â€¢ Use the following information to complete Karl and Ellie Fredericksonâ€™s 2011 federal income tax return. If information is missing, use reasonable assumptions to fill in the gaps.
â€¢ You may need the following forms to complete the project: Form 1040 and Schedule A. The forms, schedules, and instructions can be found at the IRS
Web site (www.irs.gov). The instructions can be helpful in completing the forms.
â€¢An Excel spreadsheet with all your detailed calculations and narratives explaining how you arrived at your numbers are REQUIRED for this assignment.
1. Karl Frederickson is employed as a human resources manager for Toys Unlimited, Inc., and Ellie is a financial planner for her motherâ€™s company,Frederickson Investments, Inc., a full service wealth planning firm. They provide the following information:
â€¢ They both want to contribute to the presidential election campaign.
â€¢ They live at 9876 Fighting Irish Lane, South Bend, IN.
â€¢ Karlâ€™s birthday is XXXXX and his Social Security number is XXXXX
â€¢ Ellieâ€™s birthday is XXXXX and her Social Security number is XXXXX
â€¢ Karl or Ellie do not have any foreign bank accounts or trusts.
2. Karl received a Form W-2 from Toys Unlimited, Inc. that contained the following information:
â€¢ Line 1 Wages, tips, other compensation: $45,000
â€¢ Line 2 Federal income tax withheld: 7,500
â€¢ Line 3 Social Security wages: 45,000
â€¢ Line 4 Social Security tax withheld: 1,890
â€¢ Line 5 Medicare wages and tips: 45,000
â€¢ Line 6 Medicare tax withheld: 653
â€¢ Line 17 State income tax: 2,200
3. Ellie received a Form W-2 from Frederickson Investments, Inc. that contained the following information:
â€¢ Line 1 Wages, tips, other compensation: $85,000
â€¢ Line 2 Federal income tax withheld: 12,500
â€¢ Line 3 Social Security wages: 85,000
â€¢ Line 4 Social Security tax withheld: 3,570
â€¢ Line 5 Medicare wages and tips: 85,000
â€¢ Line 6 Medicare tax withheld: 1,233
â€¢ Line 17 State income tax: 4,200
Appendix C C-3
4. Karl and Ellie incurred the following medical expenses for the year:
â€¢ Transportation to Chicago for Karlâ€™s cancer treatment: 2,000 miles
â€¢ Unreimbursed hospital charges for Karl: $6,500
â€¢ Unreimbursed prescription drug charges for Karl and Ellie: 1,750
â€¢ Unreimbursed physician charges for Karl and Ellie: 2,200
â€¢ Unreimbursed prescription glasses for Ellie: 150
â€¢ Laser hair treatment for Ellie (so that she will no longer need to shave her legs) 2,000
5. Karl and Ellie paid $12,000 of interest payments on their primary residence (acquisition debt of $225,000). They also paid $1,750 of interest expense on Ellieâ€™s car loan and $500 of interest on their Visa card.
6. Karl and Ellie paid $4,000 of real estate taxes on their home and $1,000 of real estate tax on a vacant lot they purchased with the hope of building their dream home in the future. They also paid $3,000 in sales tax on Ellieâ€™s car and other purchases and $1,000 of ad valoreum tax on their cars.
7. Karl and Ellie made the following contributions this year:
â€¢ American Red Cross $ 200
â€¢ United Way 150
â€¢ St. Josephâ€™s Catholic Church 8,000
â€¢ Food for the family of Hannah Barbara (a neighbor 225
who suffered a tragic car accident this past year).
â€¢ Stock transfer to the University of Notre Dame (originally 750
purchased for $1,000 in 2005)
8. Karl incurred $4,000 of unreimbursed meals and entertainment related to his job. Ellie incurred $1,200 of expenses for investment publications, and last year they paid their CPA $500 to prepare their tax return.
9. The roof on Karl and Ellieâ€™s house was severely damaged in a hail storm. They had to replace the roof ($7,500), which unfortunately was not covered by insurance because of their high deductible ($10,000).
10. Karl won $5,000 in the state lottery. He has been playing the lottery for years ($10 in lottery tickets every week ($520 in total) that he saves to keep track of the numbers he plays).