Assessment 4 instructions: 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 a 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.

Introduction

“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. http://www.quotegarden.com/taxes.htm

Note: The assessments in this course are presented in a 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.

Preparation

The Schedule A tax form allows taxpayers to itemize their deductions, rather than using the standard deduction. For this assessment, you will determine itemized deductions for the Weavers for Schedule A.

Scenario

Jacob and Taylor Weaver, ages 45 and 42 respectively, are married and are filing jointly in 2021.

  • They have three children, Ashley, age 9; Patrick, age 6; and John, age 17.
    • 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 $31,000 in 2021.
  • Income Taxes: $4,200 withheld.
  • Interest received from Local Bank: $6,575.
  • Estimated tax payments: $25,000.
    • $350 paid with their 2020 state tax return.
  • Jacob and Taylor bought their first house in 2021.
    • Home mortgage interest: $12,246.
    • Property tax: $12,230.
  • 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 2021 in the amount of $6,011.
  • Health insurance for the family, through Taylor’s job, cost $7,500 for all 12 months of 2021.
  • They paid deductibles and co-payments of $2,550.

Instructions

For this assessment, complete the following:

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

Competencies Measured

By successfully completing this assessment, you will demonstrate your proficiency in the following course competencies and assessment criteria:

  • Competency 2: Analyze the basics of individual income tax return preparation.
    • Apply laws and rules for state and local deductions on Schedule A tax form.
    • Apply laws and rules for medical expenses on Schedule A tax form.
    • Apply laws and rules for interest deductions on Schedule A tax form.
    • Apply laws and rules for charitable contributions on Schedule A tax form.
    • Interpret official rules and instructions to record correct entries on tax forms.

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