Fill out a 1040, Schedules A, B, C, D, & Schedules 1/2/3 with the following information.
Tax Return Project
BA 431, Fall 2021
Use the following information to prepare an individual tax return complete with appropriate
schedules and attachments. In addition to the 1040 and schedules, please attach your work
papers and calculations.
Taxpayer and Spouse:
Name: Wilbur Farnstrom Name: Ethel Farnstrom
Address: 3083 Honeysuckle Avenue Address: 3083 Honeysuckle Avenue
Dallas, OR 97338 Dallas, OR 97338
SS#: 123-45-6789 SS#: 234-56-7890
Birth date: 6/10/1959 Birth date: 2/12/1962
Status: Married, filing jointly Status: Married, filing jointly
Dependents:
Name: Grace Farnstrom, daughter Name: Howard Farnstrom, son
Address: 3083 Honeysuckle Avenue Address: 3083 Honeysuckle Avenue
Dallas, OR 97338 Dallas, OR 97338
SS#: 345-67-8901 SS#: 567-89-1023
Birth date: 10/11/2004 Birth date: 11/12/2006
2
Wilbur is employed as a Bank Manager and has W-2 income of $5,400 per month. Federal
taxes of $380 per month are withheld from his gross pay.
Ethel is employed part-time as a receptionist and has W-2 income of $2,300 per month.
Federal taxes of $190 per month are withheld from her gross pay.
State income taxes totaling $348 per month and $150 per month have been withheld from
their gross pay, respectively.
Ethel has a small transcription business that she runs from her home. She has dedicated a 4th
bedroom in the family’s 4,200 square foot home to the business. The room measures 16 x 20.
She reports income for this year of $12,500 from the small business. Ethel paid estimated
quarterly taxes of $270 per month for three quarters. Costs relating to the home are as
follows:
Annual Property taxes $5,800
Annual Mortgage Interest $11,800
Utilities $184 per month
Business telephone $94 per month
Office supplies $65 per month
Depreciation $68 per month
The couple has received $201 in interest income on their savings account for the year. Every
month, Wilbur deposits $300 to his traditional IRA account and Ethel deposits $175 to her
traditional IRA account.
Wilbur takes prescription medications that cost $285 per month. The family incurred dental
expenses this year of $3,767 and medical expenses of $9,628 for the year. Ethel went to the
eye doctor this year and purchased eyeglasses with a cost to her of $440. Wilbur had to travel
to visit a specialist for a heart condition to a city 375 miles from his home. He made the
roundtrip twice this year.
3
The Farnstrom family attends Countryside Church each Sunday. They have an automated
deduction from their checking account for contributions of $85 per week. The family traveled
on behalf of their church this year. They kept a travel log that indicates they traveled 1,610
miles in charitable travel.
The employees of the bank where Wilbur works are represented by a union. Union dues are
1.6% of each employee’s gross pay.
The full-time employees at the office where Ethel works are also represented by a union. Union dues are 1.3% of each full-time employees gross pay.
Ethel has some antique jewelry that has sentimental value. To ensure its safety, she has
obtained a safe deposit box at Wilbur’s bank. The fee for the box is $28 per month. The
Farnstrom’s store their tax returns and investment information in the box as well.
The couple takes their tax return to a CPA for preparation. The CPA worked on the returns for
five hours at an hourly fee of $250 per hour.
Wilbur and Ethel purchased 700 shares of LOL, Inc stock for $19.00 per share 18 months ago.
This year they sold the stock for a total of $16,500. The transaction had an investment fee of
$250. They also sold 500 shares of long term stock to Ethel’s sister for a loss of $10 per share.
