Assessment 4 Itemized Deductions – Schedule A

Overview

Assessment 4 Itemized Deductions – Schedule A . Determine itemized deductions and complete a Schedule A for a tax scenario.

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 4 until you have submitted and received faculty feedback for Assessment 3.

Context

“If you make any money, the government shoves you in the creek once a year with it in your pockets, and all that don’t get wet you can keep.” — Will Rogers, American cowboy and humorist.

Staying with Will Rogers’ analogy, Schedule A is analogous to a sealed sandwich bag that protects some of the coins from the raging waters of government greed. If you are fortunate enough to have made significant income during a tax year, it is quite possible that you also have significant deductions to offset those monies. The Schedule A tax form allows taxpayers to itemize their deductions, rather than using the standard deduction.

Reference Quotegarden.com. (n.d.). Quotations about taxes. Retrieved from

http://www.quotegarden.com/taxes.html

Questions to Consider

Assessment 4 Itemized Deductions – Schedule A

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.

• Do you believe that the federal government should abolish the current income tax structure and replace it with a consumption tax structure?

• Would a consumption tax be fair to the majority of taxpayers? • How would you explain the pros and cons of the current income tax structure to a foreigner?

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 4 Itemized Deductions – Schedule A

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 4 until you have submitted and received faculty feedback for Assessment 3.

For this assessment, complete the following:

• Read the information provided in the scenario below. • Use information and publications from IRS.gov and the other IRS resources linked in the

Resources to determine itemized deductions for the Weavers for Schedule A, based on the scenario information.

• Add the information you determine to Schedule A. • Submit Schedule A.

Scenario

Assessment 4 Itemized Deductions – Schedule A

• 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.

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◦ Social Security numbers are: Jacob, 222-33-4444; Taylor, 555-66-7777; Ashley, 888- 99-1234; Patrick, 789-56-4321; John, 123-45-6789.

• Jacob is self-employed as a contractor. ◦ 2014 net income: $133,000. ◦ Clients owe him a total of $53,000 for work completed in 2014. ◦ 2014 estimated tax payments: $18,000.

• Taylor works part-time as a paralegal. ◦ She earned $26,000 in 2014. ◦ Federal income withholding: $2,350.

• Weavers paid $350 with their 2013 state tax return. • Jacob and Taylor bought their first house in 2014.

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

• 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. ◦ Dental insurance for the family was $1200.

• Car insurance for the family car was $600.

How to use the scoring guide

Itemized Deductions – Schedule A Scoring Guide

Use the scoring guide to enhance your learning.

VIEW SCORING GUIDE

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ACTIVITY

Apply laws and rules for charitable contributions on Schedule A tax form.

Apply laws and rules for interest deductions on Schedule A tax form.

Apply laws and rules for medical expenses on Schedule A tax form.

Apply laws and rules for state and local deductions on Schedule A tax form.

Interpret official rules and instructions to record correct entries on tax forms.

Assessment 4 Itemized Deductions – Schedule A

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