Jack White – Advanced Training Exercise

Jack White (xxx-xx-0196) was married, but got divorced in 2011. Jack has two children, Scarlett and Henry, who live with him all year long except for the weekends when they stay with their mother, Karen Elson. Jack paid all the household expenses and provided all of Scarlett and Henry’s support.

Jack’s friend Brendan Benson fell on some hard times and moved in with Jack on January 1 of the current tax year and lived with Jack all year. He couldn’t find a job and Jack provided all his support for the year.

Wages: Jack worked at an upholstery shop in Birmingham, which he received a Form W-2 for.

Business Income: Jack is also self-employed as a musician, and received a 1099-MISC for a couple of shows he played at the Ryman Auditorium. He also played a few gigs at Workplay Theater, but he was paid $7,000 in cash for his performances. Jack used the cash method of accounting, materially participated in the business, and had no employees.

Jack had the following expenses:  Supplies (including guitars, drumsticks, etc.) - $4,000  Professional fees to Jack’s agent - $1,200  Advertising - $1,000 Jack also used his vehicle for business travel of 6,500 miles. He put his car into service on 01/01/2005. He has written documentation of all his mileage. He also uses his car for personal use as well, and does not have another vehicle for personal use.

Retirement Income Jack took an early distribution from his Individual Retirement Account. The distribution code listed indicates it was an early distribution with no known exception. Jack says that he took the distribution to pay household expenses.

Dividends/Foreign Tax: Jack received a Form 1099-DIV, which included an amount for foreign tax paid.

Alimony: Jack paid $100 a month in alimony to his ex-wife, Karen Olson (321-00-0196), for her rent. He also receives $150 a month from his other ex-wife, Meg White, to help cover some medical expenses.

College Tuition Payments: Jack’s daughter, Scarlett, is exceptionally bright and began attending college early this year. Jack paid her tuition and received a 1098-T. Jack also purchased $600 worth of books from Amazon for his daughter’s classes. Scarlett has never claimed an education credit before and has never been convicted for a felony drug possession.

SAVEFIRST | Jack White - Advanced Training Exercise Childcare Expenses: Jack paid Seventh Son Daycare to watch Henry while he was working late. He paid Seventh Son Daycare (17-8493844) $450 for all of the tax year. The daycare is location at 777 7th Ave W, Birmingham, AL 35205. Jack also paid his ex-wife, Karen Olson (xxx- xx-0196) to watch Henry while he went out of town a couple of nights for shows.

Residential Energy Credit: Jack installed an asphalt roof on his home this year, and it met the Energy Star program requirements. The cost of all materials was $600 and the labor cost was $200.

He also installed an energy efficient water heater, which was certified by the CEE. The cost of the heater was $1,500, and the labor cost to install the heater was $650.

Hint: see summary chart to determine if/when labor costs qualify!

Jack also claimed a $200 residential energy credit on his previous year’s tax return.

Itemized Deductions: Jack would like to itemize his deductions if possible. He provides you with the following receipts and income documents:

Receipt Amount Insurance premiums $1300 Doctor co-pays $200 Prescription drugs $600 Eyeglasses $150 Life insurance policy $450 Extra-strength Tylenol $25 Donation to Music is Hope Foundation $800 Donation to the British Youth Band Association*Hint:ahem, British $400 FMV of upholstered furniture donated to Salvation Army $300 Check for real estate taxes paid for ex-spouse Meg White $320 Water & sewer city tax on Jack’s residence $250 hunting license $35 Personal property tax $570 Ad valorem tax $189 Interest paid on his car loan $650 tax prep fee from two years ago $200 Record Industry Journal $100 Safe deposit box $75 Divorce lawyer fees $700

Even though Jack doesn't have enough expenses to be greater than the standard, pull up the pdf printout. The Schedule A should have $8,751 on line 29 as the Itemized deductions(2017)

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SAVEFIRST | Jack White - Advanced Training Exercise 3 SAVEFIRST | Jack White - Advanced Training Exercise 4 SAVEFIRST | Jack White - Advanced Training Exercise 5 a Employee’s social security number 22222 XXX-XX-0196 OMB No. 1545-0008 b Employer identification number (EIN) 1 Wages, tips, other compensation 2 Federal income tax withheld 65-8899999 17,995.00 2,400.00 c Employer’s name, address, and ZIP code 3 Social security wages 4 Social security tax withheld Third Man Upholstery 17,995.00 1,116.00 1200 White Stripes Blvd 5 Medicare wages and tips 6 Medicare tax withheld Birmingham, AL 35203 17,995.00 261.00 7 Social security tips 8 Allocated tips

d Control number 9 Verification code 10 Dependent care benefits

e Employee’s first name and initial Last name Suff. 11 Nonqualified plans 12a C o d Jack White e 13 Statutory Retirement Third-party employee plan sick pay 12b 623 7th Ave S C o d Your City, YS, YZ e 14 Other 12c C o d e 12d C o d e f Employee’s address and ZIP code 15 State Employer’s state ID number 16 State wages, tips, etc. 17 State income tax 18 Local wages, tips, etc. 19 Local income tax 20 Locality name YS 12434445544 17,995.00 900.00 17,995.00 167.00 BHAM

Wage and Tax Department of the Treasury—Internal Revenue Service Form W-2 Statement 20XX Copy 1—For State, City, or Local Tax Department

SAVEFIRST | Jack White - Advanced Training Exercise 6 CORRECTED (if checked) PAYER’S name, street address, city or town, state or province, country, ZIP 1 Rents OMB No. 1545-0115 or foreign postal code, and telephone no. Ryman Auditorium $ Miscellaneous 116 5th Ave N 2 Royalties 20XX Income Nashville, TN 37219 $ Form 1099-MISC 3 Other income 4 Federal income tax withheld Copy B $ $ For Recipient PAYER’S federal identification number RECIPIENT’S identification number 5 Fishing boat proceeds 6 Medical and health care payments 26-5552233 XXX-XX-0196 $ $ RECIPIENT’S name 7 Nonemployee compensation 8 Substitute payments in lieu of This is important tax dividends or interest information and is Jack White being furnished to the Internal Revenue Street address (including apt. no.) $ 22,475.00 $ Service. If you are 9 Payer made direct sales of 10 Crop insurance proceeds required to file a 623 7th Ave S $5,000 or more of consumer return, a negligence products to a buyer penalty or other City or town, state or province, country, and ZIP or foreign postal code (recipient) for resale ▶ $ sanction may be 11 12 imposed on you if Your City, YS, YZ this income is taxable and the IRS Account number (see instructions) FATCA filing 13 Excess golden parachute 14 Gross proceeds paid to an determines that it requirement payments attorney has not been $ $ reported. 15a Section 409A deferrals 15b Section 409A income 16 State tax withheld 17 State/Payer’s state no. 18 State income $ $ $ $ $ $ Form 1099-MISC (keep for your records) www.irs.gov/form1099misc Department of the Treasury - Internal Revenue Service

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SAVEFIRST | Jack White - Advanced Training Exercise 7 CORRECTED (if checked) PAYER’S name, street address, city or town, state or province, country, ZIP 1a Total ordinary dividends OMB No. 1545-0110 or foreign postal code, and telephone no. Regions Bank $ 85.00 Dividends and 1901 5th Ave S 1b Qualified dividends 20XX Distributions Birmingham, AL 35203 $ 75.00 Form 1099-DIV 2a Total capital gain distr. 2b Unrecap. Sec. 1250 gain Copy B $ $ For Recipient PAYER’S federal identification number RECIPIENT’S identification number 2c Section 1202 gain 2d Collectibles (28%) gain

44-4444444 XXX-XX-0196 $ $ RECIPIENT’S name 3 Nondividend distributions 4 Federal income tax withheld This is important tax $ $ 25.00 information and is Jack White 5 Investment expenses being furnished to the Internal Revenue Street address (including apt. no.) $ Service. If you are 6 Foreign tax paid 7 Foreign country or U.S. possession required to file a 623 7th Ave S return, a negligence penalty or other City or town, state or province, country, and ZIP or foreign postal code $ 60.00 sanction may be imposed on you if Your City, YS, YZ 8 Cash liquidation distributions 9 Noncash liquidation distributions this income is taxable $ $ and the IRS determines that it has FATCA filing 10 Exempt-interest dividends 11 Specified private activity not been reported. requirement bond interest dividends $ $ Account number (see instructions) 12 State 13 State identification no. 14 State tax withheld $ $ Form 1099-DIV (keep for your records) www.irs.gov/form1099div Department of the Treasury - Internal Revenue Service

SAVEFIRST | Jack White - Advanced Training Exercise 8 CORRECTED (if checked) RECIPIENT'S/LENDER'S name, street address, city or town, state or *Caution: The amount shown may OMB No. 1545-0901 province, country, ZIP or foreign postal code, and telephone no. not be fully deductible by you. Limits based on the loan amount Mortgage Highland Mortgage and the cost and value of the secured property may apply. Also, 20XX Interest Company you may only deduct interest to the 2140 11th Ave S extent it was incurred by you, Statement actually paid by you, and not Birmingham, AL 35205 reimbursed by another person. Form 1098 1 Mortgage interest received from payer(s)/borrower(s)* Copy B $ 5,250 For Payer/ RECIPIENT'S/LENDER'S federal PAYER'S/BORROWER'S taxpayer 2 Outstanding mortgage 3 Mortgage origination date Borrower identification number identification no. principal as of 1/1/2017 $ 200.00 The information in boxes 1 through 10 is important tax 4 Refund of overpaid 5 Mortgage insurance 65-4332145 XXX-XX-0196 interest premiums information and is being furnished to the Internal PAYER'S/BORROWER'S name $ $ 250.00 Revenue Service. If you are 6 Points paid on purchase of principal residence required to file a return, a Jack White $ negligence penalty or other sanction may be imposed Street address (including apt. no.) 7 Is address of property securing mortgage same as PAYER'S/BORROWER'S address? on you if the IRS determines that an underpayment of 623 7th Ave S If “Yes,” box is checked ...... tax results because you If “No,” see box 8 or 9, below City or town, state or province, country, and ZIP or foreign postal code overstated a deduction for this mortgage interest 8 Address of property securing mortgage or for these points, reported Your City, YS, YZ in boxes 1 and 6; or 10 Number of mortgaged properties 11 Other because you didn't report 9 If property securing mortgage has no address, below is the the refund of interest Real Estate Taxes: description of the property (box 4); or because you 325.00 claimed a non-deductible Account number (see instructions) item.

Form 1098 (Keep for your records) www.irs.gov/form1098 Department of the Treasury - Internal Revenue Service

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