Category: Writing

Dependency Requirements. Juan helps support his mother
Maria, his son Jose, and a niece Norma. How man y dependents can Juan claim
given these additional faces?
Maria lives with Juan. She receives $12,000 of Social
Security benefits, which she uses to pay for food, clothing, medical expenses,
and other living expenses (the Social Security is wholly tax-exempt in this
situation). Juan provides Maria ‘s room which has a rental value of $5,000 and
pays an additional $4,000 toward her support. Jose, age 12, lives with his
mother, Linda. Juan pays $12,000 per year child support, and Linda provides an
additional $4,000 of support. Norma, age 20, is a part-time college student who
lives in an apartment. She earned $6,000 working part -time and received a
scholarship of $2,000. Norma’s father provided $4,000 toward her support, and
Juan provided $7,000.

IRS Audits . Which of the following individuals is most
likely to be audited?
a. Connie has a $20,000 net loss from her unincorporated
business (a cattle ranch). She also received a $200,000 salary as an executive
of a corporation.
b. Craig has AGI of $20,000 from wages and uses the standard
deduction.
c. Dale fails to report $120 of dividends from a stock
investment. His taxab le income is $40,000 and he has no other unusually large
itemized deductions or business expenses. A Form 1099 is reported to the IRS.

Interest and Penalties. In 2018, Paul, who is single, has a
comfortable salary from his job as well as income from his investment
portfolio. However, he is habituall y late in filing his federal income tax
return. He did not file his 2018 income tax return until December 4, 2019 (due
dare was April 15, 2019) and no extensions of time to file the return were
filed. Below are amounts from his 2018 return:
Paul sent a check with his return to the IRS for the
balance due of $5,400 . He is relieved that he has completed his filing
requirement for 2018 and has mer his financial obligation to the government for
2018.
Has Paul mer all of his financial obligations ro the
IRS for 2018? If nor, what additional amounts will Paul be liable to pay to the
IRS?

Partnership Income. Howard Gartman is a 40% partner in the
Horton & Gartman Partnership. During 2019, the partnership reported the
total items below (100%) on its Form 1065:
Howard and his wife Dawn, who file a joint return, also had
the following income and deductions from sources not connected with the
partnership:
Howard and Dawn have two children. During 2019, Dawn had
$4,500 in federal income taxes withheld from her salary and Howard made four
estimated tax payments of $2,500 each ($10,000 total). Compute Howard and Dawn
‘s Federal income tax liability for 2019 and whether they have a balance due or
a tax refund. Ignore the child tax credits.