Training Practice Problems

VOLUNTEER TAX PREPARER Training Practice Problems Everything we do is made possible or made better by volunteers. JANUARY 2019

CEP BASIC TAX PREPARATION 3 VOLUNTEER PRACTICE PROBLEMS Volunteer Name: TaxWise Online website: twonline.taxwise.com CEP TaxWise Online Training Client ID: 6001535 TaxWise Online Username: TaxWise Online Password: CEP Volunteer Website: economicprogress.org/volunteer CEP Volunteer Helpdesk: volunteer@economicprogress.org

TABLE OF CONTENTS Introduction...2 Basic Tax Preparation 3 Agenda And What To Expect...3 Overview Of Resources Available...4 Letter #1 From Mary Lake....5 The Certification Process...6 Mary Lake Tax Preparation...7 Letter #2 From Benjamin Spring...22 Sample Certification Test Questions...24 Take Home Tax Returns....25 1. Paul Waters...27 2. Walter And Beatrice Rivers...45 3. Maurice Brooks And Ray Branch....65 4. Carmen Garcia...83 Basic Certification Test: Study Guide For Tax Year 2018...97 Appendix A: Advanced Certification Test / Publication 6744 Page 87 Corrections... 104 TRAINING PRACTICE PROBLEMS 2019 1

INTRODUCTION Welcome! Congratulations on becoming a Center for Economic Progress (CEP) volunteer tax preparer. You re joining a community of over 90,000 volunteers nationwide who prepare over 3.5 million tax returns a year. You ll learn a lot, meet wonderful people, and contribute to the well-being of your community. Thank you for your service. CEP Vision The Center for Economic Progress envisions an America of shared prosperity, where all working families can access the financial opportunities they need to succeed. CEP Mission The Center for Economic Progress (CEP) helps low-income, working families as a trusted provider of tax and financial services. Everything we do, from direct service to informing public policy, improves the financial stability of those we serve. CEP Services CEP provides income-eligible workers with free, high quality tax preparation and an alternative to paid tax preparers. We serve families who make less than 55,000 and individuals who make less than 30,000. Based on those income guidelines, we can help one in three Illinois residents. Through our tax clinic, we provide free, professional representation to low-wage taxpayers facing an IRS controversy. We also offer tax training for small businesses to establish sound business practices, and to build their knowledge of record keeping and self-employment tax laws. We promote financial education and sound money practices helping cut ties to predatory financial services. We provide year-round workshops and one-on-one financial coaching to help members set financial goals; create spending plans; access safe and affordable bank products like banks accounts and small dollar loans; and review and correct credit reports and improve credit scores. CEP is a non-partisan organization. 2 TRAINING PRACTICE PROBLEMS 2019

BASIC TAX PREPARATION 3 AGENDA AND WHAT TO EXPECT Class Agenda 1. CEP Introduction 2. Overview of resources available 3. Dear Shirley Mary Lake discussion 4. Mary Lake Tax Preparation 5. Dear Shirley Benjamin Spring discussion 6. The Certification Practice Problems and Process What to Expect This class will give you hands-on experience working with our tax preparation software, TaxWise Online, to complete a sample tax return. We will look at the scenario of a typical client, Mary Lake, and discuss how to use our resources to answer her questions and correctly file her tax return. After Mary Lake s scenario, we will look at another typical client, Benjamin Spring, who has some questions about his Individual Taxpayer Identification Number (ITIN). We ll talk about what ITINs are, how they affect a tax return, and how to communicate when talking about them. We will teach you how to certify as a volunteer tax preparer and will even complete a few practice problems to prepare you for taking the certification test. Finally, we will provide three practice problems for you to prepare on your own. At the end of this course, you will be ready to pass the Basic (or Advanced) Tax Preparer certification test and then volunteer as a tax preparer at one of our tax sites. You will be able to navigate the resources available at your tax site to answer questions, you will know how to use TaxWise Online, and you will be familiar with typical client scenarios that we see. We highly encourage and expect that you complete your online training before attending this class. If for some reason, you were unable to finish the online training, please let your instructor know. Please note, you will not be able to sign up for a shift at a tax site without completing the online training so if you have not already completed it, please do so at your earliest convenience. We promise it will be helpful and engaging! TRAINING PRACTICE PROBLEMS 2019 3

OVERVIEW OF RESOURCES AVAILABLE Publication 4012, VITA Volunteer Resource Guide This book is a comprehensive resource published by IRS specially for VITA volunteer tax preparers. This publication includes information about relevant tax law and provides easy to use visuals and maps to answer your tax related questions. Please note that the tax preparation software explanations refer to the TaxSlayerPRO tax preparation software, which CEP does not use. Rather, the CEP uses the TaxWise Online software so these sections of the 4012 will not be relevant to you as a tax preparer. For specific questions about the TaxWise Online software, ask your instructor or site manager. Form 6744, VITA/TCE Volunteer Assistor s Test/Retest This booklet, also developed by IRS, contains the certification tests and retests for VITA tax preparers. We recommend that you take whichever test you decide in this booklet first before taking the test online. Note: Volunteers can access the electronic version of all IRS forms and publications at www.irs.gov/forms-instructions You Can Do It! Volunteer Resource Guide This booklet is developed by CEP staff specifically for you. It contains information on tax law, CEP s financial services, and CEP s site procedures. Most volunteers find this to be the most useful resources available. Put your name on it and don t go to a tax site without it! Study Guide Also developed by CEP staff, this study guide helps volunteers prepare for and pass the tax preparation certification tests. Worried about the test? Carefully review this guide and you should be more than ready to pass the test. The study guide for the basic certification test is at the end of this document, and the study guide for the advanced certification test can be found on the volunteer resource hub. Publication 4491, VITA/TCE Training Guide This booklet, also developed by IRS is the IRS comprehensive training guide broken down by topic. This resource is normally available as an electronic copy, but given the tax law changes the IRS elected to print the resource for all volunteers! Volunteer Resource Hub Volunteers can access a volunteer resource hub organized and moderated by experienced volunteers at www.economicprogress.org/resources. This resource hub will be a collection of tools and resources that will help you make sense of complicated tax law and answer any of your questions. If you would like to post something you feel might be helpful to the CEP volunteer community, please email hub@ecomonicprogress.org. 4 TRAINING PRACTICE PROBLEMS 2019

HERE S SHIRLEY! Taxes can be complex and confusing and taxpayers often have lots of questions. Shirley is CEP s resident tax expert and during today s training you will be asked to help Shirley answer some letters sent in by a couple taxpayers. These exercises will give you a chance to hone your skills and get ready to answer the kinds of questions that you will be asked at your tax site. Soon you, too, will be able to answer tax questions! LETTER #1 FROM MARY LAKE Dear Shirley, I m a single mom with three children, ages 17, 8, and 6. They have always lived with me and I provide all of their support. My ex, Donald, moved out and left us for good around Halloween, 2016, but I can t afford an attorney to get a divorce. My kids saw their dad only a couple times last year when he brought them birthday gifts. My neighbor took a tax class last summer and she tells me that since Donald and I are still technically married, we have to file our taxes together. I don t think that s fair. I never talk to Donald anymore and I m not even sure how to get a hold of him. What should I do about filing my taxes for 2018. Thanks, Mary Lake P.S. I ran into Don s mom at the store last week and she said that Don has already filed his taxes and he claimed my six-year old and my eight-year-old and he s going to get a really big refund. Discussion Questions: What questions should Shirley ask Mary to clarify the situation? What is Mary s correct filing status? Are Mary s children her qualifying children for the EITC? For the child tax credit? For the credit for other dependents? What advice do you think Shirley should give Mary in this situation? TRAINING PRACTICE PROBLEMS 2019 5

THE CERTIFICATION PROCESS Once you have completed this Basic Tax Preparation 3 course and prepared all the practice problems, you are prepared to take and pass the Basic (or Advanced) Test! Congratulations! Taking either test is the last step in the training process. Once you take and pass the test, you will be certified to serve as a tax preparer at any one of our CEP tax sites. FREQUENTLY ASKED QUESTIONS What is my Unique 6-Digit Code, and when do I need to use the Code? The IRS s certification tests require you to complete several tax returns. The example returns include social security numbers and/or federal ID numbers. The IRS will provide the first three digits of these numbers, but you will need to enter the last six digits. Because there will be hundreds of CEP volunteers using our tax software at the same time, each volunteer will receive a Unique 6-Digit Code to complete the tax returns. You will use your unique six digit code you received during the Basic Tax Prep 3 class to replace the last six digits of each sample Social Security Number or Federal ID number. For example, replace 00-xxxx with your six digit code when completing the practice returns and when completing the certification tests. If you misplaced your Unique 6-Digit Code contact CEP s Volunteer Engagement at 312-630-0288 or volunteer@economicprogress.org to obtain your 6-Digit Code. Can I complete the test online? Yes, the Basic and Advanced Certification Tests are online at: economicprogress.exceedlms.com/student/plan. This enables you to submit your answers electronically as well as save, print and sign your Volunteer Agreement. It is recommended that volunteers take the test in the physical Form 6744 Test Book to answer all of the questions and prepare practice returns in CEP s Practice Lab first, then log into the test at economicprogress.exceedlms.com/student/plan, enter your answers, and electronically submit the test. Can I start the test online and then come back to finish it later? Yes, you can start the test, save your entered responses, log-out, come back and finish the test later. You are able to go back to previous pages once you have already viewed them. Even if you selected answers to the questions on those pages, you are able to go back and view the page. It is recommended that you take your time while taking the certification test. If you need to take a break, be sure to save your answers and log back into the test once you have the time. Do I have to take the Basic Exam before I take the Advanced Exam? No, the Advanced Certification exam includes scenarios from the Basic Certification exam. You are able to compete just the Advanced Certification if you would like. However, it is recommended that new volunteers complete the Basic Certification exam before completing the Advanced Certification if they would like extra practice. What if I do not pass a test on my first attempt? You are allowed one additional attempt for each certification test. The test questions are randomized from the pool of questions from the regular test and retest. The result is a different test on each attempt. The retest questions are reworded versions of the regular test questions. The Basic and Advance Retest are accessible through: economicprogress.exceedlms.com/student/plan. How will I access the tax preparation software? CEP will utilize the TaxWise Online software to prepare practice and the IRS test tax returns. To access CEP s Tax Return Training Portal use the following information: Website: twonline.taxwise.com Client ID: 6001535 6 TRAINING PRACTICE PROBLEMS 2019

MARY LAKE TAX PREPARATION OBJECTIVES 1: Learn how to start a new return in TaxWise Online 2: Focus on Main Information Sheet 3: Enter dependents and filing status 4: Basic Income Entry 5: Introduction to the ACA worksheet TRAINING PRACTICE PROBLEMS 2019 7

MARY LAKE TAX PREPARATION 611-00-XXXX 613-00-XXXX 612-00-XXXX 614-00-XXXX Item 1: Social Security Cards and Check 8 TRAINING PRACTICE PROBLEMS 2019

MARY LAKE TAX PREPARATION Item 2: Intake Documents Form 13614-C, page 1 TRAINING PRACTICE PROBLEMS 2019 9

MARY LAKE TAX PREPARATION Item 2: Intake Documents Form 13614-C, page 2 10 TRAINING PRACTICE PROBLEMS 2019

MARY LAKE TAX PREPARATION Item 2: Intake Documents 13614-C, page 3 TRAINING PRACTICE PROBLEMS 2019 11

MARY LAKE TAX PREPARATION Item 4: Supplemental Intake Sheet 12 TRAINING PRACTICE PROBLEMS 2019

MARY LAKE TAX PREPARATION b Employer identification number (EIN) 61-500XXXX c Employer s name, address, and ZIP code CLEAN PRINT INC 822 5TH ST CHICAGO, IL 60626 a Employee s social security number 611-00-XXXX OMB No. 1545-0008 Safe, accurate, FAST! Use Visit the IRS website at www.irs.gov/efile 1 Wages, tips, other compensation 2 Federal income tax withheld 42,700 3 Social security wages 4 Social security tax withheld 44,700 5 Medicare wages and tips 6 Medicare tax withheld 44,700 4,411 2,771 648 7 Social security tips 8 Allocated tips d Control number 9 10 Dependent care benefits e Employee s first name and initial Last name Suff. MARY LAKE 319 S. 4TH ST. APT 8 CHICAGO, IL 60626 11 Nonqualified plans 12a See instructions for box 12 C 13 Statutory employee 14 Other f Employee s address and ZIP code 15 State Employer s state ID number 16 State wages, tips, etc. 17 State income tax 18 Local wages, tips, etc. 19 Local income tax 20 Locality name IL 61500XXXX 42,700 2,035 Retirement plan Third-party sick pay o d e 12b C o d e 12c C o d e 12d C o d e D 2,000 DD 3,400 Wage and Tax Form W-2 Copy B To Be Filed With Employee s FEDERAL Tax Return. This information is being furnished to the Internal Revenue Service. Statement 2018 Department of the Treasury Internal Revenue Service Item 4: Form W-2 2018 The Big Cheap Store 509 Hester Avenue Chicago, IL 60626 Mary Lake 654 W. Western apt 33 Chicago, IL 60645 61-200XXXX 188.00 0 188.00 188.00 12.00 3.00 IL 61200XXXX 188.00 5.00 Item 5: Form W-2 TRAINING PRACTICE PROBLEMS 2019 13

MARY LAKE TAX PREPARATION Item 7: Form W-2G CORRECTED (if checked) RECIPIENT S/LENDER S name, street address, city or town, state or province, country, ZIP or foreign postal code, and telephone number Lincoln Standard 484 5th Avenue New York, NY 10018 RECIPIENT S federal identification no. 61-800XXXX BORROWER S name Mary Lake OMB No. 1545-1576 2018 BORROWER S social security number 1 Student loan interest received by lender 611-00-XXXX 400.00 Street address (including apt. no.) 319 S. 4th St #8 City or town, state or province, country, and ZIP or foreign postal code Chicago, IL 605626 Form 1098-E Account number (see instructions) 2 If checked, box 1 does not include loan origination fees and/or capitalized interest for loans made before September 1, 2004......... Form 1098-E (keep for your records) www.irs.gov/form1098e Student Loan Interest Statement Copy B For Borrower This is important tax information and is being furnished to the Internal Revenue Service. If you are required to file a return, a negligence penalty or other sanction may be imposed on you if the IRS determines that an underpayment of tax results because you overstated a deduction for student loan interest. Department of the Treasury - Internal Revenue Service Item 8: Form 1098-E 38 TRAINING PRACTICE PROBLEMS 2018 Item 6: Form 1098-E 14 TRAINING PRACTICE PROBLEMS 2019

MARY LAKE TAX PREPARATION Form 1040 Department of the Treasury Internal Revenue Service (99) U.S. Individual Income Tax Return 2018 OMB No. 1545-0074 IRS Use Only Do not write or staple in this space. Filing status: Single Married filing jointly Married filing separately Head of household Qualifying widow(er) Your first name and initial Last name Your social security number MARY M LAKE 6 1 1 0 0 X X X X Your standard deduction: Someone can claim you as a dependent You were born before January 2, 1954 You are blind If joint return, spouse's first name and initial Last name Spouse s social security number DRAFT AS OF August 13, 2018 DO NOT FILE Spouse standard deduction: Someone can claim your spouse as a dependent Spouse was born before January 2, 1954 Spouse is blind Spouse itemizes on a separate return or you were dual-status alien Home address (number and street). If you have a P.O. box, see instructions. Apt. no. 319 S 4TH ST 8 City, town or post office, state, and ZIP code. If you have a foreign address, attach Schedule 6. CHICAGO, IL 60626 Full-year health care coverage or exempt (see inst.) Presidential Election Campaign (see inst.) You Spouse If more than four dependents, see inst. and here Dependents (see instructions): (2) Social security number (3) Relationship to you (4) if qualifies for (see inst.): (1) First name Last name Child tax credit Credit for other dependents JOHN LAKE 6 1 2 0 0 X X X X SON SUSAN LAKE 6 1 3 0 0 X X X X DAUGHTER TROY SMITH 6 1 4 0 0 X X X X SON Sign Here Joint return? See instructions. Keep a copy for your records. Paid Preparer Use Only Under penalties of perjury, I declare that I have examined this return and accompanying schedules and statements, and to the best of my knowledge and belief, they are true, correct, and complete. Declaration of preparer (other than taxpayer) is based on all information of which preparer has any knowledge. Your signature Date Your occupation CLERK If the IRS sent you an Identity Protection PIN, enter it here (see inst.) Spouse s signature. If a joint return, both must sign. Date Spouse s occupation If the IRS sent you an Identity Protection PIN, enter it here (see inst.) Preparer s name Preparer s signature PTIN Firm s EIN Check if: 3rd Party Designee Firm s name Phone no. Self-employed Firm s address For Disclosure, Privacy Act, and Paperwork Reduction Act Notice, see separate instructions. Cat. No. 11320B Form 1040 (2018) Form 1040 (2018) Page 2 1 Wages, salaries, tips, etc. Attach Form(s) W-2................ 1 42,888 2a Tax-exempt interest... 2a b Taxable interest... 2b Attach Form(s) W-2. Also attach 3a Qualified dividends... 3a b Ordinary dividends... 3b Form(s) W-2G and 1099-R if tax was 4a IRAs, pensions, and annuities. 4a b Taxable amount... 4b withheld. 5a Social security benefits.. 5a b Taxable amount... 5b 6 Total income. Add lines 1 through 5. Add any amount from Schedule 1, line 22..... 6 42,888 7 Adjusted gross income. If you have no adjustments to income, enter the amount from line 6; otherwise, subtract Schedule 1, line 36, from line 6................. 7 42,488 DRAFT AS OF August 13, 2018 DO NOT FILE Standard Deduction for 8 Standard deduction or itemized deductions (from Schedule A)............ 8 18,000 Single or married filing separately, 9 Qualified business income deduction (see instructions).............. 9 12,000 10 Taxable income. Subtract lines 8 and 9 from line 7. If zero or less, enter -0-........ 10 24,488 Married filing jointly or Qualifying 11 a Tax (see inst) 2,665 (check if any from: 1 Form(s) 8814 2 Form 4972 3 ) widow(er), 24,000 b Add any amount from Schedule 2 and check here............ 11 2,665 Head of 12 a Child tax credit/credit for other dependents 2,465 b Add any amount from Schedule 3 and check here 12 2,665 household, 18,000 13 Subtract line 12 from line 11. If zero or less, enter -0-.............. 13 0 If you checked 14 Other taxes. Attach Schedule 4.................... 14 0 any box under Standard 15 Total tax. Add lines 13 and 14.................... 15 0 deduction, see instructions. 16 Federal income tax withheld from Forms W-2 and 1099............. 16 4,411 17 Refundable credits: a EIC (see inst.) 1,331 b Sch 8812 2,035 c Form 8863 Add any amount from Schedule 5.............. 17 3,366 18 Add lines 16 and 17. These are your total payments.............. 18 7,777 Refund 19 If line 18 is more than line 15, subtract line 15 from line 18. This is the amount you overpaid.... 19 7,777 20a Amount of line 19 you want refunded to you. If Form 8888 is attached, check here.... 20a 7,777 Direct deposit? See instructions. b Routing number c Type: Checking Savings d Account number 21 Amount of line 19 you want applied to your 2019 estimated tax.. 21 Amount You Owe 22 Amount you owe. Subtract line 18 from line 15. For details on how to pay, see instructions... 22 23 Estimated tax penalty (see instructions)........ 23 Go to www.irs.gov/form1040 for instructions and the latest information. Form 1040 (2018) Item 7: 1040 answer one, pages 1 and 2 TRAINING PRACTICE PROBLEMS 2019 15

MARY LAKE TAX PREPARATION SCHEDULE 1 (Form 1040) Department of the Treasury Internal Revenue Service Name(s) shown on Form 1040 MARY M LAKE Additional Income Adjustments to Income Additional Income and Adjustments to Income Attach to Form 1040. Go to www.irs.gov/form1040 for instructions and the latest information. 1 9 b Reserved........................ 1 9b 10 Taxable refunds, credits, or offsets of state and local income taxes..... 10 11 Alimony received...................... 11 12 Business income or (loss). Attach Schedule C or C-EZ......... 12 13 Capital gain or (loss). Attach Schedule D if required. If not required, check here 13 DRAFT AS OF July 31, 2018 DO NOT FILE 14 Other gains or (losses). Attach Form 4797.............. 14 15a Reserved........................ 15b 16a Reserved........................ 16b 17 Rental real estate, royalties, partnerships, S corporations, trusts, etc. Attach Schedule E 17 18 Farm income or (loss). Attach Schedule F.............. 18 19 Unemployment compensation................. 19 20a Reserved........................ 20b 21 Other income. List type and amount 21 22 Combine the amounts in the far right column. If you don t have any adjustments to income, enter here and include on Form 1040, line 6. Otherwise, go to line 23.. 22 23 Educator expenses............ 23 24 Certain business expenses of reservists, performing artists, and fee-basis government officials. Attach Form 2106.. 24 25 Health savings account deduction. Attach Form 8889. 25 OMB No. 1545-0074 2018 Attachment Sequence No. 01 Your social security number 611-00-XXXX 26 Moving expenses for members of the Armed Forces. Attach Form 3903............ 26 27 Deductible part of self-employment tax. Attach Schedule SE 27 28 Self-employed SEP, SIMPLE, and qualified plans.. 28 29 Self-employed health insurance deduction.... 29 30 Penalty on early withdrawal of savings...... 30 31a Alimony paid b Recipient s SSN 31a 32 IRA deduction.............. 32 33 Student loan interest deduction........ 33 400 34 Reserved............... 34 35 Reserved............... 35 36 Add lines 23 through 35................... 36 400 For Paperwork Reduction Act Notice, see your tax return instructions. Cat. No. 71479F Schedule 1 (Form 1040) 2018 Item 8: Schedule 1 (Form 1040) 16 TRAINING PRACTICE PROBLEMS 2019

MARY LAKE TAX PREPARATION SCHEDULE 3 (Form 1040) Department of the Treasury Internal Revenue Service Name(s) shown on Form 1040 MARY M LAKE Nonrefundable Credits Nonrefundable Credits Attach to Form 1040. Go to www.irs.gov/form1040 for instructions and the latest information. 48 Foreign tax credit. Attach Form 1116 if required............. 48 49 Credit for child and dependent care expenses. Attach Form 2441....... 49 50 Education credits from Form 8863, line 19.............. 50 51 Retirement savings contributions credit. Attach Form 8880......... 51 52 Reserved......................... 52 DRAFT AS OF July 31, 2018 DO NOT FILE 53 Residential energy credit. Attach Form 5695.............. 53 54 Other credits from Form a 3800 b 8801 c 54 55 Add the amounts in the far right column. Enter here and include on Form 1040, line 12 55 OMB No. 1545-0074 2018 Attachment Sequence No. 03 Your social security number 611-00-XXXX 200 For Paperwork Reduction Act Notice, see your tax return instructions. Cat. No. 71480G Schedule 3 (Form 1040) 2018 200 Item 9: Schedule 3 (Form 1040) TRAINING PRACTICE PROBLEMS 2019 17

MARY LAKE TAX PREPARATION SCHEDULE EIC (Form 1040) Department of the Treasury Internal Revenue Service (99) Name(s) shown on return MARY M LAKE Earned Income Credit Qualifying Child Information Complete and attach to Form 1040 only if you have a qualifying child. Go to www.irs.gov/scheduleeic for the latest information. DRAFT AS OF August 21, 2018 DO NOT FILE Before you begin:! CAUTION 1040 EIC OMB No. 1545-0074 2018 Attachment Sequence No. 43 Your social security number 611-00-XXXX See the instructions for Form 1040, line 17a, to make sure that (a) you can take the EIC, and (b) you have a qualifying child. Be sure the child s name on line 1 and social security number (SSN) on line 2 agree with the child s social security card. Otherwise, at the time we process your return, we may reduce or disallow your EIC. If the name or SSN on the child s social security card is not correct, call the Social Security Administration at 1-800-772-1213. You can't claim the EIC for a child who didn't live with you for more than half of the year. If you take the EIC even though you are not eligible, you may not be allowed to take the credit for up to 10 years. See the instructions for details. It will take us longer to process your return and issue your refund if you do not fill in all lines that apply for each qualifying child. Qualifying Child Information Child 1 Child 2 Child 3 1 Child s name If you have more than three qualifying children, you have to list only three to get the maximum credit. 2 Child s SSN The child must have an SSN as defined in the instructions for Form 1040, line 17a, unless the child was born and died in 2018. If your child was born and died in 2018 and did not have an SSN, enter Died on this line and attach a copy of the child s birth certificate, death certificate, or hospital medical records showing a live birth. First name Last name First name Last name First name Last name JOHN LAKE SUSAN LAKE TROY SMITH 612-00-XXXX 613-00-XXXX 614-00-XXXX 3 Child s year of birth 4 a Was the child under age 24 at the end of 2018, a student, and younger than you (or your spouse, if filing jointly)? Year 2 0 1 2 Year 2 0 1 0 Year 2 0 0 1 If born after 1999 and the child is younger than you (or your spouse, if filing jointly), skip lines 4a and 4b; go to line 5. If born after 1999 and the child is younger than you (or your spouse, if filing jointly), skip lines 4a and 4b; go to line 5. Yes. No. Yes. No. Go to line 5. Go to line 4b. Go to line 5. Go to line 4b. If born after 1999 and the child is younger than you (or your spouse, if filing jointly), skip lines 4a and 4b; go to line 5. Go to line 5. Yes. No. Go to line 4b. b Was the child permanently and totally disabled during any part of 2018? Yes. No. Yes. No. Yes. No. Go to line 5. The child is not a qualifying child. Go to line 5. The child is not a qualifying child. Go to line 5. The child is not a qualifying child. 5 Child s relationship to you (for example, son, daughter, grandchild, niece, nephew, eligible foster child, etc.) SON DAUGHTER SON 6 Number of months child lived with you in the United States during 2018 If the child lived with you for more than half of 2018 but less than 7 months, enter 7. If the child was born or died in 2018 and your home was the child s home for more than half the time he or she was alive during 2018, enter 12. For Paperwork Reduction Act Notice, see your tax return instructions. 12 12 12 months Do not enter more than 12 months. months Do not enter more than 12 months. months Do not enter more than 12 months. Cat. No. 13339M Schedule EIC (Form 1040) 2018 Item 10: Schedule EIC (Form 1040) 18 TRAINING PRACTICE PROBLEMS 2019

MARY LAKE TAX PREPARATION SCHEDULE 8812 (Form 1040) Department of the Treasury Internal Revenue Service (99) Name(s) shown on return Additional Child Tax Credit Attach to Form 1040 or Form 1040NR. Go to www.irs.gov/schedule8812 for instructions and the latest information. DRAFT AS OF August 9, 2018 DO NOT FILE 1040 1040NR 8812 MARY M LAKE Part I All Filers Caution: If you file Form 2555 or 2555-EZ, stop here; you cannot claim the additional child tax credit. 1 If you are required to use the worksheet in Pub. 972, enter the amount from line 10 of the Child Tax Credit and Credit for Other Dependents Worksheet in the publication. Otherwise: } 1040 filers: Enter the amount from line 8 of your Child Tax Credit and Credit for Other Dependents Worksheet (see the instructions for Form 1040, line 12a). 1 1040NR filers: Enter the amount from line 8 of your Child Tax Credit and Credit for Other Dependents Worksheet (see the instructions for Form 1040NR, line 49). 2 Enter the amount from Form 1040, line 12a, or Form 1040NR, line 49............ 2 3 Subtract line 2 from line 1. If zero, stop here; you cannot claim this credit........... 3 4 Number of qualifying children under 17 with the required social security number: 2 X 1,400. Enter the result. If zero, stop here; you cannot claim this credit.............. 4 TIP: The number of children you use for this line is the same as the number of children you used for line 1 of the Child Tax Credit and Credit for Other Dependents Worksheet. 5 Enter the smaller of line 3 or line 4...................... 5 6a Earned income (see separate instructions)........... 6a 42,888 b Nontaxable combat pay (see separate instructions)........... 6b 100 7 Is the amount on line 6a more than 2,500? No. Leave line 7 blank and enter -0- on line 8. Yes. Subtract 2,500 from the amount on line 6a. Enter the result... 7 OMB No. 1545-0074 2018 Attachment Sequence No. 47 Your social security number 611-00-XXXX 8 Multiply the amount on line 7 by 15% (0.15) and enter the result.............. 8 6,058 Next. On line 4, is the amount 4,200 or more? No. If line 8 is zero, stop here; you cannot claim this credit. Otherwise, skip Part II and enter the smaller of line 5 or line 8 on line 15. Yes. If line 8 is equal to or more than line 5, skip Part II and enter the amount from line 5 on line 15. Otherwise, go to line 9. Part II Certain Filers Who Have Three or More Qualifying Children 9 Withheld social security, Medicare, and Additional Medicare taxes from Form(s) W-2, boxes 4 and 6. If married filing jointly, include your spouse s amounts with yours. If your employer withheld or you paid Additional Medicare Tax or tier 1 RRTA taxes, see separate instructions...... 9 } 10 1040 filers: Enter the total of the amounts from Schedule 1 (Form 1040), line 27, and Schedule 4 (Form 1040), line 58, plus any taxes that you identified using code UT and entered on Schedule 4 (Form 1040), line 62. 10 1040NR filers: Enter the total of the amounts from Form 1040NR, lines 27 and 56, plus any taxes that you identified using code UT and entered on line 60. 11 Add lines 9 and 10.................. 11 12 1040 filers: Enter the total of the amounts from Form 1040, line 17a, and Schedule 5 (Form 1040), line 72. } 1040NR filers: Enter the amount from Form 1040NR, line 67. 12 13 Subtract line 12 from line 11. If zero or less, enter -0-................. 13 14 Enter the larger of line 8 or line 13...................... 14 Next, enter the smaller of line 5 or line 14 on line 15. Part III Additional Child Tax Credit 15 This is your additional child tax credit..................... 15 2,035 Enter this amount on 1040 Form 1040, line 17b, or Form 1040NR, line 64. 1040NR 4,500 2,465 2,035 2,800 For Paperwork Reduction Act Notice, see your tax return instructions. Cat. No. 59761M Schedule 8812 (Form 1040) 2018 Item 11: Schedule 8812 (Form 1040) TRAINING PRACTICE PROBLEMS 2019 19

MARY LAKE TAX PREPARATION Form 8880 Department of the Treasury Internal Revenue Service Name(s) shown on return MARY M LAKE! CAUTION Credit for Qualified Retirement Savings Contributions Attach to Form 1040 or Form 1040NR. Go to www.irs.gov/form8880 for the latest information. You cannot take this credit if either of the following applies. OMB No. 1545-0074 2018 Attachment Sequence No. 54 Your social security number 611-00-XXXX DRAFT AS OF August 8, 2018 DO NOT FILE The amount on Form 1040, line 7 or Form 1040NR, line 36 is more than 31,500 (47,250 if head of household; 63,000 if married filing jointly). The person(s) who made the qualified contribution or elective deferral (a) was born after January 1, 2001; (b) is claimed as a dependent on someone else s 2018 tax return; or (c) was a student (see instructions). (a) You (b) Your spouse 1 Traditional and Roth IRA contributions, and ABLE account contributions by the designated beneficiary for 2018. Do not include rollover contributions.................... 1 2 Elective deferrals to a 401(k) or other qualified employer plan, voluntary employee contributions, and 501(c)(18)(D) plan contributions for 2018 (see instructions).................. 2 3 Add lines 1 and 2.................. 3 4 Certain distributions received after 2015 and before the due date (including extensions) of your 2018 tax return (see instructions). If married filing jointly, include both spouses amounts in both columns. See instructions for an exception............. 4 0 5 Subtract line 4 from line 3. If zero or less, enter -0-....... 5 2,000 6 In each column, enter the smaller of line 5 or 2,000...... 6 2,000 7 Add the amounts on line 6. If zero, stop; you can t take this credit........... 7 8 Enter the amount from Form 1040, line 7* or Form 1040NR, line 36.. 8 9 Enter the applicable decimal amount shown below. Over If line 8 is But not over Married filing jointly And your filing status is Enter on line 9 Head of household Single, Married filing separately, or Qualifying widow(er) --- 19,000 0.5 0.5 0.5 19,000 20,500 0.5 0.5 0.2 20,500 28,500 0.5 0.5 0.1 9 x 0. 28,500 30,750 0.5 0.2 0.1 30,750 31,500 0.5 0.1 0.1 31,500 38,000 0.5 0.1 0.0 38,000 41,000 0.2 0.1 0.0 41,000 47,250 0.1 0.1 0.0 47,250 63,000 0.1 0.0 0.0 63,000 --- 0.0 0.0 0.0 Note: If line 9 is zero, stop; you can t take this credit. 10 Multiply line 7 by line 9......................... 10 200 11 Limitation based on tax liability. Enter the amount from the Credit Limit Worksheet in the instructions............................. 11 2,035 12 Credit for qualified retirement savings contributions. Enter the smaller of line 10 or line 11 here and on Schedule 3 (Form 1040), line 51; or Form 1040NR, line 48........... 12 200 2,000 2,000 * See Pub. 590-A for the amount to enter if you claim any exclusion or deduction for foreign earned income, foreign housing, or income from Puerto Rico or for bona fide residents of American Samoa. For Paperwork Reduction Act Notice, see your tax return instructions. Cat. No. 33394D Form 8880 (2018) Item 12: Form 8880 20 TRAINING PRACTICE PROBLEMS 2019

MARY LAKE TAX PREPARATION Form 8888 Department of the Treasury Internal Revenue Service Name(s) shown on return MARY M LAKE Allocation of Refund (Including Savings Bond Purchases) Go to www.irs.gov/form8888 for the latest information. Attach to your income tax return. Part I Direct Deposit Complete this part if you want us to directly deposit a portion of your refund to one or more accounts. 1a Amount to be deposited in first account (see instructions)............. 1a DRAFT AS OF July 24, 2018 DO NOT FILE b Routing number 1 0 7 0 0 0 1 7 8 c Checking Savings d Account number 2 a Amount to be deposited in second account................. 2a b Routing number c Checking Savings d Account number 3 a Amount to be deposited in third account.................. 3a b Routing number c Checking Savings d Account number Part II! CAUTION 2 0 2 0 1 0 OMB No. 1545-0074 2018 Attachment Sequence No. 56 Your social security number 611-00-XXXX U.S. Series I Savings Bond Purchases Complete this part if you want to buy paper bonds with a portion of your refund. If a name is entered on line 5c or 6c below, co-ownership will be assumed unless the beneficiary box is checked. See instructions for more details. 4 Amount to be used for bond purchases for yourself (and your spouse, if filing jointly).... 4 7,677 5a Amount to be used to buy bonds for yourself, your spouse, or someone else...... 5a b Enter the owner s name (First then Last) for the bond registration T R O Y S M I T H 100 c If you would like to add a co-owner or beneficiary, enter the name here (First then Last). If beneficiary, also check here M A R Y L A K E 6a Amount to be used to buy bonds for yourself, your spouse, or someone else...... 6a b Enter the owner s name (First then Last) for the bond registration c If you would like to add a co-owner or beneficiary, enter the name here (First then Last). If beneficiary, also check here Part III Paper Check Complete this part if you want a portion of your refund to be sent to you as a check. 7 Amount to be refunded by check..................... 7 Part IV Total Allocation of Refund 8 Add lines 1a, 2a, 3a, 4, 5a, 6a, and 7. The total must equal the refund amount shown on your tax return.............................. 8 For Paperwork Reduction Act Notice, see your tax return instructions. Cat. No. 21858A Form 8888 (2018) Item 13: Form 8888 TRAINING PRACTICE PROBLEMS 2019 21

LETTER #2 FROM BENJAMIN SPRING Dear Shirley, Last year I got an ITIN number from the IRS and this is my first year filing a tax return. I am single and I have a twoyear-old son who lived with me all year. I didn t get him an ITIN since he was born in Chicago and he already has a social security number. I noticed that the W-2 that my employer gave me does not have my ITIN number on it. There is some other number in the space, employee s social security number. Which number should I use for my taxes? Thanks, Benjamin Spring Discussion Questions: What is an ITIN number? And what purpose does it serve taxpayers? Which identifying number should Ben use on his tax return? Can Ben claim his son as his qualifying child for the EITC? For the child tax credit? For the credit for other dependents? 22 TRAINING PRACTICE PROBLEMS 2019

Item 14: Sample ITIN Letter TRAINING PRACTICE PROBLEMS 2019 23

SAMPLE CERTIFICATION TEST QUESTIONS Read Basic Scenario 5, Mathew Rice and Ashley Tufts, on page 29 of Form 6744 the certification test book and prepare to answer the questions. First, think about this family, one taxpayer at a time. Mathew is single. He earned 13,000. He has two small children who lived with him all year. His children did not provide over half of their own support. He did not pay any of the household expenses. Ashley is married, but did not live with her spouse and doesn t want to file a joint return. She earned 27,000. She paid all of the household expenses. She has no children. She is not related to anyone in the household. Got that straight in your head? Next, assume you are preparing Mathew s tax return. What is Mathew s filing status? Why? Who can Mathew claim as a qualifying child dependent? Who can Mathew claim as a qualifying relative dependent? Who can Mathew claim as a qualifying child for the EITC? Who can Mathew claim as a qualifying child for the child tax credit? Can Mathew claim the credit for other dependents? Then, assume you are preparing Ashley s tax return. What is Ashley s filing status? Who can Ashley claim as a qualifying child dependent? Who can Ashley claim as a qualifying relative dependent? Who can Ashley claim as a qualifying child for the EITC? Who can Ashley claim as a qualifying child for the child tax credit? Can Ashley claim the credit for other dependents? Now, you are ready to answer test questions 9 and 10. Consult your resources. No one remembers all these rules! Did you find answers in Publication 4012? If so, what page(s)? Is any of this covered in the You Can Do It? If so, what page(s)? 24 TRAINING PRACTICE PROBLEMS 2019

Take Home Tax Returns Paul Waters Walter and Beatrice Rivers Maurice Brooks and Ray Branch Carmen Garcia TRAINING PRACTICE PROBLEMS 2019 25

26 TRAINING PRACTICE PROBLEMS 2019

1. Paul Waters OBJECTIVES 1: Form 1099-R income. Paul has taken an early distribution and gets the 10% penalty. 2: Paul had gambling winnings and a W-2G with withholding. 3: Paul has a tuition statement from a community college where he took one course. TRAINING PRACTICE PROBLEMS 2019 27

TAKE HOME TAX RETURNS: PAUL WATERS 567-00-XXXX item 1: Social Security Card 28 TRAINING PRACTICE PROBLEMS 2019

TAKE HOME TAX RETURNS: PAUL WATERS Item 2: Intake Documents 13614-C, page 1 TRAINING PRACTICE PROBLEMS 2019 29

TAKE HOME TAX RETURNS: PAUL WATERS Item 2: Intake Documents 13614-C, page 2 30 TRAINING PRACTICE PROBLEMS 2019

TAKE HOME TAX RETURNS: PAUL WATERS Item 2: Intake Documents 13614-C, page 3 TRAINING PRACTICE PROBLEMS 2019 31

TAKE HOME TAX RETURNS: PAUL WATERS Item 3: Supplemental Intake Sheet, 32 TRAINING PRACTICE PROBLEMS 2019

TAKE HOME TAX RETURNS: PAUL WATERS CORRECTED (if checked) PAYER S name, street address, city or town, state or province, 1 Gross distribution country, and ZIP or foreign postal code 3,000.00 2a Taxable amount NATIONAL COMPANY 232 WEST WESTERN CHICAGO, IL 60602 PAYER S federal identification number 61-600XXXX RECIPIENT S name PAUL P WATERS Street address (including apt. no.) 240 MONROE ST. RECIPIENT S identification number City or town, state or province, country, and ZIP or foreign postal code AURORA, IL 60502 10 Amount allocable to IRR within 5 years Account number (see instructions) Form 1099-R 567-00-XXXX 11 1st year of desig. Roth contrib. FATCA filing requirement www.irs.gov/form1099r 2b Taxable amount not determined 3 Capital gain (included in box 2a) 3,000.00 5 Employee contributions /Designated Roth contributions or insurance premiums 7 Distribution code(s) 1 IRA/ SEP/ SIMPLE OMB No. 1545-0119 2018 Form 1099-R Total distribution 4 Federal income tax withheld 300.00 6 Net unrealized appreciation in employer s securities 8 Other % 9a Your percentage of total 9b Total employee contributions distribution % 12 State tax withheld 15 Local tax withheld Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. Copy B Report this income on your federal tax return. If this form shows federal income tax withheld in box 4, attach this copy to your return. This information is being furnished to the Internal Revenue Service. 13 State/Payer s state no. 14 State distribution 16 Name of locality 17 Local distribution Department of the Treasury - Internal Revenue Service Item 1: Form 1099-R PAYER S name, street address, city or town, state or province, country, ZIP or foreign postal code, and telephone no. IL DEPT EMPLOYMENT SECURITY 100 SPRING AVENUE SPRINGFIELD, IL 62704 PAYER S federal identification number RECIPIENT S identification number 36-300XXXX 567-00-XXXX RECIPIENT S name PAUL P. WATERS Street address (including apt. no.) 240 N. MONROE City or town, state or province, country, and ZIP or foreign postal code AURORA, IL 60502 Account number (see instructions) CORRECTED (if checked) 1 Unemployment compensation OMB No. 1545-0120 2018 2 State or local income tax refunds, credits, or offsets Form 1099-G 3 Box 2 amount is for tax year 4 Federal income tax withheld 2,592 5 RTAA payments Form 1099-G (keep for your records) www.irs.gov/form1099g 222 6 Taxable grants 7 Agriculture payments 8 If checked, box 2 is trade or business income 9 Market gain 10a State 10b State identification no. 11 State income tax withheld IL 36300XXXX 22.00 Certain Government Payments Copy B For Recipient This is important tax information and is being furnished to the Internal Revenue Service. If you are required to file a return, a negligence penalty or other sanction may be imposed on you if this income is taxable and the IRS determines that it has not been reported. Department of the Treasury - Internal Revenue Service Item 2: Form 1099-G TRAINING PRACTICE PROBLEMS 2019 33

TAKE HOME TAX RETURNS: PAUL WATERS b Employer identification number (EIN) 74-700XXXX c Employer s name, address, and ZIP code THAT BIG COMPANY 444 PERRIWINKLE DRIVE AURORA, IL 60502 a Employee s social security number 567-00-XXXX OMB No. 1545-0008 Safe, accurate, FAST! Use Visit the IRS website at www.irs.gov/efile 1 Wages, tips, other compensation 2 Federal income tax withheld 23,000 2,252 3 Social security wages 4 Social security tax withheld 23,000 5 Medicare wages and tips 6 Medicare tax withheld 23,000 1,426 334 7 Social security tips 8 Allocated tips d Control number 9 Verification code 10 Dependent care benefits e Employee s first name and initial Last name Suff. PAUL P. WATERS 240 N. MONROE AURORA, IL 60502 11 Nonqualified plans 12a See instructions for box 12 C 13 Statutory employee 14 Other f Employee s address and ZIP code 15 State Employer s state ID number 16 State wages, tips, etc. 17 State income tax 18 Local wages, tips, etc. 19 Local income tax 20 Locality name IL 74-700XXXX 456 111 23,000 1,500 Retirement plan Third-party sick pay o d e 12b C o d e 12c C o d e 12d C o d e DD 2,345 Wage and Tax Form W-2 Copy B To Be Filed With Employee s FEDERAL Tax Return. This information is being furnished to the Internal Revenue Service. Statement 2018 Department of the Treasury Internal Revenue Service Item 3: Form W-2 b Employer identification number (EIN) 61-500XXXX c Employer s name, address, and ZIP code CLEAN PRINT INC 822 5TH ST CHICAGO, IL 60626 a Employee s social security number 567-00-XXXX OMB No. 1545-0008 Safe, accurate, FAST! Use Visit the IRS website at www.irs.gov/efile 1 Wages, tips, other compensation 2 Federal income tax withheld 12,000 3 Social security wages 4 Social security tax withheld 12,000 5 Medicare wages and tips 6 Medicare tax withheld 12,000 1.200 744 174 7 Social security tips 8 Allocated tips d Control number 9 10 Dependent care benefits e Employee s first name and initial Last name Suff. PAUL P. WATERS 240 NORTH MONROE AURORA, IL 60502 11 Nonqualified plans 12a See instructions for box 12 C 13 Statutory employee 14 Other f Employee s address and ZIP code 15 State Employer s state ID number 16 State wages, tips, etc. 17 State income tax 18 Local wages, tips, etc. 19 Local income tax 20 Locality name IL 56700XXXX 111 00 12,000 1,000 Retirement plan Third-party sick pay o d e 12b C o d e 12c C o d e 12d C o d e DD 2,000 Wage and Tax Form W-2 Copy B To Be Filed With Employee s FEDERAL Tax Return. This information is being furnished to the Internal Revenue Service. Statement 2018 Department of the Treasury Internal Revenue Service Item 4: Form W-2 34 TRAINING PRACTICE PROBLEMS 2019

TAKE HOME TAX RETURNS: PAUL WATERS PAYER S name, street address, city or town, province or state, country, and ZIP or foreign postal code TWENTY-FOUR SEVEN 456 MAIN STREET BIG ROCK, IL 60511 PAYER S federal identification number WINNER S name PAYER'S telephone number 24-700XXXX 331-555-2477 CORRECTED (if checked) 1 Reportable winnings 2 Date won JULY 1, 2018 2,500.00 3 Type of wager 4 Federal income tax withheld SLOTS 250.00 5 Transaction 6 Race 7 Winnings from identical wagers 8 Cashier 475 9 Winner s taxpayer identification no. 10 Window 567-00-XXXX 11 First I.D. 12 Second I.D. OMB No. 1545-0238 2018 Form W-2G Certain Gambling Winnings This information is being furnished to the Internal Revenue Service PAUL P. WATERS Street address (including apt. no.) 240 MONROE City or town, province or state, country, and ZIP or foreign postal code AURORA, IL 60502 13 State/Payer s state identification no. 14 State winnings IL-247247 2,500.00 15 State income tax withheld 16 Local winnings 0 17 Local income tax withheld 18 Name of locality Copy B Report this income on your federal tax return. If this form shows federal income tax withheld in box 4, attach this copy to your return. BIG ROCK Under penalties of perjury, I declare that, to the best of my knowledge and belief, the name, address, and taxpayer identification number that I have furnished correctly identify me as the recipient of this payment and any payments from identical wagers, and that no other person is entitled to any part of these payments. Signature Date P P Waters 7-1-18 Form W-2G www.irs.gov/w2g Department of the Treasury - Internal Revenue Service Item 5: Form W2-G CORRECTED FILER'S name, street address, city or town, state or province, country, ZIP or foreign postal code, and telephone number Boynton Community College 333 W. 3rd St. Naperville, IL 60540 FILER'S employer identification no. 72-700XXXX STUDENT'S name Paul Waters Street address (including apt. no.) 240 N. Monroe STUDENT'S TIN City or town, state or province, country, and ZIP or foreign postal code Aurora, IL 60502 Service Provider/Acct. No. (see instr.) 567-00-XXXX 8 Check if at least half-time student 1 Payments received for qualified tuition and related expenses 350 2 OMB No. 1545-1574 2018 Form 1098-T 3 If this box is checked, your educational institution changed its reporting method for 2018 4 Adjustments made for a prior year 6 Adjustments to scholarships or grants for a prior year 9 Checked if a graduate student Form 1098-T (keep for your records) www.irs.gov/form1098t Tuition Statement Copy B For Student 5 Scholarships or grants This is important tax information and is being furnished to the 7 Checked if the amount in box 1 includes IRS. This form amounts for an must be used to academic period complete Form 8863 beginning January to claim education March 2019 credits. Give it to the tax preparer or use it to 10 Ins. contract reimb./refund prepare the tax return. Department of the Treasury - Internal Revenue Service Item 6: Form 1098-T TRAINING PRACTICE PROBLEMS 2019 35

TAKE HOME TAX RETURNS: PAUL WATERS Form 1040 Department of the Treasury Internal Revenue Service (99) U.S. Individual Income Tax Return 2018 OMB No. 1545-0074 IRS Use Only Do not write or staple in this space. Filing status: Single Married filing jointly Married filing separately Head of household Qualifying widow(er) Your first name and initial Last name Your social security number PAUL P WATERS 5 6 7 0 0 X X X X Your standard deduction: Someone can claim you as a dependent You were born before January 2, 1954 You are blind If joint return, spouse's first name and initial Last name Spouse s social security number DRAFT AS OF August 13, 2018 DO NOT FILE Spouse standard deduction: Someone can claim your spouse as a dependent Spouse was born before January 2, 1954 Spouse is blind Spouse itemizes on a separate return or you were dual-status alien Home address (number and street). If you have a P.O. box, see instructions. 240 N MONROE City, town or post office, state, and ZIP code. If you have a foreign address, attach Schedule 6. AURORA IL 60502 Apt. no. Full-year health care coverage or exempt (see inst.) Presidential Election Campaign (see inst.) You Spouse If more than four dependents, see inst. and here Dependents (see instructions): (2) Social security number (3) Relationship to you (4) if qualifies for (see inst.): (1) First name Last name Child tax credit Credit for other dependents Sign Here Joint return? See instructions. Keep a copy for your records. Paid Preparer Use Only Under penalties of perjury, I declare that I have examined this return and accompanying schedules and statements, and to the best of my knowledge and belief, they are true, correct, and complete. Declaration of preparer (other than taxpayer) is based on all information of which preparer has any knowledge. Your signature Date Your occupation PROJECT ASSISTANT If the IRS sent you an Identity Protection PIN, enter it here (see inst.) Spouse s signature. If a joint return, both must sign. Date Spouse s occupation If the IRS sent you an Identity Protection PIN, enter it here (see inst.) Preparer s name Preparer s signature PTIN Firm s EIN Check if: 3rd Party Designee Firm s name Phone no. Self-employed Firm s address For Disclosure, Privacy Act, and Paperwork Reduction Act Notice, see separate instructions. Cat. No. 11320B Form 1040 (2018) Item 7: Form 1040, page 1 36 TRAINING PRACTICE PROBLEMS 2019

TAKE HOME TAX RETURNS: PAUL WATERS Form 1040 (2018) Page 2 1 Wages, salaries, tips, etc. Attach Form(s) W-2................ 1 35,000 2a Tax-exempt interest... 2a b Taxable interest... 2b Attach Form(s) W-2. Also attach 3a Qualified dividends... 3a b Ordinary dividends... 3b Form(s) W-2G and 1099-R if tax was 4a IRAs, pensions, and annuities. 4a 3,000 b Taxable amount... 4b 3,000 withheld. 5a Social security benefits.. 5a b Taxable amount... 5b 6 Total income. Add lines 1 through 5. Add any amount from Schedule 1, line 22 5,092..... 6 43,092 7 Adjusted gross income. If you have no adjustments to income, enter the amount from line 6; otherwise, subtract Schedule 1, line 36, from line 6................. 7 43,092 DRAFT AS OF August 13, 2018 DO NOT FILE Standard Deduction for 8 Standard deduction or itemized deductions (from Schedule A)............ 8 12,000 Single or married filing separately, 9 Qualified business income deduction (see instructions).............. 9 12,000 10 Taxable income. Subtract lines 8 and 9 from line 7. If zero or less, enter -0-........ 10 31,092 Married filing jointly or Qualifying 11 a Tax (see inst) 3,539 (check if any from: 1 Form(s) 8814 2 Form 4972 3 ) widow(er), 24,000 b Add any amount from Schedule 2 and check here............ 11 3,539 Head of 12 a Child tax credit/credit for other dependents b Add any amount from Schedule 3 and check here 12 70 household, 18,000 13 Subtract line 12 from line 11. If zero or less, enter -0-.............. 13 3,469 If you checked 14 Other taxes. Attach Schedule 4.................... 14 300 any box under Standard 15 Total tax. Add lines 13 and 14.................... 15 3,769 deduction, see instructions. 16 Federal income tax withheld from Forms W-2 and 1099............. 16 4,224 17 Refundable credits: a EIC (see inst.) b Sch 8812 c Form 8863 Add any amount from Schedule 5 100.............. 17 100 18 Add lines 16 and 17. These are your total payments.............. 18 4,324 Refund 19 If line 18 is more than line 15, subtract line 15 from line 18. This is the amount you overpaid.... 19 555 20a Amount of line 19 you want refunded to you. If Form 8888 is attached, check here.... 20a 555 Direct deposit? See instructions. b Routing number c Type: Checking Savings d Account number 21 Amount of line 19 you want applied to your 2019 estimated tax.. 21 Amount You Owe 22 Amount you owe. Subtract line 18 from line 15. For details on how to pay, see instructions... 22 23 Estimated tax penalty (see instructions)........ 23 Go to www.irs.gov/form1040 for instructions and the latest information. Form 1040 (2018) Item 8: Form 1040, page 2 TRAINING PRACTICE PROBLEMS 2019 37

TAKE HOME TAX RETURNS: PAUL WATERS SCHEDULE 1 (Form 1040) Department of the Treasury Internal Revenue Service Name(s) shown on Form 1040 PAUL P WATERS Additional Income Adjustments to Income Additional Income and Adjustments to Income Attach to Form 1040. Go to www.irs.gov/form1040 for instructions and the latest information. 1 9 b Reserved........................ 1 9b 10 Taxable refunds, credits, or offsets of state and local income taxes..... 10 11 Alimony received...................... 11 12 Business income or (loss). Attach Schedule C or C-EZ......... 12 13 Capital gain or (loss). Attach Schedule D if required. If not required, check here 13 DRAFT AS OF July 31, 2018 DO NOT FILE 14 Other gains or (losses). Attach Form 4797.............. 14 15a Reserved........................ 15b 16a Reserved........................ 16b 17 Rental real estate, royalties, partnerships, S corporations, trusts, etc. Attach Schedule E 17 18 Farm income or (loss). Attach Schedule F.............. 18 19 Unemployment compensation................. 19 OMB No. 1545-0074 2018 Attachment Sequence No. 01 Your social security number 567-00-XXXX 2,592 20a Reserved........................ 20b 21 Other income. List type and amount GAMBLING 21 2,500 22 Combine the amounts in the far right column. If you don t have any adjustments to income, enter here and include on Form 1040, line 6. Otherwise, go to line 23.. 22 5,092 23 Educator expenses............ 23 24 Certain business expenses of reservists, performing artists, and fee-basis government officials. Attach Form 2106.. 24 25 Health savings account deduction. Attach Form 8889. 25 26 Moving expenses for members of the Armed Forces. Attach Form 3903............ 26 27 Deductible part of self-employment tax. Attach Schedule SE 27 28 Self-employed SEP, SIMPLE, and qualified plans.. 28 29 Self-employed health insurance deduction.... 29 30 Penalty on early withdrawal of savings...... 30 31a Alimony paid b Recipient s SSN 31a 32 IRA deduction.............. 32 33 Student loan interest deduction........ 33 34 Reserved............... 34 35 Reserved............... 35 36 Add lines 23 through 35................... 36 For Paperwork Reduction Act Notice, see your tax return instructions. Cat. No. 71479F Schedule 1 (Form 1040) 2018 Item 9: Schedule 1 38 TRAINING PRACTICE PROBLEMS 2019

TAKE HOME TAX RETURNS: PAUL WATERS SCHEDULE 3 (Form 1040) Department of the Treasury Internal Revenue Service Name(s) shown on Form 1040 PAUL P WATERS Nonrefundable Credits Nonrefundable Credits Attach to Form 1040. Go to www.irs.gov/form1040 for instructions and the latest information. 48 Foreign tax credit. Attach Form 1116 if required............. 48 49 Credit for child and dependent care expenses. Attach Form 2441....... 49 50 Education credits from Form 8863, line 19.............. 50 51 Retirement savings contributions credit. Attach Form 8880......... 51 52 Reserved......................... 52 DRAFT AS OF July 31, 2018 DO NOT FILE 53 Residential energy credit. Attach Form 5695.............. 53 54 Other credits from Form a 3800 b 8801 c 54 55 Add the amounts in the far right column. Enter here and include on Form 1040, line 12 55 OMB No. 1545-0074 2018 Attachment Sequence No. 03 Your social security number 567-00-XXXX For Paperwork Reduction Act Notice, see your tax return instructions. Cat. No. 71480G Schedule 3 (Form 1040) 2018 70 70 Item 10: Schedule 3 TRAINING PRACTICE PROBLEMS 2019 39

TAKE HOME TAX RETURNS: PAUL WATERS SCHEDULE 4 (Form 1040) Department of the Treasury Internal Revenue Service Name(s) shown on Form 1040 PAUL P. WATERS Other Taxes Other Taxes Attach to Form 1040. Go to www.irs.gov/form1040 for instructions and the latest information. 57 Self-employment tax. Attach Schedule SE............ 57 58 Unreported social security and Medicare tax from: Form a 4137 b 8919 58 59 Additional tax on IRAs, other qualified retirement plans, and other tax-favored accounts. Attach Form 5329 if required............. 59 60a Household employment taxes. Attach Schedule H.......... 60a DRAFT AS OF July 31, 2018 DO NOT FILE b Repayment of first-time homebuyer credit from Form 5405. Attach Form 5405 if required........................ 60b 61 Health care: individual responsibility (see instructions)......... 61 62 Taxes from: a Form 8959 b Form 8960 c Instructions; enter code(s) 62 63 Section 965 net tax liability installment from Form 965-A.............. 63 64 Add the amounts in the far right column. These are your total other taxes. Enter here and on Form 1040, line 14................ 64 OMB No. 1545-0074 2018 Attachment Sequence No. 04 Your social security number 567-00-XXXX For Paperwork Reduction Act Notice, see your tax return instructions. Cat. No. 71481R Schedule 4 (Form 1040) 2018 300 300 Item 11: Schedule 4 40 TRAINING PRACTICE PROBLEMS 2019

TAKE HOME TAX RETURNS: PAUL WATERS SCHEDULE 5 (Form 1040) Department of the Treasury Internal Revenue Service Name(s) shown on Form 1040 Other Payments and Refundable Credits Other Payments and Refundable Credits Attach to Form 1040. Go to www.irs.gov/form1040 for instructions and the latest information. 65 Reserved........................ 65 66 2018 estimated tax payments and amount applied from 2017 return.... 66 67a Reserved........................ 67a b Reserved........................ 67b 68 69 Reserved........................ 68 69 DRAFT AS OF July 31, 2018 DO NOT FILE 70 Net premium tax credit. Attach Form 8962............. 70 71 Amount paid with request for extension to file (see instructions)...... 71 72 Excess social security and tier 1 RRTA tax withheld.......... 72 73 Credit for federal tax on fuels. Attach Form 4136........... 73 74 Credits from Form: a 2439 b Reserved c 8885 d 74 OMB No. 1545-0074 2018 Attachment Sequence No. 05 Your social security number 75 Add the amounts in the far right column. These are your total other payments and refundable credits. Enter here and include on Form 1040, line 17.... 75 For Paperwork Reduction Act Notice, see your tax return instructions. Cat. No. 71482C Schedule 5 (Form 1040) 2018 Item 12: Schedule 5 TRAINING PRACTICE PROBLEMS 2019 41

TAKE HOME TAX RETURNS: PAUL WATERS Education Credits OMB No. 1545-0074 Form 8863 (American Opportunity and Lifetime Learning Credits) Attach to Form 1040. 2018 Department of the Treasury Attachment Internal Revenue Service (99) Go to www.irs.gov/form8863 for instructions and the latest information. Sequence No. 50 Name(s) shown on return Your social security number PAUL P WATERS 567 00 XXXX! CAUTION DRAFT AS OF August 9, 2018 DO NOT FILE Complete a separate Part III on page 2 for each student for whom you're claiming either credit before you complete Parts I and II. Part I Refundable American Opportunity Credit 1 After completing Part III for each student, enter the total of all amounts from all Parts III, line 30. 1 2 Enter: 180,000 if married filing jointly; 90,000 if single, head of household, or qualifying widow(er)............. 2 3 Enter the amount from Form 1040, line 7. If you re filing Form 2555, 2555- EZ, or 4563, or you re excluding income from Puerto Rico, see Pub. 970 for the amount to enter................. 3 4 Subtract line 3 from line 2. If zero or less, stop; you can t take any education credit................... 4 5 Enter: 20,000 if married filing jointly; 10,000 if single, head of household, or qualifying widow(er)................. 5 6 If line 4 is: Equal to or more than line 5, enter 1.000 on line 6............ Less than line 5, divide line 4 by line 5. Enter the result as a decimal (rounded to at least three places)..................... }.... 6. 7 Multiply line 1 by line 6. Caution: If you were under age 24 at the end of the year and meet the conditions described in the instructions, you can t take the refundable American opportunity credit; skip line 8, enter the amount from line 7 on line 9, and check this box.... 7 8 Refundable American opportunity credit. Multiply line 7 by 40% (0.40). Enter the amount here and on Form 1040, line 17c. Then go to line 9 below................. 8 Part II Nonrefundable Education Credits 9 Subtract line 8 from line 7. Enter here and on line 2 of the Credit Limit Worksheet (see instructions) 9 10 After completing Part III for each student, enter the total of all amounts from all Parts III, line 31. If zero, skip lines 11 through 17, enter -0- on line 18, and go to line 19.......... 10 350 11 Enter the smaller of line 10 or 10,000.................... 11 350 12 Multiply line 11 by 20% (0.20)....................... 12 70 13 Enter: 134,000 if married filing jointly; 67,000 if single, head of household, or qualifying widow(er)............. 13 67,000 14 Enter the amount from Form 1040, line 7. If you're filing Form 2555, 2555- EZ, or 4563, or you re excluding income from Puerto Rico, see Pub. 970 for the amount to enter................. 14 43,092 15 Subtract line 14 from line 13. If zero or less, skip lines 16 and 17, enter -0- on line 18, and go to line 19............... 15 23,908 16 Enter: 20,000 if married filing jointly; 10,000 if single, head of household, or qualifying widow(er)................. 16 10,000 17 If line 15 is: Equal to or more than line 16, enter 1.000 on line 17 and go to line 18 Less than line 16, divide line 15 by line 16. Enter the result as a decimal (rounded to at least three places).............................. 17 1. 000 18 Multiply line 12 by line 17. Enter here and on line 1 of the Credit Limit Worksheet (see instructions) 18 70 19 Nonrefundable education credits. Enter the amount from line 7 of the Credit Limit Worksheet (see instructions) here and on Schedule 3 (Form 1040), line 50.............. 19 70 For Paperwork Reduction Act Notice, see your tax return instructions. Cat. No. 25379M Form 8863 (2018) item 13: Form 8863, page 1 42 TRAINING PRACTICE PROBLEMS 2019

TAKE HOME TAX RETURNS: PAUL WATERS Form 8863 (2018) Page 2 Name(s) shown on return Your social security number PAUL P WATERS 567 00 XXXX! CAUTION Complete Part III for each student for whom you re claiming either the American opportunity credit or lifetime learning credit. Use additional copies of page 2 as needed for each student. DRAFT AS OF August 9, 2018 DO NOT FILE Part III Student and Educational Institution Information. See instructions. 20 Student name (as shown on page 1 of your tax return) 21 Student social security number (as shown on page 1 of your tax return) PAUL P WATERS 567 00 XXXX 22 Educational institution information (see instructions) a. Name of first educational institution b. Name of second educational institution (if any) BOYNTON COMMUNITY COLLEGE (1) Address. Number and street (or P.O. box). City, town or post office, state, and ZIP code. If a foreign address, see instructions. 333 W 3RD ST NAPERVILLE, IL 60504 (2) Did the student receive Form 1098-T from this institution for 2018? (3) Did the student receive Form 1098-T from this institution for 2017 with box 2 filled in and box 7 checked? Yes Yes (4) Enter the institution s employer identification number (EIN) if you re claiming the American opportunity credit or if you checked Yes in (2) or (3). You can get the EIN from Form 1098-T or from the institution. 7 2 7 0 0 X X X X No No (1) Address. Number and street (or P.O. box). City, town or post office, state, and ZIP code. If a foreign address, see instructions. (2) Did the student receive Form 1098-T from this institution for 2018? (3) Did the student receive Form 1098-T from this institution for 2017 with box 2 filled in and box 7 checked? Yes Yes (4) Enter the institution s employer identification number (EIN) if you re claiming the American opportunity credit or if you checked Yes in (2) or (3). You can get the EIN from Form 1098-T or from the institution. No No 23 Has the Hope Scholarship Credit or American opportunity credit or the former Hope Scholarship Credit been claimed for this student for any 4 tax years before 2018? 24 Was the student enrolled at least half-time for at least one academic period that began or is treated as having begun in 2018 at an eligible educational institution in a program leading towards a postsecondary degree, certificate, or other recognized postsecondary educational credential? See instructions. 25 Did the student complete the first 4 years of postsecondary education before 2018? See instructions. 26 Was the student convicted, before the end of 2018, of a felony for possession or distribution of a controlled substance?! CAUTION Yes Stop! Go to line 31 for this student. No Go to line 24. Yes Go to line 25. No Stop! Go to line 31 for this student. Yes Stop! Go to line 31 for this student. Yes Stop! Go to line 31 for this student. No Go to line 26. No Complete lines 27 through 30 for this student. You can't take the American opportunity credit and the lifetime learning credit for the same student in the same year. If you complete lines 27 through 30 for this student, don't complete line 31. American Opportunity Credit 27 Adjusted qualified education expenses (see instructions). Don t enter more than 4,000..... 27 28 Subtract 2,000 from line 27. If zero or less, enter -0-................. 28 29 Multiply line 28 by 25% (0.25)........................ 29 30 If line 28 is zero, enter the amount from line 27. Otherwise, add 2,000 to the amount on line 29 and enter the result. Skip line 31. Include the total of all amounts from all Parts III, line 30, on Part I, line 1. 30 Lifetime Learning Credit 31 Adjusted qualified education expenses (see instructions). Include the total of all amounts from all Parts III, line 31, on Part II, line 10......................... 31 350 Form 8863 (2018) Item 13: Form 8963, page 2 TRAINING PRACTICE PROBLEMS 2019 43

Health Coverage Exemptions Form 8965 2018 Department of the Treasury Internal Revenue Service Name as shown on return PAUL P. WATERS Attach to Form 1040. Go to www.irs.gov/form8965 for instructions and the latest information. Your social security number 567-00-XXXX OMB No. 1545-0074 Attachment Sequence No. 75 DRAFT AS OF August 27, 2018 Complete this form if you have a Marketplace-granted coverage exemption or you are claiming a coverage exemption on your return. Part I 1 Marketplace-Granted Coverage Exemptions for Individuals. If you and/or a member of your tax household have an exemption granted by the Marketplace, complete Part I. (a) Name of Individual (b) SSN (c) Exemption Certificate Number 2 3 DO NOT FILE 4 5 6 Part II Coverage Exemptions Claimed on Your Return for Your Household 7 If you are claiming a coverage exemption because your household income or gross income is below the filing threshold, check here.................................. Coverage Exemptions Claimed on Your Return for Individuals. If you and/or a member of your tax Part III household are claiming an exemption on your return, complete Part III. (a) Name of Individual (b) SSN (c) Exemption Type (d) Full Year (e) Jan (f) Feb (g) Mar (h) Apr (i) May (j) June (k) July (l) Aug (m) Sept (n) Oct (o) Nov (p) Dec 8 PAUL P. WATERS 567-00-XXXX B X X 9 10 11 12 13 For Privacy Act and Paperwork Reduction Act Notice, see your tax return instructions. Cat. No. 37787G Form 8965 (2018) Item 14: Form 8965 44 TRAINING PRACTICE PROBLEMS 2019

2. Walter and Beatrice Rivers OBJECTIVES 1: Child and Dependent Care Expenses. 2: Social Security income with Federal withholding 3: American Opportunity Tax Credit with qualified tuition and book expenses. TRAINING PRACTICE PROBLEMS 2019 45

TAKE HOME TAX RETURNS: WALTER AND BEATRICE RIVERS 555-00-XXXX WALTER RIVERS Walter Rivers 556-00-XXXX BEATRICE RIVERS Beatrice Rivers 557-00-XXXX JEREMY RIVERS Jeremy Rivers 558-00-XXXX WARREN WHITE Warren White 4 Item 1: Social Security Cards 46 TRAINING PRACTICE PROBLEMS 2019

TAKE HOME TAX RETURNS: WALTER AND BEATRICE RIVERS Item 2: Intake Documents 13614-C, page 1 TRAINING PRACTICE PROBLEMS 2019 47

TAKE HOME TAX RETURNS: WALTER AND BEATRICE RIVERS Item 2: Intake Documents 13614-C, page 2 48 TRAINING PRACTICE PROBLEMS 2019

TAKE HOME TAX RETURNS: WALTER AND BEATRICE RIVERS Item 2: Intake Documents 13614-C, page 3 TRAINING PRACTICE PROBLEMS 2019 49

TAKE HOME TAX RETURNS: WALTER AND BEATRICE RIVERS Item 3: Supplemental Intake Sheet 50 TRAINING PRACTICE PROBLEMS 2019

TAKE HOME TAX RETURNS: WALTER AND BEATRICE RIVERS 2018 MANGO TWIST 404 N. 53RD ST. CHICAGO, IL 60645 WALTER RIVERS 490 W. KING ST. CHICAGO, IL 60645 10-500XXXX 32,550 32,550 32,550 555-00-XXXX 2,754 2,018 472 IL 10500XXXX 32,550 X 2,350 Item 4: W-2 TRAINING PRACTICE PROBLEMS 2019 51

TAKE HOME TAX RETURNS: WALTER AND BEATRICE RIVERS b Employer identification number (EIN) 61-500XXXX c Employer s name, address, and ZIP code CLEAN PRINT INC 822 5TH ST CHICAGO, IL 60626 a Employee s social security number 556-00-XXXX OMB No. 1545-0008 Safe, accurate, FAST! Use Visit the IRS website at www.irs.gov/efile 1 Wages, tips, other compensation 2 Federal income tax withheld 2,700 3 Social security wages 4 Social security tax withheld 2,700 5 Medicare wages and tips 6 Medicare tax withheld 2,700 270 167 39 7 Social security tips 8 Allocated tips d Control number 9 10 Dependent care benefits e Employee s first name and initial Last name Suff. BEATRICE RIVERS 490 W. KING ST. CHICAGO, IL 60645 11 Nonqualified plans 12a See instructions for box 12 C 13 Statutory employee 14 Other f Employee s address and ZIP code 15 State Employer s state ID number 16 State wages, tips, etc. 17 State income tax 18 Local wages, tips, etc. 19 Local income tax 20 Locality name IL 61500XXXX 2,700 135 Retirement plan Third-party sick pay o d e 12b C o d e 12c C o d e 12d C o d e Wage and Tax Form W-2 Copy B To Be Filed With Employee s FEDERAL Tax Return. This information is being furnished to the Internal Revenue Service. Statement 2018 Department of the Treasury Internal Revenue Service Item 5: Form W-2 CORRECTED (if checked) PAYER S name, street address, city or town, state or province, 1 Gross distribution country, and ZIP or foreign postal code 8,455 2a Taxable amount GENERAL FUNDS 32345 N. MAIN ST. CHICAGO, IL 60602 PAYER S federal identification number 62-400XXXX RECIPIENT S name BEATRICE RIVERS Street address (including apt. no.) 490 WEST KING STREET RECIPIENT S identification number City or town, state or province, country, and ZIP or foreign postal code CHICAGO, IL 60645 10 Amount allocable to IRR within 5 years Account number (see instructions) Form 1099-R 556-00-XXXX 11 1st year of desig. Roth contrib. FATCA filing requirement www.irs.gov/form1099r 2b Taxable amount not determined 3 Capital gain (included in box 2a) 5,906 5 Employee contributions /Designated Roth contributions or insurance premiums 7 Distribution code(s) 7 IRA/ SEP/ SIMPLE OMB No. 1545-0119 2018 Form 1099-R Total distribution 4 Federal income tax withheld 0 6 Net unrealized appreciation in employer s securities 8 Other % 9a Your percentage of total 9b Total employee contributions distribution % 12 State tax withheld 15 Local tax withheld Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. Copy B Report this income on your federal tax return. If this form shows federal income tax withheld in box 4, attach this copy to your return. This information is being furnished to the Internal Revenue Service. 13 State/Payer s state no. 14 State distribution 16 Name of locality 17 Local distribution Department of the Treasury - Internal Revenue Service Item 6: Form 1099-R 52 TRAINING PRACTICE PROBLEMS 2019

TAKE HOME TAX RETURNS: WALTER AND BEATRICE RIVERS FORM SSA-1099 SOCIAL SECURITY BENEFIT STATEMENT 2018 PART OF YOUR SOCIAL SECURITY BENEFITS SHOWN IN BOX 5 MAY BE TAXABLE INCOME SEE THE REVERSE FOR MORE INFORMATION Box 1. Name Box 2. Beneficiary s Social Security Number BEATRICE RIVERS 556-00-XXXX Box 3. Benefits Paid in 2018 9,800 Box 4. Benefits Repaid to SSA in 2018 Box 5. Net Benefits for 2018 (Box 3 minus Box 9,800 DESCRIPTION OF AMOUNT IN BOX 3 DESCRIPTION OF AMOUNT IN BOX 4 Paid by check or Direct deposit 8,600 Medicare premiums deducted From your benefit 1,200 Medicare Prescription Drug premiums (Part D) deducted from your benefits: Box 6. Voluntary Federal Income Tax Withheld 480.00 Box 7. Address 490 W. King St. Chicago, IL 60645 Box 8. Claim Number (Use this number if you need to contact SSA) Form SSA 1099 DO NOT RETURN THIS FORM TO SSA OR IRS Item 7: SSA-Form 1099 (Hers) TRAINING PRACTICE PROBLEMS 2019 53

TAKE HOME TAX RETURNS: WALTER AND BEATRICE RIVERS CORRECTED FILER'S name, street address, city or town, state or province, country, ZIP or foreign postal code, and telephone number Winfield University 233 S. Trumball Dayton, Ohio 45412 FILER'S employer identification no. 57-700XXXX STUDENT'S name JEREMY RIVERS STUDENT'S TIN 557-00-XXXX Street address (including apt. no.) 490 W. KING ST. City or town, state or province, country, and ZIP or foreign postal code CHICAGO, IL 60645 Service Provider/Acct. No. (see instr.) 8 Check if at least half-time student 1 Payments received for qualified tuition and related expenses 15,000 2 OMB No. 1545-1574 2018 Form 1098-T 3 If this box is checked, your educational institution changed its reporting method for 2018 4 Adjustments made for a prior year 6 Adjustments to scholarships or grants for a prior year 9 Checked if a graduate student Form 1098-T (keep for your records) www.irs.gov/form1098t 5 Scholarships or grants 11,200 7 Checked if the amount in box 1 includes amounts for an academic period beginning January March 2019 10 Ins. contract reimb./refund Tuition Statement Copy B For Student This is important tax information and is being furnished to the IRS. This form must be used to complete Form 8863 to claim education credits. Give it to the tax preparer or use it to prepare the tax return. Department of the Treasury - Internal Revenue Service Item 8: Form 1098-T 54 TRAINING PRACTICE PROBLEMS 2019

TAKE HOME TAX RETURNS: WALTER AND BEATRICE RIVERS MARY LOU S HOME DAYCARE 111 MAIN STREET CHICAGO, IL 60645 FEIN 69-900XXXX January 15, 2019 Beatrice Rivers 490 W. King Chicago, IL 60645 Dear Beatrice, Thanks for your business in 2018. We loved having little Peggy with us last summer. The total that you paid for child care last year was 1,500. Hope to see you again in 2019! Warm regard, Mary Lou Perkins Mary Lou Perkins Your Name item 9: Daycare Letter TRAINING PRACTICE PROBLEMS 2019 55

TAKE HOME TAX RETURNS: WALTER AND BEATRICE RIVERS Form 1040 Department of the Treasury Internal Revenue Service (99) U.S. Individual Income Tax Return 2018 OMB No. 1545-0074 IRS Use Only Do not write or staple in this space. Filing status: Single Married filing jointly Married filing separately Head of household Qualifying widow(er) Your first name and initial Last name Your social security number WALTER RIVERS 5 5 5 0 0 X X X X Your standard deduction: Someone can claim you as a dependent You were born before January 2, 1954 You are blind If joint return, spouse's first name and initial Last name Spouse s social security number BEATRICE RIVERS 5 5 6 0 0 X X X X DRAFT AS OF August 13, 2018 DO NOT FILE Spouse standard deduction: Someone can claim your spouse as a dependent Spouse was born before January 2, 1954 Spouse is blind Spouse itemizes on a separate return or you were dual-status alien Home address (number and street). If you have a P.O. box, see instructions. 490 W KING ST City, town or post office, state, and ZIP code. If you have a foreign address, attach Schedule 6. CHICAGO, IL 60645 Apt. no. Full-year health care coverage or exempt (see inst.) Presidential Election Campaign (see inst.) You Spouse If more than four dependents, see inst. and here Dependents (see instructions): (2) Social security number (3) Relationship to you (4) if qualifies for (see inst.): (1) First name Last name Child tax credit Credit for other dependents JEREMY RIVERS 5 5 7 0 0 X X X X SON PEGGY WALKER 4 4 4 0 0 X X X X GRANDCHILD WARREN WHITE 5 5 8 0 0 X X X X PARENT Sign Here Joint return? See instructions. Keep a copy for your records. Under penalties of perjury, I declare that I have examined this return and accompanying schedules and statements, and to the best of my knowledge and belief, they are true, correct, and complete. Declaration of preparer (other than taxpayer) is based on all information of which preparer has any knowledge. Your signature Date Your occupation MANAGER If the IRS sent you an Identity Protection PIN, enter it here (see inst.) Spouse s signature. If a joint return, both must sign. Date Spouse s occupation RETIRED If the IRS sent you an Identity Protection PIN, enter it here (see inst.) Paid Preparer s name Preparer s signature PTIN Firm s EIN Check if: Preparer 3rd Party Designee Use Only Firm s name Phone no. Self-employed Firm s address For Disclosure, Privacy Act, and Paperwork Reduction Act Notice, see separate instructions. Cat. No. 11320B Form 1040 (2018) Item 10: Form 1040, page 1 56 TRAINING PRACTICE PROBLEMS 2019

TAKE HOME TAX RETURNS: WALTER AND BEATRICE RIVERS Form 1040 (2018) Page 2 1 Wages, salaries, tips, etc. Attach Form(s) W-2................ 1 35,250 2a Tax-exempt interest... 2a b Taxable interest... 2b 30 Attach Form(s) W-2. Also attach 3a Qualified dividends... 3a b Ordinary dividends... 3b Form(s) W-2G and 1099-R if tax was 4a IRAs, pensions, and annuities. 4a 8,455 b Taxable amount... 4b 5,906 withheld. 5a Social security benefits.. 5a 9,800 b Taxable amount... 5b 6.673 6 Total income. Add lines 1 through 5. Add any amount from Schedule 1, line 22..... 6 47,859 7 Adjusted gross income. If you have no adjustments to income, enter the amount from line 6; otherwise, subtract Schedule 1, line 36, from line 6................. 7 47,859 DRAFT AS OF August 13, 2018 DO NOT FILE Standard Deduction for 8 Standard deduction or itemized deductions (from Schedule A)............ 8 25,300 Single or married filing separately, 9 Qualified business income deduction (see instructions).............. 9 12,000 10 Taxable income. Subtract lines 8 and 9 from line 7. If zero or less, enter -0-........ 10 22,559 Married filing jointly or Qualifying 11 a Tax (see inst) 2,328 (check if any from: 1 Form(s) 8814 2 Form 4972 3 ) widow(er), 24,000 b Add any amount from Schedule 2 and check here............ 11 2,328 Head of 12 a Child tax credit/credit for other dependents 528 b Add any amount from Schedule 3 and check here 12 2,328 household, 18,000 13 Subtract line 12 from line 11. If zero or less, enter -0-.............. 13 0 If you checked 14 Other taxes. Attach Schedule 4.................... 14 any box under Standard 15 Total tax. Add lines 13 and 14.................... 15 0 deduction, see instructions. 16 Federal income tax withheld from Forms W-2 and 1099............. 16 3,504 17 Refundable credits: a EIC (see inst.) 762 b Sch 8812 1.400 c Form 8863 1,000 Add any amount from Schedule 5.............. 17 3,162 18 Add lines 16 and 17. These are your total payments.............. 18 6,666 19 If line 18 is more than line 15, subtract line 15 from line 18. This is the amount you overpaid.... 19 6,666 Refund 20a Amount of line 19 you want refunded to you. If Form 8888 is attached, check here.... 20a 6,666 Direct deposit? See instructions. b Routing number c Type: Checking Savings d Account number 21 Amount of line 19 you want applied to your 2019 estimated tax.. 21 Amount You Owe 22 Amount you owe. Subtract line 18 from line 15. For details on how to pay, see instructions... 22 23 Estimated tax penalty (see instructions)........ 23 Go to www.irs.gov/form1040 for instructions and the latest information. Form 1040 (2018) Item 11: Form 1040, page 2 TRAINING PRACTICE PROBLEMS 2019 57

TAKE HOME TAX RETURNS: WALTER AND BEATRICE RIVERS SCHEDULE 3 (Form 1040) Department of the Treasury Internal Revenue Service Name(s) shown on Form 1040 WALTER AND BEATRICE RIVERS Nonrefundable Credits Nonrefundable Credits Attach to Form 1040. Go to www.irs.gov/form1040 for instructions and the latest information. 48 Foreign tax credit. Attach Form 1116 if required............. 48 49 Credit for child and dependent care expenses. Attach Form 2441....... 49 50 Education credits from Form 8863, line 19.............. 50 51 Retirement savings contributions credit. Attach Form 8880......... 51 52 Reserved......................... 52 DRAFT AS OF July 31, 2018 DO NOT FILE 53 Residential energy credit. Attach Form 5695.............. 53 54 Other credits from Form a 3800 b 8801 c 54 55 Add the amounts in the far right column. Enter here and include on Form 1040, line 12 55 OMB No. 1545-0074 2018 Attachment Sequence No. 03 Your social security number 555-00-XXXX 1,800 For Paperwork Reduction Act Notice, see your tax return instructions. Cat. No. 71480G Schedule 3 (Form 1040) 2018 300 1,500 Item 12: Schedule 3 58 TRAINING PRACTICE PROBLEMS 2019

TAKE HOME TAX RETURNS: WALTER AND BEATRICE RIVERS SCHEDULE EIC (Form 1040) Earned Income Credit Qualifying Child Information Complete and attach to Form 1040 only if you have a qualifying child. Department of the Treasury Go to www.irs.gov/scheduleeic for the latest information. Internal Revenue Service (99) Name(s) shown on return WALTER AND BEATRICE RIVERS DRAFT AS OF August 21, 2018 DO NOT FILE Before you begin:! CAUTION 1040 EIC OMB No. 1545-0074 2018 Attachment Sequence No. 43 Your social security number 555-00-XXXX See the instructions for Form 1040, line 17a, to make sure that (a) you can take the EIC, and (b) you have a qualifying child. Be sure the child s name on line 1 and social security number (SSN) on line 2 agree with the child s social security card. Otherwise, at the time we process your return, we may reduce or disallow your EIC. If the name or SSN on the child s social security card is not correct, call the Social Security Administration at 1-800-772-1213. You can't claim the EIC for a child who didn't live with you for more than half of the year. If you take the EIC even though you are not eligible, you may not be allowed to take the credit for up to 10 years. See the instructions for details. It will take us longer to process your return and issue your refund if you do not fill in all lines that apply for each qualifying child. Qualifying Child Information Child 1 Child 2 Child 3 1 Child s name If you have more than three qualifying children, you have to list only three to get the maximum credit. 2 Child s SSN The child must have an SSN as defined in the instructions for Form 1040, line 17a, unless the child was born and died in 2018. If your child was born and died in 2018 and did not have an SSN, enter Died on this line and attach a copy of the child s birth certificate, death certificate, or hospital medical records showing a live birth. First name Last name First name Last name First name Last name JEREMY RIVERS PEGGY WALKER 557-00-XXXX 444-00-XXXX 3 Child s year of birth 4 a Was the child under age 24 at the end of 2018, a student, and younger than you (or your spouse, if filing jointly)? Year 2 0 0 0 Year 2 0 1 7 If born after 1999 and the child is younger than you (or your spouse, if filing jointly), skip lines 4a and 4b; go to line 5. Go to line 5. Yes. No. Go to line 4b. If born after 1999 and the child is younger than you (or your spouse, if filing jointly), skip lines 4a and 4b; go to line 5. Go to line 5. Yes. No. Go to line 4b. Year If born after 1999 and the child is younger than you (or your spouse, if filing jointly), skip lines 4a and 4b; go to line 5. Go to line 5. Yes. No. Go to line 4b. b Was the child permanently and totally disabled during any part of 2018? Yes. No. Yes. No. Yes. No. Go to line 5. The child is not a qualifying child. Go to line 5. The child is not a qualifying child. Go to line 5. The child is not a qualifying child. 5 Child s relationship to you (for example, son, daughter, grandchild, niece, nephew, eligible foster child, etc.) 6 Number of months child lived with you in the United States during 2018 SON GRANDDAUGHTER If the child lived with you for more than half of 2018 but less than 7 months, enter 7. If the child was born or died in 2018 and your home was the child s home for more than half the time he or she was alive during 2018, enter 12. For Paperwork Reduction Act Notice, see your tax return instructions. 12 12 months Do not enter more than 12 months. months Do not enter more than 12 months. months Do not enter more than 12 months. Cat. No. 13339M Schedule EIC (Form 1040) 2018 Item 13: Schedule EIC TRAINING PRACTICE PROBLEMS 2019 59

TAKE HOME TAX RETURNS: WALTER AND BEATRICE RIVERS Form 2441 Department of the Treasury Internal Revenue Service (99) Name(s) shown on return WALTER AND BEATRICE RIVERS Child and Dependent Care Expenses Attach to Form 1040 or Form 1040NR. Go to www.irs.gov/form2441 for instructions and the latest information. 1040.......... 1040NR 2441 DRAFT AS OF October 2, 2018 DO NOT FILE OMB No. 1545-0074 2018 Attachment Sequence No. 21 Your social security number 555-00-XXXX You cannot claim a credit for child and dependent care expenses if your filing status is married filing separately unless you meet the requirements listed in the instructions under Married Persons Filing Separately. If you meet these requirements, check this box. Part I Persons or Organizations Who Provided the Care You must complete this part. 1 (a) Care provider s name MARY LOU'S HOME DAYCARE (If you have more than two care providers, see the instructions.) (b) Address (number, street, apt. no., city, state, and ZIP code) (c) Identifying number (SSN or EIN) (d) Amount paid (see instructions) 111 MAIN ST CHICAGO, IL 60645 69-900XXXX 1,500 Did you receive No Complete only Part II below. dependent care benefits? Yes Complete Part III on the back next. Caution: If the care was provided in your home, you may owe employment taxes. For details, see the instructions for Schedule 4 (Form 1040), line 60a; or Form 1040NR, line 59a. Part II Credit for Child and Dependent Care Expenses 2 Information about your qualifying person(s). If you have more than two qualifying persons, see the instructions. (a) Qualifying person s name (b) Qualifying person s social security number First Last (c) Qualified expenses you incurred and paid in 2018 for the person listed in column (a) PEGGY WALKER 444-00-XXXX 1,500 3 Add the amounts in column (c) of line 2. Don t enter more than 3,000 for one qualifying person or 6,000 for two or more persons. If you completed Part III, enter the amount from line 31.......................... 3 4 Enter your earned income. See instructions............... 4 5 If married filing jointly, enter your spouse s earned income (if you or your spouse was a student or was disabled, see the instructions); all others, enter the amount from line 4. 5 6 Enter the smallest of line 3, 4, or 5.................. 6 7 Enter the amount from Form 1040, line 7; or Form 1040NR, line 36............. 7 8 Enter on line 8 the decimal amount shown below that applies to the amount on line 7 If line 7 is: If line 7 is: Over But not over Decimal amount is 0 15,000.35 15,000 17,000.34 17,000 19,000.33 19,000 21,000.32 21,000 23,000.31 23,000 25,000.30 25,000 27,000.29 27,000 29,000.28 Over But not over Decimal amount is 29,000 31,000.27 31,000 33,000.26 33,000 35,000.25 35,000 37,000.24 37,000 39,000.23 39,000 41,000.22 41,000 43,000.21 43,000 No limit.20 8 X. 9 Multiply line 6 by the decimal amount on line 8. If you paid 2017 expenses in 2018, see the instructions......................... 9 10 Tax liability limit. Enter the amount from the Credit Limit Worksheet in the instructions....... 10 11 Credit for child and dependent care expenses. Enter the smaller of line 9 or line 10 here and on Schedule 3 (Form 1040), line 49; or Form 1040NR, line 47....... 11 For Paperwork Reduction Act Notice, see your tax return instructions. Cat. No. 11862M Form 2441 (2018) Item 14: Form 2241 60 TRAINING PRACTICE PROBLEMS 2019

TAKE HOME TAX RETURNS: WALTER AND BEATRICE RIVERS SCHEDULE 8812 (Form 1040) Department of the Treasury Internal Revenue Service (99) Name(s) shown on return Additional Child Tax Credit Attach to Form 1040 or Form 1040NR. Go to www.irs.gov/schedule8812 for instructions and the latest information. DRAFT AS OF August 9, 2018 DO NOT FILE 1040 1040NR 8812 OMB No. 1545-0074 2018 Attachment Sequence No. 47 Your social security number Part I All Filers Caution: If you file Form 2555 or 2555-EZ, stop here; you cannot claim the additional child tax credit. 1 If you are required to use the worksheet in Pub. 972, enter the amount from line 10 of the Child Tax Credit and Credit for Other Dependents Worksheet in the publication. Otherwise: } 1040 filers: Enter the amount from line 8 of your Child Tax Credit and Credit for Other Dependents Worksheet (see the instructions for Form 1040, line 12a). 1 1040NR filers: Enter the amount from line 8 of your Child Tax Credit and Credit for Other Dependents Worksheet (see the instructions for Form 1040NR, line 49). 2 Enter the amount from Form 1040, line 12a, or Form 1040NR, line 49............ 2 3 Subtract line 2 from line 1. If zero, stop here; you cannot claim this credit........... 3 4 Number of qualifying children under 17 with the required social security number: X 1,400. Enter the result. If zero, stop here; you cannot claim this credit.............. 4 TIP: The number of children you use for this line is the same as the number of children you used for line 1 of the Child Tax Credit and Credit for Other Dependents Worksheet. 5 Enter the smaller of line 3 or line 4...................... 5 6a Earned income (see separate instructions)........... 6a b Nontaxable combat pay (see separate instructions)........... 6b 7 Is the amount on line 6a more than 2,500? No. Leave line 7 blank and enter -0- on line 8. Yes. Subtract 2,500 from the amount on line 6a. Enter the result... 7 8 Multiply the amount on line 7 by 15% (0.15) and enter the result.............. 8 Next. On line 4, is the amount 4,200 or more? No. If line 8 is zero, stop here; you cannot claim this credit. Otherwise, skip Part II and enter the smaller of line 5 or line 8 on line 15. Yes. If line 8 is equal to or more than line 5, skip Part II and enter the amount from line 5 on line 15. Otherwise, go to line 9. Part II Certain Filers Who Have Three or More Qualifying Children 9 Withheld social security, Medicare, and Additional Medicare taxes from Form(s) W-2, boxes 4 and 6. If married filing jointly, include your spouse s amounts with yours. If your employer withheld or you paid Additional Medicare Tax or tier 1 RRTA taxes, see separate instructions...... 9 } 10 1040 filers: Enter the total of the amounts from Schedule 1 (Form 1040), line 27, and Schedule 4 (Form 1040), line 58, plus any taxes that you identified using code UT and entered on Schedule 4 (Form 1040), line 62. 10 1040NR filers: Enter the total of the amounts from Form 1040NR, lines 27 and 56, plus any taxes that you identified using code UT and entered on line 60. 11 Add lines 9 and 10.................. 11 12 1040 filers: Enter the total of the amounts from Form 1040, line 17a, and Schedule 5 (Form 1040), line 72. } 1040NR filers: Enter the amount from Form 1040NR, line 67. 12 13 Subtract line 12 from line 11. If zero or less, enter -0-................. 13 14 Enter the larger of line 8 or line 13...................... 14 Next, enter the smaller of line 5 or line 14 on line 15. Part III Additional Child Tax Credit 15 This is your additional child tax credit..................... 15 Enter this amount on 1040 Form 1040, line 17b, or Form 1040NR, line 64. 1040NR For Paperwork Reduction Act Notice, see your tax return instructions. Cat. No. 59761M Schedule 8812 (Form 1040) 2018 Item 15: Schedule 8812 TRAINING PRACTICE PROBLEMS 2019 61

TAKE HOME TAX RETURNS: WALTER AND BEATRICE RIVERS Form 8863 Department of the Treasury Internal Revenue Service (99) Name(s) shown on return WALTER AND BEATRICE RIVERS! CAUTION Education Credits (American Opportunity and Lifetime Learning Credits) Attach to Form 1040. Go to www.irs.gov/form8863 for instructions and the latest information. OMB No. 1545-0074 2018 Attachment Sequence No. 50 Your social security number DRAFT AS OF August 9, 2018 DO NOT FILE Complete a separate Part III on page 2 for each student for whom you're claiming either credit before you complete Parts I and II. Part I Refundable American Opportunity Credit 1 After completing Part III for each student, enter the total of all amounts from all Parts III, line 30. 1 2 Enter: 180,000 if married filing jointly; 90,000 if single, head of household, or qualifying widow(er)............. 2 3 Enter the amount from Form 1040, line 7. If you re filing Form 2555, 2555- EZ, or 4563, or you re excluding income from Puerto Rico, see Pub. 970 for the amount to enter................. 3 4 Subtract line 3 from line 2. If zero or less, stop; you can t take any education credit................... 4 5 Enter: 20,000 if married filing jointly; 10,000 if single, head of household, or qualifying widow(er)................. 5 6 If line 4 is: Equal to or more than line 5, enter 1.000 on line 6............ Less than line 5, divide line 4 by line 5. Enter the result as a decimal (rounded to at least three places)..................... }.... 6. 7 Multiply line 1 by line 6. Caution: If you were under age 24 at the end of the year and meet the conditions described in the instructions, you can t take the refundable American opportunity credit; skip line 8, enter the amount from line 7 on line 9, and check this box.... 7 8 Refundable American opportunity credit. Multiply line 7 by 40% (0.40). Enter the amount here and on Form 1040, line 17c. Then go to line 9 below................. 8 Part II Nonrefundable Education Credits 9 Subtract line 8 from line 7. Enter here and on line 2 of the Credit Limit Worksheet (see instructions) 9 10 After completing Part III for each student, enter the total of all amounts from all Parts III, line 31. If zero, skip lines 11 through 17, enter -0- on line 18, and go to line 19.......... 10 11 Enter the smaller of line 10 or 10,000.................... 11 12 Multiply line 11 by 20% (0.20)....................... 12 13 Enter: 134,000 if married filing jointly; 67,000 if single, head of household, or qualifying widow(er)............. 13 14 Enter the amount from Form 1040, line 7. If you're filing Form 2555, 2555- EZ, or 4563, or you re excluding income from Puerto Rico, see Pub. 970 for the amount to enter................. 14 15 Subtract line 14 from line 13. If zero or less, skip lines 16 and 17, enter -0- on line 18, and go to line 19............... 15 16 Enter: 20,000 if married filing jointly; 10,000 if single, head of household, or qualifying widow(er)................. 16 17 If line 15 is: Equal to or more than line 16, enter 1.000 on line 17 and go to line 18 Less than line 16, divide line 15 by line 16. Enter the result as a decimal (rounded to at least three places).............................. 17. 18 Multiply line 12 by line 17. Enter here and on line 1 of the Credit Limit Worksheet (see instructions) 18 19 Nonrefundable education credits. Enter the amount from line 7 of the Credit Limit Worksheet (see instructions) here and on Schedule 3 (Form 1040), line 50.............. 19 For Paperwork Reduction Act Notice, see your tax return instructions. Cat. No. 25379M Form 8863 (2018) Item 16: Form 8863, page 1 62 TRAINING PRACTICE PROBLEMS 2019

TAKE HOME TAX RETURNS: WALTER AND BEATRICE RIVERS Form 8863 (2018) Page 2 Name(s) shown on return Your social security number! CAUTION Complete Part III for each student for whom you re claiming either the American opportunity credit or lifetime learning credit. Use additional copies of page 2 as needed for each student. DRAFT AS OF August 9, 2018 DO NOT FILE Part III Student and Educational Institution Information. See instructions. 20 Student name (as shown on page 1 of your tax return) 21 Student social security number (as shown on page 1 of your tax return) 22 Educational institution information (see instructions) a. Name of first educational institution (1) Address. Number and street (or P.O. box). City, town or post office, state, and ZIP code. If a foreign address, see instructions. (2) Did the student receive Form 1098-T from this institution for 2018? (3) Did the student receive Form 1098-T from this institution for 2017 with box 2 filled in and box 7 checked? Yes Yes (4) Enter the institution s employer identification number (EIN) if you re claiming the American opportunity credit or if you checked Yes in (2) or (3). You can get the EIN from Form 1098-T or from the institution. 23 Has the Hope Scholarship Credit or American opportunity credit or the former Hope Scholarship Credit been claimed for this student for any 4 tax years before 2018? 24 Was the student enrolled at least half-time for at least one academic period that began or is treated as having begun in 2018 at an eligible educational institution in a program leading towards a postsecondary degree, certificate, or other recognized postsecondary educational credential? See instructions. 25 Did the student complete the first 4 years of postsecondary education before 2018? See instructions. 26 Was the student convicted, before the end of 2018, of a felony for possession or distribution of a controlled substance?! CAUTION No No b. Name of second educational institution (if any) (1) Address. Number and street (or P.O. box). City, town or post office, state, and ZIP code. If a foreign address, see instructions. (2) Did the student receive Form 1098-T from this institution for 2018? (3) Did the student receive Form 1098-T from this institution for 2017 with box 2 filled in and box 7 checked? Yes Yes (4) Enter the institution s employer identification number (EIN) if you re claiming the American opportunity credit or if you checked Yes in (2) or (3). You can get the EIN from Form 1098-T or from the institution. Yes Stop! Go to line 31 for this student. No Go to line 24. Yes Go to line 25. No Stop! Go to line 31 for this student. Yes Stop! Go to line 31 for this student. Yes Stop! Go to line 31 for this student. No Go to line 26. No No No Complete lines 27 through 30 for this student. You can't take the American opportunity credit and the lifetime learning credit for the same student in the same year. If you complete lines 27 through 30 for this student, don't complete line 31. American Opportunity Credit 27 Adjusted qualified education expenses (see instructions). Don t enter more than 4,000..... 27 28 Subtract 2,000 from line 27. If zero or less, enter -0-................. 28 29 Multiply line 28 by 25% (0.25)........................ 29 30 If line 28 is zero, enter the amount from line 27. Otherwise, add 2,000 to the amount on line 29 and enter the result. Skip line 31. Include the total of all amounts from all Parts III, line 30, on Part I, line 1. 30 Lifetime Learning Credit 31 Adjusted qualified education expenses (see instructions). Include the total of all amounts from all Parts III, line 31, on Part II, line 10......................... 31 Form 8863 (2018) Item 16: Form 8863, page 2 TRAINING PRACTICE PROBLEMS 2019 63

64 TRAINING PRACTICE PROBLEMS 2019

3. Maurice Brooks and Ray Branch OBJECTIVES 1: Qualifying relatives 2: Ray Branch is a rideshare driver 3: Unreported tip income requires a Form 4137 to pay social security and Medicare taxes. 4: Taxpayer who did not have health insurance is assessed an Individual Shared Responsibility Payment TRAINING PRACTICE PROBLEMS 2019 65

TAKE HOME TAX RETURNS: MAURICE BROOKS AND RAY BRANCH 620-00-XXXX Maurice Brooks Maurice Brooks 621-00-XXXX Raymond Branch Raymond Branch 622-00-XXXX Dorothy Brooks Dorothy Brooks Brooks 623-00-XXXX Alan Simpson Alan Simpson Item 1: Social Security Cards 66 TRAINING PRACTICE PROBLEMS 2019

TAKE HOME TAX RETURNS: MAURICE BROOKS AND RAY BRANCH Item 2: Intake Documents 13614-C, page 1 TRAINING PRACTICE PROBLEMS 2019 67

TAKE HOME TAX RETURNS: MAURICE BROOKS AND RAY BRANCH Item 2: Intake Documents 13614-C, page 2 68 TRAINING PRACTICE PROBLEMS 2019

TAKE HOME TAX RETURNS: MAURICE BROOKS AND RAY BRANCH Item 2: Intake Documents 13614-C, page 3 TRAINING PRACTICE PROBLEMS 2019 69

TAKE HOME TAX RETURNS: MAURICE BROOKS AND RAY BRANCH Item 3: Supplemental Intake Sheet 70 TRAINING PRACTICE PROBLEMS 2019

TAKE HOME TAX RETURNS: MAURICE BROOKS AND RAY BRANCH b Employer identification number (EIN) 66-600XXXX c Employer s name, address, and ZIP code The Lucky Alibi 333 N. Main St. Evanston, IL 60202 d Control number a Employee s social security number 620-00-XXXX OMB No. 1545-0008 Safe, accurate, FAST! Use Visit the IRS website at www.irs.gov/efile 1 Wages, tips, other compensation 2 Federal income tax withheld 40,500 2,212 3 Social security wages 4 Social security tax withheld 40,500 5 Medicare wages and tips 6 Medicare tax withheld 40,500 2,511 587 7 Social security tips 8 Allocated tips 400 850 9 Verification code 10 Dependent care benefits e Employee s first name and initial Last name Suff. Maurice M. Brooks 444 East Halsted St. Chicago Heights, IL 60411 11 Nonqualified plans 12a See instructions for box 12 C 13 Statutory employee 14 Other f Employee s address and ZIP code 15 State Employer s state ID number 16 State wages, tips, etc. 17 State income tax 18 Local wages, tips, etc. 19 Local income tax 20 Locality name IL 66600XXXX 40,500 2,835 Retirement plan Third-party sick pay o d e 12b C o d e 12c C o d e 12d C o d e DD 3,555 Wage and Tax Form W-2 Copy B To Be Filed With Employee s FEDERAL Tax Return. This information is being furnished to the Internal Revenue Service. Statement 2018 Department of the Treasury Internal Revenue Service Item: 4: Form W-2 TRAINING PRACTICE PROBLEMS 2019 71

TAKE HOME TAX RETURNS: MAURICE BROOKS AND RAY BRANCH FILER'S name, street address, city or town, state or province, country, ZIP or foreign postal code, and telephone no. FLASHRIDE 444 S. JACKSON AVE. ELGIN, IL 60102 Check to indicate if FILER is a (an): Payment settlement entity (PSE) Electronic Payment Facilitator (EPF)/Other third party PAYEE S name RAY BRANCH Street address (including apt. no.) 1234 N. 4TH AVE EVANSTON, IL 60202 Check to indicate transactions reported are: Payment card Third party network City or town, state or province, country, and ZIP or foreign postal code PSE S name and telephone number Account number (see instructions) CORRECTED (if checked) FILER S TIN PAYEE S TIN 1a Gross amount of payment card/third party network transactions 9,900 1b Card Not Present transactions 3 Number of payment transactions 5a January 5c March 5e May 5g July OMB No. 1545-2205 2018 Form 1099-K 2 Merchant category code 4 Federal income tax withheld 5b February 5d April 535.00 950.00 5f June 1,200.00 770.00 5h August 790.00 1,400.00 5i September 5j October 1,050.00 1,070.00 5k November Form 1099-K (Keep for your records) www.irs.gov/form1099k X 67-700XXXX 621-00-XXXX 80.00 0 420.00 5l December Payment Card and Third Party Network Transactions Copy B For Payee This is important tax information and is being furnished to the IRS. If you are required to file a return, a negligence penalty or other sanction may be imposed on you if taxable income results from this transaction and the IRS determines that it has not been reported. 900.00 735.00 6 State 7 State identification no. 8 State income tax withheld Department of the Treasury - Internal Revenue Service Item 5: Form 1099-K 72 TRAINING PRACTICE PROBLEMS 2019

TAKE HOME TAX RETURNS: MAURICE BROOKS AND RAY BRANCH FlashRide 444 S. Jackson Avenue Elgin, IL 60122 67-700XXXX 2018 TAX SUMMARY Ray Branch 1099-K BREAKDOWN Tolls 200 Safe ride fee 450 Airport fee 670 Misc. fee 100 Device fee 280 Fares 8,200 Total 9,900 1099-MISC BREAKDOWN Referrals 200 Incentives 300 Total 500 OTHER FlashRide Service Fee 1,500 On Trip Mileage 9,600 miles My tracking app shows I also drove these miles and had these expenses in 2018: Home to first customer and last customer back home: 350 miles Driving between customers 1,250 miles I bought stuff for my customers: cough drops 60 holiday candy 30 bottled water 150 little trees deodorizers 15 I received 2,000 in cash tips from my customers. The total miles on my car for 2018 was 13,200 miles. I drive a Toyota RAV 4 that I started using for Flashride 7-1-2017. Maurice has his own car. Item 6: FlashRide 2018 Tax Summary TRAINING PRACTICE PROBLEMS 2019 73

TAKE HOME TAX RETURNS: MAURICE BROOKS AND RAY BRANCH Form 1040 Department of the Treasury Internal Revenue Service (99) U.S. Individual Income Tax Return 2018 OMB No. 1545-0074 IRS Use Only Do not write or staple in this space. x Filing status: Single Married filing jointly Married filing separately Head of household Qualifying widow(er) Your first name and initial Last name Your social security number MAURICE BROOKS 620-00-1212 Your standard deduction: If joint return, spouse's first name and initial Someone can claim you as a dependent You were born before January 2, 1954 You are blind Last name Spouse standard deduction: Someone can claim your spouse as a dependent Spouse was born before January 2, 1954 Spouse is blind Spouse itemizes on a separate return or you were dual-status alien Home address (number and street). If you have a P.O. box, see instructions. Apt. no. City, town or post office, state, and ZIP code. If you have a foreign address, attach Schedule 6. Spouse s social security number RAYMOND BRANCH 621-00-1212 1234 N 4TH AVE CHICAGO HEIGHTS, IL 60411 Full-year health care coverage or exempt (see inst.) Presidential Election Campaign (see inst.) You Spouse If more than four dependents, see inst. and here Dependents (see instructions): (2) Social security number (3) Relationship to you (4) if qualifies for (see inst.): (1) First name Last name Child tax credit Credit for other dependents DOROTHY BROOKS 622001212 PARENT Sign Here Joint return? See instructions. Keep a copy for your records. Paid Preparers See Schedule 6 Under penalties of perjury, I declare that I have examined this return and accompanying schedules and statements, and to the best of my knowledge and belief, they are true, correct, and complete. Declaration of preparer (other than taxpayer) is based on all information of which preparer has any knowledge. Your signature Date Your occupation HOST If the IRS sent you an Identity Protection PIN, enter it here (see inst.) Spouse s signature. If a joint return, both must sign. Date Spouse s occupation DRIVER If the IRS sent you an Identity Protection PIN, enter it here (see inst.) Print/Type preparer s name Preparer s signature PTIN Check if: 3rd Party Designee Firm s name Firm s EIN Self-employed For Disclosure, Privacy Act, and Paperwork Reduction Act Notice, see separate instructions. Form 1040 (2018) QNA S12345678 PRACTICE LAB - Item 7: Form 1040, page 1 74 TRAINING PRACTICE PROBLEMS 2019

TAKE HOME TAX RETURNS: MAURICE BROOKS AND RAY BRANCH Form 1040 (2018) Page 2 1 Wages, salaries, tips, etc. Attach Form(s) W-2................ 1 2a Tax-exempt interest... 2a b Taxable interest... 2b Attach Form(s) W-2. Also attach 3a Qualified dividends... 3a b Ordinary dividends... 3b Form(s) W-2G and 1099-R if tax was 4a IRAs, pensions, and annuities. 4a b Taxable amount... 4b withheld. 5a Social security benefits.. 5a b Taxable amount... 5b 6 Total income. Add lines 1 through 5. Add any amount from Schedule 1, line 22 3032..... 6 44382 7 Adjusted gross income. If you have no adjustments to income, enter the amount from line 6; otherwise, Standard subtract Schedule 1, line 36, from line 6................. 7 44168 Deduction for 8 Standard deduction or itemized deductions (from Schedule A)............ 8 24000 Single or married filing separately, 9 Qualified business income deduction (see instructions).............. 9 12,000 10 Taxable income. Subtract lines 8 and 9 from line 7. If zero or less, enter -0-........ 10 Married filing jointly or Qualifying 11 a Tax (see inst) (check if any from: 1 Form(s) 8814 2 Form 4972 3 ) widow(er), 24,000 b Add any amount from Schedule 2 and check here............ 11 Head of 12 a Child tax credit/credit for other dependents b Add any amount from Schedule 3 and check here 12 household, 18,000 13 Subtract line 12 from line 11. If zero or less, enter -0-.............. 13 If you checked 14 Other taxes. Attach Schedule 4.................... 14 1188 any box under Standard 15 Total tax. Add lines 13 and 14.................... 15 deduction, see instructions. 16 Federal income tax withheld from Forms W-2 and 1099............. 16 2212 17 Refundable credits: a EIC (see inst.) b Sch 8812 c Form 8863 Add any amount from Schedule 5.............. 17 18 Add lines 16 and 17. These are your total payments.............. 18 2212 Refund 19 If line 18 is more than line 15, subtract line 15 from line 18. This is the amount you overpaid.... 19 20a Amount of line 19 you want refunded to you. If Form 8888 is attached, check here.... 20a Direct deposit? b Routing number c Type: Checking Savings See instructions. d Account number 21 Amount of line 19 you want applied to your 2019 estimated tax.. 21 Amount You Owe 22 Amount you owe. Subtract line 18 from line 15. For details on how to pay, see instructions... 22 23 Estimated tax penalty (see instructions)........ 23 Go to www.irs.gov/form1040 for instructions and the latest information. Form 1040 (2018) QNA BROOKS 620-00-1212 41350 Item 8: 1040, page 2 TRAINING PRACTICE PROBLEMS 2019 75

TAKE HOME TAX RETURNS: MAURICE BROOKS AND RAY BRANCH SCHEDULE 1 (Form 1040) Department of the Treasury Internal Revenue Service Name(s) shown on Form 1040 Additional Income Additional Income and Adjustments to Income Attach to Form 1040. Go to www.irs.gov/form1040 for instructions and the latest information. OMB No. 1545-0074 2018 Attachment Sequence No. 01 Your social security number BROOKS 620-00-1212 1 9 b Reserved........................ 1 9b 10 Taxable refunds, credits, or offsets of state and local income taxes..... 10 11 Alimony received...................... 11 12 Business income or (loss). Attach Schedule C or C-EZ......... 12 13 Capital gain or (loss). Attach Schedule D if required. If not required, check here 13 14 Other gains or (losses). Attach Form 4797.............. 14 15a Reserved........................ 15b 16a Reserved........................ 16b 17 Rental real estate, royalties, partnerships, S corporations, trusts, etc. Attach Schedule E 17 18 Farm income or (loss). Attach Schedule F.............. 18 19 Unemployment compensation................. 19 20a Reserved........................ 20b 21 Other income. List type and amount 21 22 Combine the amounts in the far right column. If you don t have any adjustments to income, enter here and include on Form 1040, line 6. Otherwise, go to line 23.. 22 23 Educator expenses............ 23 24 Certain business expenses of reservists, performing artists, and fee-basis government officials. Attach Form 2106.. 24 25 Health savings account deduction. Attach Form 8889. 25 26 Moving expenses for members of the Armed Forces. Attach Form 3903............ 26 27 Deductible part of self-employment tax. Attach Schedule SE 27 214 28 Self-employed SEP, SIMPLE, and qualified plans.. 28 29 Self-employed health insurance deduction.... 29 30 Penalty on early withdrawal of savings...... 30 31a Alimony paid b Recipient s SSN 31a 32 IRA deduction.............. 32 33 Student loan interest deduction........ 33 34 Reserved............... 34 35 Reserved............... 35 36 Add lines 23 through 35................... 36 Adjustments to Income For Paperwork Reduction Act Notice, see your tax return instructions. Schedule 1 (Form 1040) 2018 QNA 3032 3032 214 Item 9: Schedule 1 76 TRAINING PRACTICE PROBLEMS 2019

TAKE HOME TAX RETURNS: MAURICE BROOKS AND RAY BRANCH SCHEDULE 4 (Form 1040) Department of the Treasury Internal Revenue Service Name(s) shown on Form 1040 Other Taxes Attach to Form 1040. Go to www.irs.gov/form1040 for instructions and the latest information. OMB No. 1545-0074 2018 Attachment Sequence No. 04 Your social security number BROOKS 620-00-1212 Other 57 Self-employment tax. Attach Schedule SE............ 57 428 Taxes x 65 58 Unreported social security and Medicare tax from: Form a 4137 b 8919 58 59 Additional tax on IRAs, other qualified retirement plans, and other tax-favored accounts. Attach Form 5329 if required............. 59 60a Household employment taxes. Attach Schedule H.......... 60a b Repayment of first-time homebuyer credit from Form 5405. Attach Form 5405 if required........................ 60b 61 Health care: individual responsibility (see instructions)......... 61 695 62 Taxes from: a Form 8959 b Form 8960 c Instructions; enter code(s) 62 63 Section 965 net tax liability installment from Form 965-A.............. 63 0 64 Add the amounts in the far right column. These are your total other taxes. Enter here and on Form 1040, line 14................ 64 1188 For Paperwork Reduction Act Notice, see your tax return instructions. Schedule 4 (Form 1040) 2018 QNA Item 10: Schedule 4 TRAINING PRACTICE PROBLEMS 2019 77

TAKE HOME TAX RETURNS: MAURICE BROOKS AND RAY BRANCH SCHEDULE C (Form 1040) Department of the Treasury Internal Revenue Service (99) Name of proprietor Profit or Loss From Business (Sole Proprietorship) OMB No. 1545-0074 2018 Attachment Sequence No. 09 Go to www.irs.gov/schedulec for instructions and the latest information. Attach to Form 1040, 1040NR, or 1041; partnerships generally must file Form 1065. Social security number (SSN) RAYMOND BRANCH 621-00-1212 A Principal business or profession, including product or service (see instructions) B Enter code from instructions C Business name. If no separate business name, leave blank. D Employer ID number (EIN) (see instr.) TAXI LIMOUSINE 4 8 5 3 0 0 E Business address (including suite or room no.) City, town or post office, state, and ZIP code F Accounting method: (1) X Cash (2) Accrual (3) Other (specify) G Did you materially participate in the operation of this business during 2018? If No, see instructions for limit on losses. X Yes No H If you started or acquired this business during 2018, check here................. I Did you make any payments in 2018 that would require you to file Form(s) 1099? (see instructions)........ Yes X No J If Yes, did you or will you file required Forms 1099?..................... Yes No Part I Income 1 Gross receipts or sales. See instructions for line 1 and check the box if this income was reported to you on Form W-2 and the Statutory employee box on that form was checked......... 1 4 Cost of goods sold (from line 42)...................... 4 5 Gross profit. Subtract line 4 from line 3.................... 5 6 Other income, including federal and state gasoline or fuel tax credit or refund (see instructions).... 6 7 Gross income. Add lines 5 and 6..................... 7 2 Returns and allowances......................... 2 3 Subtract line 2 from line 1........................ 3 12400 12400 12400 12400 Part II Expenses. Enter expenses for business use of your home only on line 30. 8 Advertising..... 8 18 Office expense (see instructions) 18 9 Car and truck expenses (see 19 Pension and profit-sharing plans. 19 instructions)..... 9 5913 20 Rent or lease (see instructions): 10 Commissions and fees. 10 a Vehicles, machinery, and equipment 20a 11 Contract labor (see instructions) 11 b Other business property... 20b 12 Depletion..... 12 21 Repairs and maintenance... 21 13 Depreciation and section 179 22 Supplies (not included in Part III). 22 expense deduction (not included in Part III) (see 23 Taxes and licenses..... 23 255 instructions)..... 13 24 Travel and meals: 14 Employee benefit programs a Travel......... 24a (other than on line 19).. 14 b Deductible meals (see 15 Insurance (other than health) 15 instructions)....... 24b 16 Interest (see instructions): 25 Utilities........ 25 a Mortgage (paid to banks, etc.) 16a 26 Wages (less employment credits). 26 b Other...... 16b 27 a Other expenses (from line 48).. 27a 3200 17 Legal and professional services 17 b Reserved for future use... 27b 28 Total expenses before expenses for business use of home. Add lines 8 through 27a...... 28 29 Tentative profit or (loss). Subtract line 28 from line 7................. 29 9368 3032 30 Expenses for business use of your home. Do not report these expenses elsewhere. Attach Form 8829 unless using the simplified method (see instructions). Simplified method filers only: enter the total square footage of: (a) your home: and (b) the part of your home used for business:. Use the Simplified Method Worksheet in the instructions to figure the amount to enter on line 30......... 30 31 Net profit or (loss). Subtract line 30 from line 29. If a profit, enter on both Schedule 1 (Form 1040), line 12 (or Form 1040NR, line 13) and on Schedule SE, line 2. (If you checked the box on line 1, see instructions). Estates and trusts, enter on Form 1041, line 3. } 31 3032 If a loss, you must go to line 32. 32 If you have a loss, check the box that describes your investment in this activity (see instructions). } If you checked 32a, enter the loss on both Schedule 1 (Form 1040), line 12 (or Form 1040NR, line 13) and on Schedule SE, line 2. (If you checked the box on line 1, see the line 31 instructions). 32a All investment is at risk. Estates and trusts, enter on Form 1041, line 3. 32b Some investment is not at risk. If you checked 32b, you must attach Form 6198. Your loss may be limited. For Paperwork Reduction Act Notice, see the separate instructions. Link ID - 1000 Schedule C (Form 1040) 2018 QNA Item 11: Schedule C, page 1 78 TRAINING PRACTICE PROBLEMS 2019

TAKE HOME TAX RETURNS: MAURICE BROOKS AND RAY BRANCH RAYMOND BRANCH 621-00-1212 Schedule C (Form 1040) 2018 Page 2 Part III Cost of Goods Sold (see instructions) 33 Method(s) used to value closing inventory: a Cost b Lower of cost or market c Other (attach explanation) 34 Was there any change in determining quantities, costs, or valuations between opening and closing inventory? If Yes, attach explanation.......................... Yes X No 35 Inventory at beginning of year. If different from last year s closing inventory, attach explanation... 35 36 Purchases less cost of items withdrawn for personal use.............. 36 37 Cost of labor. Do not include any amounts paid to yourself.............. 37 38 Materials and supplies........................ 38 39 Other costs............................ 39 40 Add lines 35 through 39........................ 40 41 Inventory at end of year........................ 41 42 Cost of goods sold. Subtract line 41 from line 40. Enter the result here and on line 4...... 42 Part IV Information on Your Vehicle. Complete this part only if you are claiming car or truck expenses on line 9 and are not required to file Form 4562 for this business. See the instructions for line 13 to find out if you must file Form 4562. 07 01 2017 43 When did you place your vehicle in service for business purposes? (month, day, year) / / 44 Of the total number of miles you drove your vehicle during 2018, enter the number of miles you used your vehicle for: 10850 350 2000 a Business b Commuting (see instructions) c Other 45 Was your vehicle available for personal use during off-duty hours?............... X Yes No 46 Do you (or your spouse) have another vehicle available for personal use?.............. X Yes No 47a Do you have evidence to support your deduction?.................... X Yes No b If Yes, is the evidence written?......................... X Yes No Part V Other Expenses. List below business expenses not included on lines 8 26 or line 30. AIRPORT FEE 670 DEVICE FEE 280 FLASHRIDE SERVICE FEE 1500 MISCELLANEOUS FEE 100 SAFE RIDE FEE 450 TOLLS 200 48 Total other expenses. Enter here and on line 27a................ 48 QNA 3200 Schedule C (Form 1040) 2018 Item 11: Schedule C, page 2 TRAINING PRACTICE PROBLEMS 2019 79

TAKE HOME TAX RETURNS: MAURICE BROOKS AND RAY BRANCH Form 4137 Department of the Treasury Internal Revenue Service (99) Social Security and Medicare Tax on Unreported Tip Income Go to www.irs.gov/form4137 for the latest information. Attach to Form 1040, Form 1040NR, Form 1040NR-EZ, Form 1040-SS, or Form 1040-PR. Name of person who received tips. If married, complete a separate Form 4137 for each spouse with unreported tips. 1 (a) Name of employer to whom you were required to but didn t report all your tips (see instructions) (b) Employer identification number (see instructions) (c) Total cash and charge tips you received (including unreported tips) (see instructions) OMB No. 1545-0074 2018 Attachment Sequence No. 24 Social security number MAURICE BROOKS 620-00-1212 (d) Total cash and charge tips you reported to your employer A THE LUCKY ALIBI 66-6001234 1250 400 B C D E 2 Total cash and charge tips you received in 2018. Add the amounts from line 1, column (c)........... 2 1250 3 Total cash and charge tips you reported to your employer(s) in 2018. Add the amounts from line 1, column (d)......................... 3 4 Subtract line 3 from line 2. This amount is income you must include in the total on Form 1040, line 1; Form 1040NR, line 8; or Form 1040NR-EZ, line 3.......... 4 5 Cash and charge tips you received but didn t report to your employer because the total was less than 20 in a calendar month (see instructions)............. 5 6 Unreported tips subject to Medicare tax. Subtract line 5 from line 4........ 6 7 Maximum amount of wages (including tips) subject to social security tax................ 7 128,400 00 8 Total social security wages and social security tips (total of boxes 3 and 7 shown on your Form(s) W-2) and railroad retirement (RRTA) compensation (subject to 6.2% rate) (see instructions).................. 8 40900 9 Subtract line 8 from line 7. If line 8 is more than line 7, enter -0-......... 9 10 Unreported tips subject to social security tax. Enter the smaller of line 6 or line 9. If you received tips as a federal, state, or local government employee, see instructions.... 10 11 Multiply line 10 by 0.062 (social security tax rate).............. 11 12 Multiply line 6 by 0.0145 (Medicare tax rate)................ 12 13 Add lines 11 and 12. Enter the result here and on Schedule 4 (Form 1040), line 58; Form 1040NR, line 56; or Form 1040NR-EZ, line 14 (Form 1040-SS and 1040-PR filers, see instructions.).......................... 13 400 850 850 87500 850 53 12 65 General Instructions Future Developments For the latest information about developments related to Form 4137 and its instructions, such as legislation enacted after they were published, go to www.irs.gov/form4137. What s New For 2018, the maximum wages and tips subject to social security tax increases to 128,400. The social security tax rate an employee must pay on tips remains at 6.2% (0.062). Reminder A 0.9% Additional Medicare Tax applies to Medicare wages, Railroad Retirement Tax Act compensation, and self-employment income over a threshold amount based on your filing status. Use Form 8959, Additional Medicare Tax, to figure this tax. For more information on the Additional Medicare Tax, see What is the Additional Medicare Tax? at www.irs.gov/admt. Purpose of form. Use Form 4137 only to figure the social security and Medicare tax owed on tips you didn t report to your employer, including any allocated tips shown on your Form(s) W-2 that you must report as income. You also must report the income on Form 1040, line 1; Form 1040NR, line 8; or Form 1040NR-EZ, line 3. By filing this form, your social security and Medicare tips will be credited to your social security record (used to figure your benefits). Don t use Form 4137 as a substitute Form W-2.! CAUTION If you believe you re an employee and you received Form 1099- MISC, Miscellaneous Income, instead of Form W-2, Wage and Tax Statement, because your employer didn t consider you an employee, don t use this form to report the social security and Medicare tax on that income. Instead, use Form 8919, Uncollected Social Security and Medicare Tax on Wages. For Paperwork Reduction Act Notice, see your tax return instructions. Form 4137 (2018) QNA Item 12: Form 8962, page 1 80 TRAINING PRACTICE PROBLEMS 2019

TAKE HOME TAX RETURNS: MAURICE BROOKS AND RAY BRANCH Schedule SE (Form 1040) 2018 Attachment Sequence No. 17 Page 2 Name of person with self-employment income (as shown on Form 1040 or Form 1040NR) RAYMOND BRANCH Social security number of person with self-employment income 621-00-1212 Section B Long Schedule SE Part I Self-Employment Tax Note: If your only income subject to self-employment tax is church employee income, see instructions. Also see instructions for the definition of church employee income. A If you are a minister, member of a religious order, or Christian Science practitioner and you filed Form 4361, but you had 400 or more of other net earnings from self-employment, check here and continue with Part I...... 1a Net farm profit or (loss) from Schedule F, line 34, and farm partnerships, Schedule K-1 (Form 1065), box 14, code A. Note: Skip lines 1a and 1b if you use the farm optional method (see instructions) 1a b If you received social security retirement or disability benefits, enter the amount of Conservation Reserve Program payments included on Schedule F, line 4b, or listed on Schedule K-1 (Form 1065), box 20, code AH 1b ( ) 2 Net profit or (loss) from Schedule C, line 31; Schedule C-EZ, line 3; Schedule K-1 (Form 1065), box 14, code A (other than farming); and Schedule K-1 (Form 1065-B), box 9, code J1. Ministers and members of religious orders, see instructions for types of income to report on this line. See instructions for other income to report. Note: Skip this line if you use the nonfarm optional method (see instructions).................... 2 3 Combine lines 1a, 1b, and 2...................... 3 4 a If line 3 is more than zero, multiply line 3 by 92.35% (0.9235). Otherwise, enter amount from line 3 4a Note: If line 4a is less than 400 due to Conservation Reserve Program payments on line 1b, see instructions. b If you elect one or both of the optional methods, enter the total of lines 15 and 17 here.. 4b c Combine lines 4a and 4b. If less than 400, stop; you don't owe self-employment tax. Exception: If less than 400 and you had church employee income, enter -0- and continue 4c 5 a Enter your church employee income from Form W-2. See instructions for definition of church employee income... 5a b Multiply line 5a by 92.35% (0.9235). If less than 100, enter -0-.......... 5b 6 Add lines 4c and 5b........................ 6 7 Maximum amount of combined wages and self-employment earnings subject to social security tax or the 6.2% portion of the 7.65% railroad retirement (tier 1) tax for 2018...... 7 8 a Total social security wages and tips (total of boxes 3 and 7 on Form(s) W-2) and railroad retirement (tier 1) compensation. If 128,400 or more, skip lines 8b through 10, and go to line 11 8a b Unreported tips subject to social security tax (from Form 4137, line 10) 8b c Wages subject to social security tax (from Form 8919, line 10) 8c d Add lines 8a, 8b, and 8c....................... 8d 9 Subtract line 8d from line 7. If zero or less, enter -0- here and on line 10 and go to line 11. 9 10 Multiply the smaller of line 6 or line 9 by 12.4% (0.124)............. 10 11 Multiply line 6 by 2.9% (0.029)..................... 11 12 Self-employment tax. Add lines 10 and 11. Enter here and on Schedule 4 (Form 1040), line 57, or Form 1040NR, line 55..................... 12 13 Deduction for one-half of self-employment tax. Multiply line 12 by 50% (0.50). Enter the result here and on Schedule 1 (Form 1040), line 27, or Form 1040NR, line 27. 13 214 Part II Optional Methods To Figure Net Earnings (see instructions) Farm Optional Method. You may use this method only if (a) your gross farm income 1 wasn't more than 7,920, or (b) your net farm profits 2 were less than 5,717. 14 Maximum income for optional methods.................. 14 15 Enter the smaller of: two-thirds ( 2 /3) of gross farm income 1 (not less than zero) or 5,280. Also include this amount on line 4b above................... 15 Nonfarm Optional Method. You may use this method only if (a) your net nonfarm profits 3 were less than 5,717 and also less than 72.189% of your gross nonfarm income, 4 and (b) you had net earnings from self-employment of at least 400 in 2 of the prior 3 years. Caution: You may use this method no more than five times. 16 Subtract line 15 from line 14...................... 16 17 Enter the smaller of: two-thirds ( 2 /3) of gross nonfarm income 4 (not less than zero) or the amount on line 16. Also include this amount on line 4b above........... 17 3032 3032 2800 2800 2800 128,400 00 128400 347 81 428 5,280 00 1 From Sch. F, line 9, and Sch. K-1 (Form 1065), box 14, code B. 2 From Sch. F, line 34, and Sch. K-1 (Form 1065), box 14, code A minus the amount you would have entered on line 1b had you not used the optional method. QNA 3 From Sch. C, line 31; Sch. C-EZ, line 3; Sch. K-1 (Form 1065), box 14, code A; and Sch. K-1 (Form 1065-B), box 9, code J1. 4 From Sch. C, line 7; Sch. C-EZ, line 1; Sch. K-1 (Form 1065), box 14, code C; and Sch. K-1 (Form 1065-B), box 9, code J2. Schedule SE (Form 1040) 2018 Item 12: Form 8962, page 2 TRAINING PRACTICE PROBLEMS 2019 81

TAKE HOME TAX RETURNS: MAURICE BROOKS AND RAY BRANCH **** SUPPORTING NOTES FOR SCHEDULE C 621-00-1212 RAYMOND BRANCH *** FILE COPY ONLY -- DO NOT MAIL *** ---------------------------------------- Schedule of Gross Receipts or Sales: Description Amount 1099-K FROM FLASHRIDE 9,900 CASH TIPS 2,000 Total Gross Receipts or Sales: 11,900 ---------------------------------------- Schedule of Materials & Supplies: Description Amount BOTTLED WATER 150 COUGH DROPS 60 HOLIDAY CANDY 30 LITTLE PINE TREE DEODERIZERS 15 Total Materials & Supplies: 255 Item 13: Supporting Notes for Schedule C 82 TRAINING PRACTICE PROBLEMS 2019

4. Carmen Garcia OBJECTIVES 1: Taxpayer has an Individual Taxpayer Identification Number (ITIN). 2: Child Tax Credit and Credit for Other Dependents 3: The children have health insurance while Carmen is eligible to claim a health coverage exemption. 4: Federal refund is directly deposited into Carmen s checking account. TRAINING PRACTICE PROBLEMS 2019 83 83

TAKE HOME TAX RETURNS: CARMEN GARCIA MARCH 1, 2007 AUGUST 8, 1981 CARMEN C. GARCIA 9022 E. 2ND STREET APT 3B CHICAGO, IL 60608 917-00-XXXX CARMEN CONSTANZA GARCIA AUGUST 8, 1981 Item 5: ITIN Letter for Carmen Garcia 84 TRAINING PRACTICE PROBLEMS 2019

TAKE HOME TAX RETURNS: CARMEN GARCIA MARCH 1, 2007 JUNE 6, 2006 MARTIN GARCIA C/O CARMEN C. GARCIA 9022 E. 2ND STREET APT 3B CHICAGO, IL 60608 918-00-XXXX MARTIN MATEO GARCIA JUNE 6, 2006 Item 6: ITIN Letter for Martin Garcia TRAINING PRACTICE PROBLEMS 2019 85

TAKE HOME TAX RETURNS: CARMEN GARCIA 212-00-XXXX SEBASTIAN GARCIA Sebastian Garcia Carmen C. Garcia 9022 E. 2 nd Street Apt 3B Chicago, IL 60608 20 4545 Central Bank Chicago, IL 60601 MEMO 107000178 765432 4545 Item 1: Social Security Card and Check 86 TRAINING PRACTICE PROBLEMS 2019

TAKE HOME TAX RETURNS: CARMEN GARCIA Item 2: Intake Documents 13614-C, page 1 TRAINING PRACTICE PROBLEMS 2019 87

TAKE HOME TAX RETURNS: CARMEN GARCIA Item 2: Intake Documents 13614-C, page 2 88 TRAINING PRACTICE PROBLEMS 2019

TAKE HOME TAX RETURNS: CARMEN GARCIA Item 2: Intake Documents 13614-C, page 3 TRAINING PRACTICE PROBLEMS 2019 89