AC 371 – Michael Bubble lives at 5151 Aerie Drive, Tulsa, OK 73003. He is an office manager with Jensen Manufacturing

QUESTION

Tax Return Project (b)AC 371 – Income Tax IGeneral InformationThis project has two parts to it. First, you will prepare an individual income tax return for a hypothetical taxpayer based on the information provided below for tax year 2012. For this project, please use forms off of .irs.gov/”>www.irs.gov to complete your hypothetical tax return. Do NOT use TurboTax or TaxCut or ANY other software for this project. Make sure that you turn in all forms and supporting documents for the tax return of your hypothetical taxpayer. Second, you will write a short document, either a memo to the file or a letter to the client (about a page in length), with some tax issues that you note for your taxpayer or tax planning opportunities for your taxpayer. Samples of client letters and memos to the file will be posted on Blackboard Learn. If you have any questions, please let me know (.ua.edu”>sjurney@cba.ua.edu).GradingThe tax return project is due on November 20th. Feel free to turn-in your project early, or you may turn-in a paper copy at the beginning of class. The tax return itself (Form 1040 with all appropriate forms and schedules attached) will be worth 50 points. The writing portion of the assignment (memo or letter) will be worth 25 points. Your project will be graded on the following basis:(i) Organization with respect to neatness and completeness of tax return(ii) Correctness of information on the tax return(iii) Organization, clarity and thought regarding the tax issues/concerns (should have at least two) for your hypothetical client(iv) Communication skills are necessary for a successful professional career. Treat your memo to the file or letter to the client as professional communication; thus, your memo or letter should be free of spelling, grammar, or punctuation errors.(v) Remember, this is to be done as an individual project. Please do not work on it with anyone else. You may ask general questions of each other, but do not work on the tax return with anyone else. It must be your own work. If you do have questions or issues, please let me know.NotePlease note that this a tax return for the 2012 tax year. Currently, the tax forms are not available for the 2013 tax year, so we will use the tax forms for 2012. Please make sure you are using 2012 tax schedules/amounts/thresholds when completing the tax return.Hypothetical Taxpayer InformationThe information below is provided from the client’s documentation (such as W-2s, 1099s, 1098s, client portfolio, etc. Do not complete these type forms.)Michael Bubble lives at 5151 Aerie Drive, Tulsa, OK 73003. He is an office manager with Jensen Manufacturing Company, 89203 Western Avenue, Tulsa, 74112 (employer identification number 38-7788214). He also has a part-time tax practice.During 2012, Michael received interest of $1,750 from Home Federal Savings and Loan and $995 from Home State Bank (each reported on form 1099-INT). He also received qualified dividends of $975 from Cowboy Corporation, $1,250 from Sooner Corporation, and $860 from Hurricane Corporation (each reported on a Form 1099-DIV).Michael is single and has no dependents; he does pay alimony of $925 a month to his ex-wife (SSN 256-78-2345). Michael’s birthday is 9/15/74, and his SSN is 101-22-3434.On January 2, 2012, Michael acquired 200 shares of Sooner Corporation common stock for $15 a share. He sold the stock on December 19, 2012, for $35 a share. Michael also received a $1,250 state tax refund from Oklahoma on June 1, 2012. On his 2011 Federal income tax return, he reported total itemized deductions of $8,700, which included $2,400 of state income tax withheld by his employer. He paid $1,050 in state sales taxes in 2011.Information from his W-2 from Jensen:LineDescriptionAmount1Wages, tips, other compensation 59,000.002Federal income tax withheld 8,500.003Social security wages 59,000.004Social security tax withheld 3,658.005Medicare wages and tips 59,000.006Medicare tax withheld 855.0015State OK16State wages, tips, etc. 59,000.0017State income tax withheld 1,950.00During 2012, Michael paid $875 for prescription medicines and $7,250 in doctor bills, hospital bills, and medical insurance premiums. Michael had hair plugs installed, which cost $6,500 and was not covered by insurance. Michael paid real property taxes of $2,975 on his home. Interest on his home mortgage was $4,805, and interest to credit card companies was $1,970.Fees earned from his part-time tax practice in 2012 totaled $8,500. He paid $1,585 to have the tax returns processed by a computerized tax service.At the suggestion of his employer, Michael attended a convention on current developments in managerial accounting. Michael was not reimbursed for the travel expenses of $1,980 (including $200 for the cost of meals) he incurred in attending the convention.Michael bought a used mini-van from his brother-in-law, who was broke and needed the cash, for $4,800 on June 5, 2012. He sold it to a friend for $6,100 on November 2, 2012. On February 1, 2012, Michael bought 550 shares of Cowboy Corporation common stock for $17.00 a share. On November 28, 2012, he sold them for $12.50 a share.Michael contributed $25 each week to his church, and $50 each month to United Way. Professional dues and subscriptions totaled $1,575 related to his job as a manager. Michael maintained his sales tax receipts for a total of $2,450. Michael paid estimated Federal taxes of $1,250. Michael donated about 100 paperback books (his cost was about $800 and thrift store value is about $150) to his local Goodwill during 2012, as well as an old writing desk and chair (his cost was about $950 and thrift store value is $350).Based on the information above, please complete his 2012 individual income tax return. Do not compute self-employment tax (i.e., no schedule SE) or AMT (i.e., no Form 6251).

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