Question

Can anyone help me with this tax return/memo assignment?

REQUIRED:   Please prepare a tax return for Garcias for 2018 as married filing jointly. You can retrieve a blank copy of the Tax return from IRS.gov. Please prepare and file all relevant schedules, sign and date the return as a paid preparer.      Also write a brief memo to Garcias about their tax situations and advise them for future years.   Ignore any state tax implications.

Joe and his wife, Emily Garcia have requested you to prepare their federal tax return for the year 2018.   Joe says, he missed the filing deadlines.   Joe has a plumbing business and has all receipts in the shoe box. Joe has not incorporated any entity but operates as a “Joe- the Plumber” sole- proprietor. Emily has been working as a nurse and has her W-2 for 2018.   Garcias have no children but are thinking of adapting someone in future.   Joe has offered to pay you a fee of $2,000 for this job.    The details are as under:

a) Joe’s total receipts from plumbing services are $150,000 for 2018.

b) Joe’s expenses for which receipts are available (related to plumbing business) are $60,000 for year 2018. Joe says he paid for lot of items with cash but has no receipts!

c) Joe’s mileage details are not available. Joe has some estimate in his diary/ schedules.

d) Joe’s diesel bills and repairs bills for his truck are $15,000 for year 2018 (receipts from shoe box).

e) Joe’s doesn’t have any capital expenses for the business.   Joe thinks that the business is expanding and can employ one-person full time and can easily afford to pay him a beginner’s salary and this will bring more business.

f) Emily’s W-2 for 2018 shows salary of $48,000 and federal taxes withheld $6,000. Social security and Medicare taxes withheld by the employer for 2018 were $2,976 and $696 respectively. State income taxes withheld were $2,400.

g) Garcias have no dependents, and they are not dependents on anyone.   They own the house and pay the mortgage interest of $17,400 in 2018.   Property taxes paid in 2018 are $5,500.

h) Garcia’s contributed $1,000 to their Church in 2018 and have receipts for this payment.