Unique Circumstances

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Southern New Hampshire University *

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350

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Accounting

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Apr 3, 2024

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Volunteer Income Tax Assist/ACC-350 4-3 Assignment: Unique Circumstances Southern New Hampshire University March 29, 2024 Victoria Klaskey

Scenario A First question, which discusses Chris, is the first example of a unique occurrence. She is a woman, and she is married to George, however George left their home in February 2022. It is important to note, though, that despite George's official relocation out of the residence, they are still together. Chris hasn't spoken to George since her husband departed, and they do have a kid, Mary, who is nine years old. Chris will submit Mary's income taxes for 2022 and list her as a dependent. Chris got $36,200 in wages in addition to $50 in interest. Chris was also unemployed for the entire year and was compensated with eighteen hundred dollars in unemployment benefits. Mary received more than half of Chris's support, and he also covered all of the house's maintenance expenses. Chris and Mary both have genuine social security numbers and spent the full year in the United States. The fact that Chris is married and that her spouse George moved out of the house, but they are still together legally, would be unusual. Because of this, she would be able to file as head of household and be eligible for the earned income tax credit because her income is deemed low to moderate for a person with a kid. In California, where dwellings are permitted, unemployment benefits are excluded from state income tax; elsewhere, the money received for unemployment is considered taxable income. Even if her spouse, George, filed with itemized deductions, she would still be eligible to take the standard deduction for filing as head of household. She would be eligible for earned income credit in addition to dependent care benefits. She would have to consider the possibility, nevertheless, that the Internal Revenue Service may reduce her tax rate because of the events that transpired in 2022.

When we examine Chris' particular situation, we can see that, although she is married to George, he has been absent from her life for a while. But since they have never been formal separation proceedings, Chris would be impacted if George filed erroneously. George would have to file as the head of the home even if he is married and filing separately. Additionally, according to Lake, if both parents file as heads of household and meet the requirements for the child tax credit on their income tax returns, this might trigger an alert for the parent who files second, which could result in the Internal Revenue Service rejecting their return. It should be noted that both parents may be chosen to participate in the auditing procedure. Although a great deal of information is provided, this scenario also leaves out certain important details. When George files his taxes, will he be claiming his child? What details will he need to claim his kid if he decides to claim Mary? Chris will have to present evidence for both the upkeep of her home and her assertion that she provides more than half of her child's care. Based on the facts provided, I can state that Chris is eligible to file her return as a head of household, that her unemployment income would be taxable, and that her unemployment income would qualify her for the earned income tax credit. She will need to record the fifty dollars she earned in interest on her return as income. However, because such tax credits require supporting evidence, investigation will need to be done to get the necessary documents to demonstrate proof that she provided more than half of the support for her kid and for the upkeep of the house. Such corroborating evidence would demonstrate her eligibility for the child tax credit. Furthermore, I'll consult Internal Revenue Service Publication number 4012 to find out what other benefits she might be eligible for, including Income Schedules K-1 and rentals. I'll also figure out what expenses Chris paid for, like mortgage interest, property taxes, and rental expenses, to see if she

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qualifies for any additional credits. The exam that would declare her child to be a qualified child would then need to be addressed. Scenario B The second scenario concerns a person by the name of Jenny. Jenny is a fifty-seven-year-old woman with a current Social Security number. She made fifty-two thousand dollars a year and was enrolled in an insurance program for the entire year called a high deductible health plan (HDHP), under which she was solely covered. Throughout the year, she added two thousand dollars to her own health savings account, and her mother added one thousand dollars to Jenny's health savings account as well. Upon examination of Jenny's W-2, however, we discovered that she had a code of W in box 12. Additionally, she provided us with Form 5498-SA, which displays the sum of $3,625 in box two. The distributions she made from her health savings account to cover costs for which she was not compensated are listed below: $240 for a gym membership, $40 for over-the-counter medication, Replacement Crown: $1,500 in value, $200 worth of prescription medication, $900 worth of unpaid medical bills and Eight Physical Therapy Visits after Knee Surgery: $400 Jenny has a high deductible health plan and a health savings account, which makes her situation special. Considering this, Mathur and Kellen (2017) argue that she will require Forms 5498-SA and 8889 to report contributions to and withdrawals from the health savings accounts. If she fails to submit the Form 8889, she will be prohibited from deducting any amounts from the contributions she made to her health savings account. Jenny provided three thousand forty dollars in unreimbursed eligible medical charges. Although a $240 gym charge was reported, the item is not permitted as it is seen as a personal expense. But if she could demonstrate that the

gym membership was required as part of her treatment for the knee surgery, which would only mean paying the membership dues to the gym, those costs might be written off as non-taxable income if she can show proof from her medical provider. Additionally, this material would serve as the necessary supporting documentation for that specific exception. Overall, the information provided is extremely simple to understand and direct. She doesn't disclose to us if she lives with her mother, whether she has any dependents, or whether she is filing jointly, which may be a role in her mother's contribution to her daughter's health savings account. She may be considered head of household even if we already know that she is single if her mother resides with her. It is also stated that she has contributions to her health savings account and that paycheck payments totaling $650 are made for her health savings account. Forms 8889 & 5498-SA would need to be completed, which would involve research. The ideal source to go for the answers to fill out the papers for the customer would be Internal Revenue Service Publication 4012, I, the part on Other Taxes. The two circumstances are very different from one another. In the first scenario, we looked at Chris's information and the documents and further information she would need to determine her eligibility for any additional tax credits. The customer in scenario two has a health savings account in addition to a high deductible health plan. She needed to file Forms 5489-SA & 8889 to take advantage of the tax savings associated with that. Furthermore, we were able to inform her that a doctor's note would be required for her to be eligible for the gym membership cost, since it is typically not considered.

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