BUS-FP4065 Assessment 3 Inclusions, Exclusions, and AGI

BUS-FP4065 Assessment 3 Inclusions, Exclusions, and AGI . Apply the rules associated with inclusions and exclusions to an individual’s gross income and apply another set of code rules to determine a taxpayer’s AGI.

Note: Completing a tax form requires specific steps that need to be executed in a sequence. The assessments in this course are presented in sequence and must be completed in order. Incorrect entries in previous assessments will result in incorrect entries in future assessments. Do not complete Assessment 3 until you have submitted and received faculty feedback for Assessment 2.

Context

“I don’t know what to do or where to turn in this taxation matter. Somewhere there must be a book that tells all about it, where I could go to straighten it out in my mind. But I don’t know where the book is, and maybe I couldn’t read it if I found it.” — Warren G. Harding, the 29th President of the United States, 1921–1923.

Questions to Consider

To deepen your understanding, you are encouraged to consider the questions below and discuss them with a fellow learner, a work associate, an interested friend, or a member of the business community.

The primary purpose of the Internal Revenue Service is to raise revenue for the government. However, the U.S. Congress has chosen to exempt certain income from taxation, such as scholarships, gifts, life insurance proceeds, municipal bond interest, and employee fringe benefits.

• Why you believe Congress has provided these exemptions to taxpayers? • Which of the additional exemptions would you challenge? • Which of the additional exemptions do you agree with?

BUS-FP4065 Assessment 3 Inclusions, Exclusions, and AGI

Resources

Required Resources

The following resources are required to complete the assessment.

Internet Resources Access the following resources by clicking the links provided. Please note that URLs change frequently. Permissions for the following links have been either granted or deemed appropriate for educational use at the time of course publication.

IRS.gov is the homepage for the federal IRS Web site. Use the tabs at the top of the page to navigate the site. The Interactive Tax Assistant and Tax Trails are tools that walk you through a series of questions to find answers to tax questions. Download the appropriate forms and publications from the IRS Web site to complete this assessment.

• IRS.gov. (n.d.). Retrieved from http://www.irs.gov/ • IRS. (n.d.). Interactive tax assistant. Retrieved from http://www.irs.gov/uac/Interactive-Tax-

Assistant-(ITA)-1 • IRS. (n.d.). Tax trails. Retrieved from www.irs.gov/Individuals/Tax-Trails%2d%2d%2dMain-Menu

Assessment Instructions

Note: The assessments in this course are presented in sequence and must be completed in order. In Assessments 2–5, you will work step-by-step toward completing a 1040 tax return and all the necessary related forms, based on a provided scenario. Do not complete Assessment 3 until you have submitted and received faculty feedback for Assessment 2. Incorrect entries in Assessment 2 affect the entries in Assessment 3.

For this assessment, use information and publications from IRS.gov and the other IRS resources linked in the Resources under the Required Resources heading to determine the adjusted gross income (AGI) for Jacob and Taylor Weaver, based on the provided scenario.

Complete the following:

• Read the information in the scenario below. • Download the appropriate forms and publications from IRS.gov. • Enter information from Assessment 2, Schedules C and SE, into the 1040 form. • Apply the rules for adjustments to adjusted gross income.

◦ Enter applicable information from the scenario into the 1040 form. ◦ Interpret official rules and instructions to record correct entries on the tax form.

• Calculate the AGI for the Weavers. • Submit the tax form.

Scenario

BUS-FP4065 Assessment 3 Inclusions, Exclusions, and AGI

• Jacob and Taylor Weaver, ages 45 and 42 respectively, are married and are filing jointly in 2014.

◦ They have three children, Ashley, age 9; Patrick, age 6; and John, age 18. ◦ Social Security numbers are: Jacob, 222-33-4444; Taylor, 555-66-7777; Ashley, 888-

99-1234; Patrick, 789-56-4321; John, 123-45-6789. • Taylor works part-time as a paralegal.

◦ She earned $26,000 in 2014. • Taxes withheld: $4,200 withheld. • Estimated tax payments: $18,000. • $350 paid with their 2013 state tax return. • Jacob and Taylor bought their first house in 2014.

◦ Home mortgage interest: $7,246. ◦ Property tax: $2,230.

• Federal income withholding: $2,350. • Charities: $4,500. • $435 to rent a moving truck. • $8,000 to put new siding on the house. • $11,600 for child care expenses ($5,800 for each child).

◦ It was paid to Lil Tigers Daycare, 1115 S. Garrison St., Muncie, IN 47305 (EIN 98- 7654321).

• Taylor is a part-time student at Ball State University in Muncie. ◦ She received a 1098-T indicating tuition and fees for 2014 in the amount of $6,011.

• Health insurance for the family, through Taylor’s job, cost $6000 for all 12 months of 2014. ◦ They paid deductibles and co-payments of $550.

How to use the scoring guide

Inclusions, Exclusions, and AGI Scoring Guide

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BUS-FP4065 Assessment 3 Inclusions, Exclusions, and AGI

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