Acc 6900 – Strategic Tax Planning

Dizzy Deans Tax Return

 Project

I would like to see the following items in your Project –

 Note: The Requirements that need to be done;

1. Cover Sheet for Project with Name of Project, Acc 6900,

2. Engagement Letter for Client; our understanding of tax engagement signed by both parties. (see attached Wiley letter –> scroll down to the end to see the sample )

3. Client Tax Return Questionnaire (you can use the year 2020);

4. Tax Return Checklist for reviewing return;

5. Cover Letter to Client with filing instruction for the return – Pro-Connect cover letter will work even if it contains filing information for the state return. If there are questionable items in return, please address in the cover letter;

6. Federal tax return with supporting Schedules & Forms; and when appropriate supporting schedule(s) to support numbers in return.

Note: Most importantly please add references or websites where you found most of your findings for all of these requirements, please.  

Our project – (we are doing a federal return not a state return)

Lance H. and Wanda B. Dean are married and live at 431 Yucca Drive, Sante Fe, NM 87501. Lance works for the convention bureau of the local Chamber of Commerce, and Wanda is employed part-time as a paralegal for a law firm.

During 2020, the Deans had the following receipts:

Wanda was previously married to John Allen. When they divorced several years ago, Wanda was awarded custody of their two children, Penny and Kyle. (Note: Wanda has never issued a Form 8332 waiver.) Under the divorce decree, John was obligated to pay alimony and child support – alimony payments were to terminate if Wanda remarried.

In July, while going to lunch in downtown Santa Fe, Wanda was injured by a tour bus. Because the driver was clearly at fault, the owner of the bus, Roadrunner Touring Company, paid her medical expenses (including a one-week stay in a hospital). To avoid a lawsuit, Roadrunner also transferred $90,000 to her in settlement of the personal injuries she sustained.

The Deans had the following expenditures for 2020:

Additional Information:   

The Adjusted Gross Income is $97,800

The Taxable income is $73,000

Refund is under a $1,000

The life insurance policy was taken out by Lance several years ago and designates Wanda as the beneficiary. As a part-time employee, Wanda is excluded from coverage under her employer’s pension plan. Consequently, she provides for own retirement with a traditional IRA obtained at a local trust company. Because the mayor is a member of the local Chamber of Commerce, Lance felt compelled to make the political contribution.

The Deans’ household includes the following, for whom they provide more than half of the support:

Penny graduated from high school on May 9, 2020 and is undecided about college. During 2020, she earned $8,500 (placed in a savings account) playing a harp in the lobby of a local hotel. Wayne is Wanda’s widower father who died on December 20, 2020. For the past few years, Wayne qualified as a dependent of the Deans.

Federal income tax withheld is $3,900 (Lance) and $1,800 (Wanda). The proper amount of Social Security, Medicare and SDI were withheld from their wages. The Deans received the appropriate coronavirus recovery rebates (economic impact payments); related questions in ProConnect should be ignored.

Determine the Federal income tax for 2020 for the Deans on a joint return by completing the appropriate forms. They do not own and did not use any virtual currency during the year, and they do not want to contribute to the Presidential Election Campaign Fund. If an overpayment results, it is to be refunded to them.

Suggested software: ProConnect Tax but I like Lacerte; according to my instructor

Sample of the Engagement Letter (Wiley):

Engagement Letter—Individual Tax Services

Date

Client

Street Address City, State, and Zip Code Dear Client:

This letter is to confirm and specify the terms of our engagement with you and to clarify the nature and extent of the services we will provide. To ensure an understanding of our mutual responsibilities, we ask all clients for whom returns are prepared to confirm the following arrangements.

We will prepare your 20XX federal and requested state income tax returns from information which you will furnish to us. We will make no audit or otherwise verify the data you submit, although it may be necessary to ask you for clarification of some of the information. We will furnish you with questionnaires and/or worksheets to guide you in gathering the necessary information. Your use of such forms will assist us in keeping our fee to a minimum. Our responsibilities do not include preparation of any other tax returns that may be due to any taxing authority.

This engagement pertains only to the tax year identified above. Our engagement will be complete upon the delivery of the completed tax return to you. You will be responsible to file the return(s) with the taxing authorities. In the event information is requested by either of the parties signing this return, that information will be furnished without obtaining the additional consent of the other party.

The law provides various penalties that may be imposed when taxpayers underestimate their tax liability. If you would like information on the amount or circumstances of these penalties, please contact me.

It is your responsibility to provide all the information required for the preparation of complete and accurate returns. You should retain all the documents, canceled checks, and other data that form the basis of income and deductions. These may be necessary to prove the accuracy and completeness of the returns to a taxing authority. You have the final responsibility for the income tax returns and, therefore, you should review them carefully before you sign them.

Our work in connection with the preparation of your income tax returns does not include any procedures designed to discover defalcations or other irregularities, should any exist. We will render such accounting and bookkeeping assistance as determined to be necessary for preparation of the income tax returns.

We will use professional judgment in resolving questions where the tax law is unclear, or where there may be conflicts between the taxing authorities’ interpretations of the law and other supportable positions. Unless otherwise instructed by you, we will resolve such questions in your favor whenever possible.

Your returns may be selected for review by the taxing authorities. Any proposed adjustments by the examining agent are subject to certain rights of appeal. In the event of such government tax examination, we will be available upon request to represent you and will render additional invoices for the time and expenses incurred.

Our fee for these services will be based upon the amount of time required at our standard billing rates, plus out-of-pocket expenses. All invoices are due and payable upon presentation.

If the foregoing fairly sets forth your understanding, please sign the enclosed copy of this letter in the space indicated and return it to our office. However, if there are other tax returns you expect us to prepare, such as gift and/or property, please inform us by noting so at the end of the return copy of this letter.

We want to express our appreciation for this opportunity to work with you.

Very truly yours,

Accepted by: ______________________