Noah and Joan Arc's Tax Return
Noah and Joan Arc live with their family at 4342 Josie Jo, Santee, CA 92071. Noah's Social Security number is 434-11-3311; Joan's is 456-87-5432. Both are in their mid-30s and enjoy good health and eyesight. Noah owns and operates a pet store and Joan is a firefighter for the city.
1. The Arcs have two children, a son named Billie Bob (Social Security number 598-01-2345), who is 7 years old, and a daughter named Mary Sue (Social Security number 554-33-2411), who is 4 years old. The Arcs paid $3,200 to the Roundup Day Care Center to take care of Mary Sue while they worked. Because Joan is a firefighter, she was home in the afternoon to care for Billie Bob after school.
2. For the current year, Joan's W-2 from the city fire department is located below. Noah made estimated federal income tax payments of $12,000 and estimated state income tax payments of $1,020 during the current year.
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a Employee's social security number 456-87-5432 |
OMB No. 1545-0008 |
Safe, accurate,
FAST! Use |
IRS e ~ file |
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| b |
Employer identification number (EIN)
33-4382966 |
1 |
Wages, tips, other compensation
27,600.00 |
2 |
Federal income tax withheld
5,050.00 |
| c |
Employer's name, address, and ZIP code
Santee Fire Department
Santee, CA 92071 |
3 |
Social security wages
27,600.00 |
4 |
Social security tax withheld
1,711.20 |
| 5 |
Medicare wages and tips
27,600.00 |
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Medicare tax withheld
400.20 |
| 7 |
Social security tips
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Allocated tips |
| d |
Control number
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9 |
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Dependent care benefits
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Employee's first name and initial
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Last name
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Suff. |
11 |
Nonqualified plans |
12a |
See instructions for box 12
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Joan Arc
4342 Josie Jo
Santee, CA 92071 |
13 |
| Statutory employee |
Retirement plan |
Third-party sick pay |
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12b |
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14 |
Other |
12c |
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12d |
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Employee's address and ZIP code |
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| 15 |
State |
Employer's state ID number |
16 |
State wages, tips, etc. |
17 |
State income tax |
18 |
Local wages, tips, etc. |
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Local income tax |
20 |
Locality name |
| CA |
1126-87021 |
27,600.00 |
1,240.00 |
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| Form W-2 Wage and Tax Statement |
2015 |
Department of the Treasury-Internal Revenue Service |
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Copy B-To Be Filed With Employee's FEDERAL Tax Return. This information is being furnished to the Internal Revenue Service.
3. Noah's pet store is located at 18542 Mission Road, Santee, CA 92071. The name of the store is "The Arc," and its taxpayer ID number is 95-9876556. The beginning inventories and ending inventories are both $10,000. The revenue and expenses for the year are as follows:
| Sales revenue (merchant card sales) |
$ 144,300 |
| Expenses: |
| Cost of sales |
$61,900 |
| Insurance |
780 |
| Accounting fees |
1,800 |
| Wages |
25,100 |
| Payroll taxes |
2,250 |
| Business meals (total) |
$400 |
| Utilities |
2,650 |
| Rental expense |
7,600 |
4. Noah and Joan paid the following amounts during the year (all by check):
| Political contributions |
$250 |
Church donations (for which a written
acknowledgment was received) |
2,700 |
| Real estate taxes on their home |
1,350 |
| Mortgage interest for purchase of home |
See Form 1098 |
| Tax return preparation fees |
350 |
| Credit card interest |
220 |
| Automobile insurance premiums |
600 |
| Uniforms for Joan |
125 |
5. Noah likes to invest in the stock market. His Form 1099-B showed the following information for Noah's stock sales:
| Stock |
Date Acquired |
Date Sold |
Sales Price |
Cost Basis |
| Blue Co. |
02/11/05 |
08/15/15 |
$4,500 |
$2,400 |
| Yellow Co. |
01/31/15 |
06/05/15 |
6,000 |
5,300 |
| Red Co. |
10/02/06 |
10/07/15 |
12,200 |
1,600 |
The expenses of sale are included in the cost basis. Noah has a long-term capital loss carryover from last year of $2,300.
6. During the year, Noah and Joan received the following qualifying dividends:
| Exxon |
$302 |
| Texas Utilities |
220 |
| Coca-Cola |
See 1099-DIV |
All stocks, bonds, and savings accounts were purchased or established with community property.
7. Noah and Joan own rental property (a single family residence) located at 6431 Gary Ct., San Diego, CA 92115. The revenue and expenses for the year are as follows:
| Rent income |
See 1099-MISC |
| Insurance |
$575 |
| Interest expense |
6,870 |
| Property taxes |
1,000 |
| Miscellaneous expenses |
600 |
| Depreciation (the house was acquired in 1991) |
3,000 |
8. All members of the Arc household were covered for the entire year under health care insurance through Joan's employer.
9. The Arcs paid California general sales tax of $976 during the year.
Required: Although Noah and Joan do not believe their tax return will be unduly complicated, they do realize their limitations and come to you for assistance. You are to prepare their federal income tax return in good form, signing the return as the preparer. You are not required to complete a California state income tax return. Noah and Joan have completed a tax organizer and have also given you several IRS forms (see 1099-DIV, 1099-MISC and 1098) that they were not sure what to do with. Make realistic assumptions about any missing data (addresses, etc.) that you may need. The following forms and schedules are required:
| Form 1040 |
Schedule E |
| Schedule A |
Schedule SE |
| Schedule B |
Form 2441 |
| Schedule C |
Form 8949 |
| Schedule D |
Qualified Dividends and Capital Gain Tax Worksheet |
If required, enter a "loss" as a negative number on the tax form. Do not enter deductions as negative numbers. If an amount box does not require an entry or the answer is zero, enter "0". If required, round your answers to the nearest dollar. However, on Schedule SE, use the rounded amounts in subsequent computations.