Taxpayer Information: Taxpayer Names: Clyde & Bonnie Barrow 666 Parker Lane Taos

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Taxpayer Information: Taxpayer Names: Clyde & Bonnie Barrow 666 Parker Lane Taos, NM 87571 Filing Status: Married Filing Jointly Dependent: Wheel Barrow Social Security Numbers: Clyde Barrow (age 46) – 111-22-3333 Bonnie Barrow (age 45) – 444-55-6666 Wheel Barrow (age 17) – 153-46-8897 Income: Wages: Bonnie • Wages – (Refer to W2 Form) Clyde • Self Employed – (Refer to Sole Proprietorship information below) Estimated Federal Tax Payments - 4 Equal Payments of $800 Refund • New Mexico State Tax Refund $125 (taken as an itemized deduction for taxes in 2014) Personal Expenses: Sales Tax on Purchase of Auto - $1,800 Sales tax from IRS Tables - $875 Real Estate Taxes - $6,150 Medical Expenses: Prescription Drugs - $410 Health Care Premiums - $10,400 Non-Prescription Drugs ( Cold & Flu Medicine, Eye-drops, Heating Pad) - $116 Non-Prescription Drugs (Insulin) - $375 Doctors Bills – 1,150 Eyeglasses - $250 Family Membership to Health Fitness Club - $900 Cosmetic Surgery for Bonnie after receiving injuries in a skiing accident – $3,000. Her Insurance reimbursement for the surgery was $2,500. Mortgage Interest - $13,250 Personal Credit Card Interest - $475 Interest on Auto Loan – $620 Charitable Contributions: American Cancer Society - $25 United Way - $75 Tax Preparation Fees - $350 Union Dues – $500 Sole Proprietorship: Clyde – Sole Proprietor Company Name: The Surrealistic Guitar Store Address: 342 Route 66, Taos , NM Principal Business – Guitar Maker Principal Business Code: 999999 Accounting Method: Cash Materially Participate in the Business: Yes Business Started in 2015 Business did not make any Payments in 2014 that required filing Form 1099 Income • Gross Sales - $68,000 • Cost of Goods Sold - $19,070 Expenses • Advertising - $420 • Car Expenses – traveled 1,865 miles for business (Mileage Method is preferred over Actual Auto Costs) • Insurance - $3,600 • Credit Card Interest - $205 • Legal Fees - $750 • Office Expenses - $110 • Rent Expense - $9,600 • Licenses - $120 • Travel Expenses: o Business trip to Martin Guitar Factory, Nazareth, PA Roundtrip Airfare: $680 Lodging: $450 Meals & Entertainment: $350 Rental Car: $120 Parking Fees: $40 • Utilities - $1,150 • Other Expenses: o Professional Dues: Guitar Makers of America - $150 o Internet Expenses - $1,125 o Cell Phone Charges - $900 o Tolls - $80 Required: 1. Download the following Tax Forms from Blackboard: Form 1040 Form 1040 – Schedule A Form 1040 – Schedule C Form 1040 – Schedule SE 2. Download the following Tax Forms from Blackboard: Forms W2 3. Prepare the 2015 Personal Income Tax for Bonnie & Clyde for 2015 a. Calculate the tax refund or amount due b. Sign your name at the bottom of Form 1040 as the preparer c. Sign Taxpayer’s Names at the bottom of Form 1040

Explanation / Answer

Form 1040

First Name:Clyde                     Last Name: Barrow        SSN:111-22-3333

Spouse first Name: Bonnie       Last Name :Barrow        SSN:444-55-6666

Address:666 Parker Lane Taos,

City: NM Zip Code: 87571

Filing Status

2)Married Filing Jointly

Exemptions:

6c)Dependants:

First Name:Wheel    Last Name: Barrow     SSN:153-46-8897   Relation: Son     AGE:17

d) Total Numbers of exemptions claimed =1

Incomes:

12)Business income: $28757.625

22)Combine Income=$28757.625

Adjusted Gross Income

27)Deductible part of self-employment tax=$2,031.66

37)AGI= $28757.625 -$2,031.66=$26,725.96

38)Amount from line 37 =$26,725.96

40)Itemized Deductions=$12,600

41) Subtract line 40 from line 38 =$26,725.96- $12,600 =$14,125.96

42)Exemptions.

If line 38 is $154,950 or less, multiply $4,000 =$4,000 *1=$4,000

43)Taxable income = Subtract line 42 from line 41. = $14,125.96 -$4,000=$10,125

Other Taxes

57 Self-employment tax: $2,031.66

63) total tax=$2,031.66

Payments

65 )2015 estimated tax payments and amount applied from 2014 return=$800*4=$3200

74) total payments = $3200

75) If line 74 is more than line 63, subtract line 63 from line 74.

This is the amount you overpaid=$3200 - $2,031.66=$1,168.34

REfund: $1,168.34

SCHEDULE C

(Form 1040)

Profit or LOss From Business

Name of proprietor::Clyde       Barrow        SSN:111-22-3333                             

A) Principal business:Sole Proprietor Company    B) Code: 999999

C)Business Name:Surrealistic Guitar Store

E) Address: 342 Route 66, Taos , NM

F) Accounting Method: Cash

G) Did you materially participate: Yes

H) If you started or acquired this business during 2015: Yes

I) Did you make any payments in 2015 that would require you to file Form(s): No

Part 1: Income

1)Gross Receipts =$68,000

4)Cost of Goods sold = $19,070

5)Gross profit:$68,000 -$19,070=$48,930

6) Other Income: $125(tax refund)

7)Gross Income:$48,930 + $125=$49,055

Part 2:

Expenses:

8) Advertising : $420

9) Car Expenses: $1072.375 (57.5 cents per mile *1,865 = $1072.375)

15)Insurance - $3,600

16)Interest:::::: $205

17) Legal Fees:$750

18) Office Expenses:$110

20)Rent Expense :$9,600

23) Licenses =$120

24) a Travel Airfare: $680

b) Deductible meals and entertainment=$175(350 *50/100=$175; only 50% is allowed for deduction)

Rental car    :$120

Parking Fees: $40

25) Utilties:$1,150

27a)Other expenses: $150+ $1,125+$900 +$80

Professional Dues: $150

Internet Expenses - $1,125

Cell Phone Charges - $900

Tolls - $80

28) Total expense: $20,297.375

29) Tentative profit = $49,055-$20,297.375=$28757.625 (Form 1040,line 12) and Schedule SE, line 2

SCHEDULE SE

2) Net Profit =$28757.625 (SCHEDULE C)

3)$28757.625

4)92.35% *$28757.625 =$26,557.666

5) Self employment Tax : $4,063 ( $26,557.666 * 15.3%)

If the amount on line 4 is less than $118,500 use 15.3%

6)Deduction of Self Employment Tax one half =$2,031.66           ($4,063 * 50/100=$2,031.66 )

( Form 1040, line 27 )

SCHEDULE A

1) Medical and Dental Expenses:$12640

Prescription Drugs - $410

Health Care Premiums - $10,400($10,400 exceeded 10% fo AGI)

Doctors Bills – 1,150

Cosmetic Surgery =$500 ( $3,000Cosmetic Surgery - $2500Insurance reimbursement )

2) Enter amount from Form 1040, line 38:$26,725.96

3) Multiply line 2 by 10%=$2,672.60

4)Subtract line 3 from line 1=$9967.40   ($12640 - $2,672.60)

Taxes You Paid

6)Real Estate Taxes:$875

7)Personal property taxes: $1,800

9) ADD:$875 +$1,800=$2,675

Interest You Paid

10) Home mortgage interest : $13,250

14) Investment interest:$620

15) ADD:$13,250 +$620=$13,870

16)Charitable Contributions:

American Cancer Society - $25

United Way - $75 Tax

19)$25+75=$100

22) Tax Preparation Fees - $350

23) other expenses Union Dues – $500

24) Add lines 21 through 23 =$350 +$500=$850

25) Enter amount from Form 1040, line 38= $26,725.96

26) Multiply line 25 by 2% =$26,725.96 * 2/10=$534.52

27) Subtract line 26 from line 24.=$534.52- $850=$315.48

29) Is Form 1040, line 38, over $154,950: NO

Itemized Deductions are exceeded $12,600, in this case we can use $12,600 as Itemized Deductions

Not allowed for deduction Medical and Dental Expenses:

Non-Prescription Drugs,Non-Prescription Drugs

Membership to Health Fitness Club

Eyeglasses

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