1040 Smith Case Study Facts: Return Information

Smith Case Study Facts: Introduction

Taxpayer Information

  1. Select Quick Track > Basic Return Information.

    OR

    Select General Information > Basic Return Information > Taxpayer Information.
  2. Enter the following taxpayer information:

     TaxpayerSpouse
    NameRobert SmithMary Smith
    Address

    123 East Main St.
    New York, NY 10016

    SSN123-45-6789987-65-4321
    OccupationEngineerExecutive
    Date of Birth01/01/197907/04/1980
  3. Verify the address information, Social Security numbers, and occupations for the taxpayers.
  4. Verify that Married filing joint is selected. The filing status is a mandatory entry on the 1040 return.
  5. Verify that Robert and Mary do not wish to contribute to the Election Campaign Fund.

Dependent Information

  1. Select Quick Track > Dependent Information.

    OR

    Select General Information > Dependents > Dependent Input.
  2. Enter Thomas Smith.
  3. Enter information for Thomas:

    SSN321-54-9876
    Time lived with
    parents in tax year    		12 months
    Date of Birth

    10/31/2011

Estimates and Penalties

Verify the Smiths’ 2018 tax liabilities and adjusted gross income were rolled over correctly from 2018.

  1. Select Estimates and Penalties > Underpayment > 2210 Penalty.
  2. Enter the following:
    Smiths’ 2018 Tax Liability

    $ 36,035

    Smiths’ 2018
    Adjusted Gross Income
    (required to be used if
    a penalty is calculated)

    $174,047

Form 2210 will only print if there is a current year penalty calculated.

W-2 Information

  1. Select Quick Track > W-2 Wages & Salaries.

    OR

    Select Source Documents > W-2.
  2. Enter the following information from Robert Smith’s W-2 from Major, Inc.:
    Wages (also used
    for Medicare)

    $157,000

    Social Security Wages

    $ 106,800

    Federal Tax Withheld

    $ 43,900

    Social Security Tax
    Withheld

    $ 6,621.60

    Medicare Wages

    $157,000

    Medicare Tax Withheld

    $ 2,277

    New York State Tax
    Withheld    		$ 6,000

Interest Income

  1. Select Quick Track > 1099-INT Interest.

    OR

    Select Source Documents > 1099-INT/1099-OID.
  2. The Smiths received a 1099 statement showing the interest they earned from National Bank for $1,732.

How to Delete Interest items: Select the interest item you want to delete, then press the Delete key. Click OK to delete the interest item.

Dividend Income

  1. Select Quick Track > 1099-DIV Dividend.

    OR

    Select Source Documents > 1099-DIV.
  2. The Smiths jointly owned the Minor, Inc. stock and received an ordinary dividend in 2019.

    Select Add new 1099-DIV payer.
  3. Enter Minor, Inc. and click OK.
  4. Enter Ordinary Dividends in the amount of $ 2,900.

The ordinary dividend income carries to Schedule B (and capital gains distribution information would carry to Schedule D if the Smiths had any capital gain distributions).

Business Information

Mary Smith started a small business in 2017, which she reported on Schedule C last year.

  1. Select Quick Track > Business Income.

    OR

    Select Income > Business Income > Mary’s Baubles Business Information.
  2. Verify the Spouse radio button to indicate that this Schedule C belongs to Mary.
  3. Verify 1 for the activity number. (Activity numbers are required if you have more than one Schedule C.)
  4. Verify that the EIN# is 95-0101010.
  5. Verify that the Accounting Method is Cash.
  6. Verify that the Inventory Valuation method is Cost.
  7. Verify that Mary Smith’s material participation in the business is indicated under Miscellaneous Information.

To enter business income and expenses:

  1. Click the Sch C Inc/Exp tab at the top of this form.
  2. Under Gross receipts or sales, enter the following:
    Sale of Jewelry

    $ 26,150

    Returns and
    allowances

    $ 370

  3. She had the following items related to Cost of Goods sold:
    Beginning Inventory

    $ 2,500

    Purchases

    $ 11,700

    Ending Inventory

    $ 2,975

  4. Enter the following expenses:

    Advertising$ 100
    Insurance

    $ 750

    Legal and
    professional fees    		$ 600

Depreciation Information

The depreciation on the desktop computer that Mary Smith uses for her business should be entered in the Business Income part of the Organizer.

  1. Under Mary’s Baubles, select Depreciation and Amortization > Asset Detail > Add new Asset.
  2. Enter the following asset information: Desktop Computer. Click OK (or press Enter).
  3. Enter the following information for the desktop computer:
    Date placed
    in service    		04/15/2019
    Cost

    $ 3,500

    Method5-year MACRS


    Before you delete any asset, turn Auto Compute off and then delete the asset from the Organizer navigation tree by pressing the Delete key.

    Leave the Life field blank. The system, by default, uses the 5-year life for 5 Year modified accelerated cost recovery property.

    Drop-down lists of alternative tax treatments facilitate entering assets for depreciation.

  4. Select the Listed radio button under Property Type.
  5. In addition, Mary only uses the computer 75% of the time for business. Enter her business use percent now. (Entry is needed here if business use is other than 100%.)

Schedule K-1

  1. Select Quick Track > Schedule K-1.

    OR

    Select Income > Schedule K-1 > Hightec LTD > Schedule K-1 Information.
  2. Hightec, LTD, an existing K-1, was rolled over from 2018.
  3. Select the Income tab, and enter the following:
    Ordinary Loss

    $3,000

    Portfolio interest

    $ 75

    Portfolio dividends

    $ 130

  4. Select the AMT/Nondeductible/Other Info tab, and enter the following information for Depreciation adjustment on property placed in service after 1986: $ 785*
  5. Select the Pass Loss Carryovers tab, and verify the Prior Year Suspended Loss Carryovers from 2018.
    Reg. Tax Operating

    $2,784

    Alt Min Tax Operating

    $3,216

* This may be relevant for AMT tax.

Estimated Tax Payments

  1. Select Quick Track > Estimated Tax Payments.

    OR

    Select Itemized Deductions > Taxes and Interest > Estimated Tax Payments.
  2. For the Federal Estimated tax payments, verify that $250 was paid in each quarter.
  3. For the State Estimated Tax payments, scroll down and select New York under State or City.
  4. Verify the following:
    • $ 100 was paid in first three quarter installments.
    • $ 200 was for the fourth quarter installment on 01/15/2020.

All estimated tax payments were made timely.

State Taxes

  1. Select Income > Miscellaneous Income > Miscellaneous Income > Miscellaneous Income.
  2. The Smiths received a refund on their State Tax Return of $519.

    They may qualify for special treatment since their income is over $150,000.

  3. Verify their 2019 Schedule A deductions. Under Income > Miscellaneous Income > Sch A Info. State/Local Tax Refund, verify the following:
    Before income limitation

    $ 29,266

    After income limitations

    $ 28,033

    Adjusted Gross Income for
    state tax calculations

    $174,047

The Smiths filed a joint return last year.

Itemized Deductions

  1. Select Quick Track > 1098 Mortgage Interest > Add new Form 1098.

    OR

    Select Source Documents > Form 1098 - Mortgage Interest and Taxes > Add new 1098.
  2. Enter Mortgage Interest information:
    Mortgage Interest

    $15,566

    Real Estate Taxes

    $ 4,850

Current-Year Cash Contributions

  1. Select Itemized Deductions > Contributions > Contributions-CY and Carryovers.
  2. Enter the following:
    Boy/Girls Scouts

    $ 550

    United Way

    $ 1,000

    Cancer Society

    $ 1,000

Credit for Prior Year Minimum Tax

  1. Select Credits > Prior Year AMT.
  2. Verify taxable income from the 2018 Form 6251, sum of lines 1 and 10: $155,543.
  3. Verify adjustments and preferences treated as exclusion items: $ 10,762.
  4. Verify the exemption amount from the line 5 worksheet of the 2018 Form 6251: $ 43,614.
  5. Verify the phase-out of exemption from the line 5 worksheet of the 2018 Form 6251: $156,500.
  6. Verify the amount of regular tax before credits minus foreign tax credit from line 10 of the 2018 Form 6251: $ 34,257.

The credit form does not automatically print if a credit is not allowed or a carryover calculated. You can force print it using the AMT credit overrides.

Comparison of Current Year to Prior Year

You should always take time to generate a comparison report in hard copy that compares against last year’s data to help insure the return is complete and you have received all the information from the taxpayer.

Verify the 2018 comparative information.

  1. Select Comparison and Reconciliation > Comparison of Current to Prior Year.
  2. Select the Generate current year/prior year comparison check box.
  3. The information should be rolled over from the 2018 tax return as follows:
    Wages, salaries, tips, etc. 

    $157,000

    Taxable interest 

    $ 1,807

    Ordinary dividends 

    $ 3,030

    Taxable refunds, credits, or offsets 

    $ 519

    Business income or (loss)  

    $ 12,580

    Adjustments to Gross Income

    		One-half of self
    employment tax

    $ 889

    Itemized Deductions
    and Exemptions

    		Taxes

    $ 11,150

    Interest

    $ 15,566

    Contributions

    $ 2,550

    Itemized deduction
    phaseout

    $ 1,486

    Total exemptions

    $ 8,100

    Exemption phaseout
    (leave blank)

    None

    Tax Liability

    		Gross income tax

    $ 36,035

    Other taxes

    $ 1,778

    Withholding

    $ 43,900

    Estimated tax and
    other payments    		$ 1,000

To view the comparison:

  1. Select Tax Forms.
  2. Select Comparison of Current to Prior Year.

 

 

 

Case Study Facts/smith_return_info.htm/TY2019

Last Modified: 03/19/2020

Last System Build: 06/17/2021

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