

   State Regular Tax	$ NONE
   State Alt. Min. Tax	$ NONE

Property and Equipment

1. Under the Rental Property folder, select Depreciation and Amortization > Asset Detail > Rental House.
2. Verify the asset information:

   Rent House purchase date	01/01/2017
   Rent House purchase price	$75,000
   Depreciation method	MACRS 27.5 year property
   AMT	No entry needed
   Accumulated depreciation	$5,341
   AMT Accumulated depreciation	$5,341

Business/Personal Use Property

The Frazers own a duplex of which 1560 square feet is rented. The other half is used part-time by Thomas Frazer.

1. Select Income > Rent and Royalty > Duplex Rental > Rent and Royalty Information.
2. Verify that the Other with personal use option is selected under Property type (Mandatory).
3. Verify that the location of the property is Park City, Utah.
4. Verify that the Activity type is Rental real estate - Active participation.
5. Verify that the total square footage is 3,000.
6. Click the Income and Expense tab, and enter the following information:

   Income	$6,000
   Total mortgage interest	$9,921
   Total real estate taxes	$1,403
   Repairs related to rental portion of duplex	$ 529
   Total utility bill for the entire duplex	$ 900
   Miscellaneous expense (rental portion only)	$ 13

Property and Equipment

1. Under the Duplex Rental folder, select Depreciation and Amortization > Asset Detail > Duplex.
2. Verify the asset information for the duplex:

   Purchased	06/01/2012
   Total price	$54,000
   Depreciation Method	Straight Line over 30 years
   Accumulated Depreciation	$16,926

3. Now add a new asset. On 7/15/2019, Thomas purchased a new appliance for $639 for the rental unit (MACRS 5-year property).
4. Select Depreciation and Amortization > Asset Detail > Add new asset.
5. Enter the description of the asset, the date purchased, and the cost.
6. Select MACRS 5 year from the Method list box.
   
   

   This asset should not be prorated between rental and personal use.

7. Scroll down to Vehicle and Home Depreciation.
8. Select the check box for Do not allocate or prorate depreciation.

Partnership and S Corporation Schedule K-1s

The Frazers received three K-1s in 2019. Thomas holds a passive interest in VLS Partners, which is not a publicly traded partnership.

1. Select Quick Track > Schedule K-1.
2. Verify the information on the Activity Information tab:

   Name	VLS Partners
   ID#	75-7777777
   Activity Type	Other passive

3. Click the Income tab, and enter the income and expenses:

   Income/Expense Item	Amount	1065 K-1 Line
   Other net rental income/loss	$ 4,000	3
   Portfolio Interest Income	$ 3,000	5
   Investment int. expense- Schedule A	$ 1,900	13H

4. Verify that a Suspended Loss Carryover of $5,500 has been entered for Federal Regular and AMT.

Deborah is a shareholder in GraphicWare, Inc., an S Corporation. She materially participated in the operation of the business which went bankrupt in 2019. She received no distribution from the bankruptcy. Her basis in the S Corporation is $20,000, but her at-risk basis as of the beginning of 2019 is only $11,000.

1. Select Schedule K-1 > GraphicWare, Inc.
2. Verify the information on the Activity Information tab:

   Name	GraphicWare, Inc.
   ID#	88-8888888
   Activity Type	Taxpayer materially participates

3. Click the Fully disposed of during the current tax year check box.
4. Click the Income tab, and enter the income and expenses:

   Income/Expense Item	Amount	1120S K-1 Line
   Ordinary loss	- $ 2,500	1

5. Click the AMT/Nondeductible/Other Info tab, and enter the following depreciation adjustment:

   Income/Expense Item	Amount	1120S K-1 Line
   AMT post ‘86	- $ 800	15a

6. Under the GraphicWare, Inc. folder, select Gains and Losses > Capital Gains and Losses > Add new Description of Property > Capital Gains & Losses to enter the following disposition information:

   Description	Partnership Interest
   Proceeds	None
   Cost	$20,000
   Holding period	Long-term investment property

7. Under the GraphicWare, Inc. folder, select At-Risk, and enter the at-risk information.
8. Scroll down to Part II, Simplified Computation of Amount At-Risk.
9. Enter $11,000 as the Adjusted basis on first day of tax year.

Publicly Traded Partnership

Thomas bought an interest in a publicly traded partnership, Master Fund XIX.

1. Select Income > Schedule K-1 > Master Fund XIX.
2. Verify the name as Master Fund XIX.
3. Verify the following information:

   Activity Type	PTP
   ID Number	75-2222222

4. Click the Schedule K-1 Information > Income tab, and enter income and expenses:

   Current year ordinary loss (Passive)

   $-4,000

Miscellaneous Income

1. Select Income > Miscellaneous Income > Miscellaneous Income > Miscellaneous Income.
2. Enter $300 for State Income Tax refunds received by the Frazers in the current year.
3. Scroll to Other Miscellaneous Income.
4. For Thomas, enter $10,000 for Director’s Fees from Hodgeport, Inc.
5. Click the field to the right of the TSJ column.
6. Select Subject to self-employment tax from the drop-down list.

Gambling Wins/Losses

Every year Thomas goes to Las Vegas and gambles. His winnings last year were $3,000, and his losses were $7,000.

1. To enter his winnings, select Income > Miscellaneous Income > Miscellaneous Income > Miscellaneous Income.
2. Scroll to Other Miscellaneous Income.
3. Click the field to the right of the TSJ column.
4. Select Not subject to self-employment tax from the drop-down list.
5. Enter Gambling winnings and the amount of $3,000.
6. To enter losses, select Itemized Deductions > Miscellaneous tab.
7. Scroll to Gambling Losses, and enter the loss.
   
   

   Losses are only deductible to the extent of winnings, so although Thomas’s losses were $7,000, you can only enter $3,000 in the losses field.

8. Check the box Do not limit losses by total gambling winnings entered on Forms W-2G.

Child’s Interest Income

Mike has a CD at First National Bank. His parents elect to file the interest income on their return. Taxable interest income was $2,000 (excluding US obligations).

1. Select Income > Kid-tax Income > Child’s Int. & Div. > Mike A.
2. Verify Mike’s name, Social Security number (222-22-2222), and the interest income amount ($2,000).
3. You can access this Organizer from the Tax Forms. Since you know the child’s income is entered on Form 8814, return to the Organizer by clicking the Tax Forms tab. Select Federal > Form 8814 > Child’s name.
4. Move your cursor to line 1a of Form 8814 and right-click. When the shortcut menu appears, select Related. Then select Organizer > Taxable Interest Income.
5. The system takes you to the Organizer screen where you were originally: Income > Kid-tax Income > Child’s Int. & Div. > Mike A.

Capital Gains and Losses

The Frazers sold 10,000 shares of AMD Corporation stock on 06/03/2019 for $50,000. The stocks were purchased on 01/01/2009 for $10,000.

1. Select Gains and Losses > Capital Gains and Losses > Add New Description > Capital Gains & Losses.
2. Enter 10,000 shares of AMD Corp. and click OK.
3. Enter the stock transaction.

In addition, a friend to whom Thomas had loaned $500 on January 1, 2019 declared bankruptcy. Thomas will not recover any of this non-business bad debt by year end.

1. Select Gains and Losses > Capital Gains and Losses > Add New Description > Capital Gains & Losses.
2. Enter Bad debt write-off - Loan Not Repaid, and click OK.
3. Enter the Selling Price as NONE.
4. Enter the Cost: $ 500.
   
   

   Remember that a non-business bad debt write off is always a short-term capital loss. It is Thomas’s write-off, so click Taxpayer.

5. Select the Holding Period: Short-term investment property.

On May 2, 2019, the Frazers sold 200 shares of jointly owned Gary Industries stock for $3,500. The stock was purchased on August 17, 2008, for $2,000.

1. Select Gains and Losses > Capital Gains and Losses > Add New Description > Capital Gains & Losses.
2. Enter the description and other sale information.

Carryover Information

The Frazers have a short-term capital loss carryover of $7,000 and long-term capital loss carryover of $17,700.

1. Select Gains and Losses > Capital Gains and Losses > Carryovers, Print, Form 2439, & Misc to enter the carryover information.
2. Scroll down to the Carryover box.
3. Verify short and long term carryovers. For AMT and State purposes, the amounts were the same.

Installment Sales

Last year the Frazers sold some land and agreed to receive payments for the purchase of the land. This year an installment payment of $500 was received for the Rio Rancho, NM property. To enter the installment payment:

1. Select Gains and Losses > Installment Sales > Prior Year-Other.
2. Enter the payment under Current Year Collections.
3. Verify the prior year collection of $500.

Sale of Home

The Frazers sold their old home for $350,000 on July 1, 2019 and purchased a new home for $600,000.

1. Select Gains and Losses > Sale of Home > Add new Date Home Sold.
2. Enter 07/01/2019 and click OK.
3. Enter all of the following information for the old home:

   Purchase Amount	$300,000
   Purchase Date	01/01/2009
   Improvements	$ 10,000
   Selling Expenses	$ 5,000

IRA Contributions

Thomas and Deborah both contributed $2,000 to an IRA this year. Thomas participates in a qualified retirement plan at work.

1. Select Adjustments to Income > IRA > IRA Contribution.
2. Enter the current year contributions.
3. Verify that the Participated in qualified employer-maintained retirement plan box is checked.

Non-Deductible IRA Information

1. Select Adjustments to Income > IRA > IRA Values.
2. Enter $2,000 in the Total Basis in Traditional IRAs made for current year for both taxpayers.
3. Deborah has an IRA (value of $17,000) in Newfund Mutual.

Employee Business Expenses

All reimbursements were included on Thomas’s W-2 in box 1.

1. Select Adjustments to Income > Employee Business Expense > Add new Occupation.
2. Enter Professional and click OK.
3. Select Reservist/National Guard under Special Treatment, and verify that Taxpayer is selected.
4. Click the Business Expenses tab.
5. Enter business expenses. The system automatically applies the limit.

   Parking and Tolls	$ 45
   Local Transportation	$ 60
   Overnight travel	$210
   Telephone	$ 21
   Professional Dues	$450
   Professional Journals	$ 75
   Meals	$3,600

Vehicle Information

Thomas uses his Toyota Pickup for business and personal use. He wants to optimize between standard mileage and actual expenses.

1. Under the Bus Exp Professional folder, select Depreciation and Amortization > Asset Detail > Add new Asset.
2. Enter Toyota Pickup and click OK.

   Purchased	07/10/2018
   Cost	$27,000
   Method	MACRS 5 Yr
   Accumulated Depreciation	$3,200

3. Scroll down, and select Automobiles in the Property Type section.
4. Select Vehicle 1 depreciation detail in the Vehicle and Home Depreciation section.
5. Under the Professional folder, select Columnar Vehicle Expense Entry.
6. Select Optimize vehicle expenses on a vehicle-by-vehicle basis.

He and Deborah own a second car for personal use. He does not have an employer-provided vehicle. Thomas maintains written records of automobile use.

1. Answer the Vehicle Information Questions.
2. Under Vehicle mileage and Vehicle expenses, enter the following on the Vehicle 1 line:

   Total Miles Driven during the year	5,000
   Total Business miles	3,500
   Gas, Oil, and Repairs	$ 2,250

Itemized Deductions

The Frazers had a list of itemized deductions that need to be entered into the tax return.

Medical

1. Select Itemized Deductions > Medical and Dental Expenses.
2. Enter the Frazers’ medical expenses:

   Doctors and Dentists	$ 750
   Medical Reimbursements	$ 200

Estimated Tax Payments

1. Select Itemized Deductions > Taxes and Interest > Estimated Tax Payments.
2. Enter the estimated tax payments made by the Frazers for Federal and Georgia.

   Date Paid	Federal	Georgia
   	Est. Taxes Paid
   04/15/2019	$1,000	$200
   06/15/2019	$3,000	$400
   09/15/2019	$1,000	$200
   01/15/2020	$1,000	$200

3. In addition, $170 for the Prior Year’s Estimate was paid, and the 2018 Georgia balance due of $300 was paid in 2019.

Other Taxes

1. Select Itemized Deductions > Taxes and Interest > Taxes-Other.
2. Enter Real Estate Taxes paid to the City of Atlanta of $3,500.
3. Enter Personal Property Taxes paid of $107.
4. Check the boxes to print the State and Local Tax Whitepaper and the Real Estate Tax whitepaper.

Investment Interest Expense

1. Select Itemized Deductions > Taxes and Interest > Investment Interest Expense > Investment Interest Exp.-Schedule A amount.
2. Enter the following:

   Payee	Smith Barney
   Amount Paid	$134

Miscellaneous Itemized Deductions

1. Select Itemized Deductions > Miscellaneous > Miscellaneous tab.
2. Verify that you have $3,000 for Gambling Losses.

Charitable Contributions

The Frazers made several cash and noncash contributions in 2019.

Cash Contributions

1. Select Itemized Deductions > Contributions > Contributions-CY and Carryovers > Contrib.-Current Year tab.
2. Enter the following cash contributions:

   Disease Research Society	$ 200
   United Way	$ 300
   Hunger Foundation	$ 50

Noncash Contributions

1. Scroll down to enter noncash contributions data.
2. Clothing was donated to Goodwill with FMV of $150.

On 10/2/2019, the Frazers donated 10,000 shares of Augusti stock to the Peachtree School for Girls, 5515 N. Peachtree Avenue, Atlanta, GA. The stock was purchased on 1/1/2005, for $4,000 and was quoted on the NYSE at the time of gift at $18,000.

1. Select Itemized Deductions > Section A Donated Property > Add New Donee Name.
2. Enter the donee name, and click OK.
3. Indicate that the ownership is Joint.
4. Enter the address and description.
5. Scroll down, and enter the Contribution Date and the rest of the information.

Taxes

Household Employees

The Frazers have a household employee who has worked for them for several years. Enter their tax information.

1. Select Taxes > Household Employment Tax > 12-3333333 > Household Employment Tax.
2. Verify that the check box is selected for Taxpayer paid any one employee household wages of $2000 or more in the current year.
3. Verify that the check box is checked for Taxpayer paid total wages of $1,000 or more in any calendar quarter.
4. Verify that the employee name is M. E. Evans.
5. Enter $2,500 for Social Security taxes, Medicare taxes, and FUTA tax.

Federal Unemployment (FUTA) Tax

1. Verify that all three questions in this section are answered YES.
2. Verify Section A information:

   State where unemployment contributions paid	Georgia
   State Reporting Number	21608
   Contributions you paid	$60.00

Credits

Child and Dependent Credit

The Frazers used a child care service in 2019:

Provider	Tot Care, Inc.
ID #	02-5033487
Address	555 Peachtree Avenue South Atlanta, GA 30305
Amount Paid: Total	$2,500
Amount Paid: Mike	$1,250
Amount Paid: Warren	$1,250

1. Select Credits > Child and Dependent Care Credit > Credit Information.
2. Enter or verify that the information is correct.
   
   

   This information will automatically carry from your Dependent Organizer if you entered a Child Care Credit amount on the Organizer. If not, you can enter it here.

3. Select Credits > Child and Dependent Care Credit > Care Provider.
4. Enter the Child Care Provider information.

Foreign Tax Credit

Earlier in this lesson, you entered a Foreign Dividend. To complete the Organizer entry for foreign taxes paid:

1. Select Foreign Information > Foreign Tax Credit > Foreign Tax Credit Options.
2. Verify that the Accounting Method is PAID.
3. Verify that the country of residence is United States.
4. Select Foreign Information > Foreign Tax Credit > Canada > Foreign Tax Credit Information.
5. Verify that the foreign country and country name are both CANADA.
6. Verify that the Income Type selected is Passive.
7. Enter the date that the foreign tax was paid: 12/31/2019.

Foreign Source Income and Deductions

Enter $3,000 for Dividends.

FTC Taxes Paid/Accrued

1. Select the Taxes Paid/Accrued tab.
2. Enter J for Allocate on a joint ratio.
3. Enter $200 for Foreign Taxes Paid (Dividends).

FTC Carryovers

1. Select the Carryovers tab.
2. Verify for Regular and AMT Tax:

   2019 Foreign Taxes Paid Carryover	$200
   2019 Credit Previously Used	$200

Estimates and Penalties

Estimated Tax Payments

The Frazers want any refund to be completely applied to next year’s tax return.

1. Select Estimates and Penalties > Estimated Tax/Overpayment > Estimated Tax/Overpayment > General Options.
2. Select Apply entire overpayment from the Application of Overpayment > Overpayment Option section to apply the entire refund to next year’s tax return.
3. Select Suppress compute and print from the Estimated Tax > Estimate Option section to suppress the estimate.

Underpayment Penalties

The Frazers’ 2018 tax liability was $16,990.

1. Select Estimates and Penalties > Underpayment > 2210 Penalty.
2. Verify that the 2018 tax liability is $16,990.

Transmittal Letter and Filing Instructions

The Frazers should receive a combined transmittal letter and filing instructions with their return. Their return will be filed with the appropriate IRS Center for Georgia residents.

1. Select Letter and Filing Instructions > General Options.
2. Verify that the Auto Selected Center for Georgia is Atlanta, GA. This should be selected automatically.
3. Verify that the option to print Transmittal letter and Filing Instructions is selected.
4. Verify that the IRS Service Center (Override) is Automatic Generation.

Georgia

Activating the State

The Frazers also need a Georgia tax return filed and want any refund or overpayment applied to the next year’s Georgia return.

1. Select States > Add States/Cities.
2. Verify that the R radio button for Georgia is selected as the Residency Status.

Estimated Taxes for Georgia

To allow any overpayment to be applied to Georgia’s next year taxes:

1. Select States > Common State > Estimates.
2. Select Prepare 2020 Estimate based on Option 2 - Suppress compute and print.
3. Select the Overpayment Options tab.
4. Select Option 5 to apply the entire overpayment from 2019 to the 2020 tax return.