ACA 1 Task 2 Answer Essay

1035 Words Jan 6th, 2014 5 Pages
ACA1 Tax Treatments for Individual Returns (Task 302.2.3)

Use the following format for your essay. It is based on the grading rubric structure. Identify the item in the appropriate rubric area and then present your reasoning in a paragraph for each tax decision you have made. Use as much space as necessary in each category. (The task instructions give a suggested total length of 2-5 pages.

A. Recommended Tax Filing Status
The recommended tax filing status for this family is Married Filing Jointly. The reason I would recommend this filing status is that there are three children that are qualifying children, but the college freshman is not under the age of 17 so that child does not qualify for the child tax credit. Spouse B’s
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The $44,000 profit from the sale of the rental house is a passive gain.

A4. Adjustments to Income (on the 1040 form this area is called Adjusted Gross Income)
Spouse A’s $600 monthly alimony is a deductible expense because his ex-spouse has to pay income tax
Spouse A’s deductible portion of his Self Employment tax on his $142,000 partnership income would be an adjustment because an individual is able to deduct the amount of taxes that an employer would normally pay.
Moving expenses are not able to be used as an adjustment to income because the family did not lessen the commute by at least 50 miles.
The passive loss from the rental properties are an adjustment to gross income.
The money that Spouse A contributes to his Keogh retirement plan is not an adjustment to gross income because it is not one of the specified types of retirement plans that are able to be used as an adjustment.

A5. Deductions
The Family should take the standard tax deduction because I do not believe that their itemized deductions will total more than the standard deduction.
The donations to charity are tax deductible as long as the couple kept up with records and can itemize each deduction. This would be reported on schedule A.
Spouse B’s new wardrobe for her new job is not tax deductible because the clothes can be worn for other occasions than just

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