ACC 227 Homework Case 2
Mike Zhu is a new client to your firm and brings in the different tax documents shown on the next few pages of the case. In addition, based on your interview with the new client you determine the following information:
Mike, age 37, is married to his partner Ying, age 35. The couple just purchased their first home, with the life insurance proceeds of $75,000 that Mike received on the death of his father and a mortgage.
In addition to his full-time job, Mike owns a small business where Mike provides investigation services. He rents a small office where he also has a store front. In the store he meets with customers to their investigation needs, such as investigating a spouse suspected of having an affair, minor property damage incidents, etc. Mike does not maintain any inventory. Service revenue from the storefront is $16,000. He also provides investigation services to other businesses. Mike has received Form 1099s for the investigation services he provides to these other businesses. The name of his company is Intelligent Investigative Services. The professional activity code is 561600 and the company’s EIN number is 15-7894321. Mike’s company uses the cash basis of accounting and Mike materially participates in the business. Mike started this business in 2017. The company did not make any payments that required the company to issue 1099s. Expenses related to Intelligent Investigative Services are office rent of $6,600, Supplies of $1,400, $600 for advertising. In addition, Mike drove his van 1,400 miles going to other businesses to provide computer consulting services. Mike placed the van into service on January 1, 2018. Intelligent Investigative Services does qualify for the Qualified Business Income (QBI) Deduction.
Mike put 18,000 other personal miles on their van. This van is Mike and Ying’s only vehicle.
Mike does not want to contribute to the Presidential Election Campaign Fund.
Mike and Ying do not have any foreign bank accounts, nor do they have any foreign investments.
Ying does not work because of a health condition. Although Mike carried a family health insurance policy the
Copays $6,000
Prescription Drugs $17,500
Medical equipment rental costs $3,000
The premiums paid on his homeowner’s policy is $950.
Mike made estimated federal tax payments of $1,000 because of running his small business on the side.
Property taxes paid on his house $7,900.
Mike and Ying made weekly contributions to the American Heart Association of $30 for 52 weeks.
Mike and Ying incurred gambling losses of $6,000.
Mike works full-time as an accounting manager.
Mike and Ying do not wish to file separate returns.
If Mike and Ying qualify for a tax refund they would like the 1RS to refund their money.
Required:
Complete Mike and Ying Zhu’s 2020 tax forms. Amounts reported on the tax forms should be rounded to the nearest dollar. You many need to do research in the textbook in chapters we have not covered yet or on the 1RS website to complete this problem. For instance, you may find it necessary to read pages 15-9 through 15-22 when considering the qualified business income deduction. You may also have to read instructions on the 1RS website to complete this assignment. You MUST use the 2020 tax tables to determine the tax. When completing Schedule SE DO NOT COMPLETE PART III. Be sure to put the tax forms in the proper order using the Attachment Sequence numbers provide in the upper right-hand corner of each form.
Check Figure: Refund of $1,610.00
