Spring 2023 Case Summary & Instructions

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School

San Jose State University *

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189

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Accounting

Date

Apr 3, 2024

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Uploaded by AdmiralGoat599

SPRING 2023 Original Case developed by Michaele L. Morrow - Suffolk University & Shane R. Stinson - The University of Alabama 1 Mr. and Mrs. Smith: A Student Introduction to Federal Tax Compliance, Preparation and Documentation Summary : In this case, students, individually or in a group, assume the role of new accounting staff tasked with the preparation of a personal federal income tax return and supporting documentation for a client of their firm. To complete the project, students submit questions based on the initial information provided, meet with the client, and submit a completed federal income tax return for the senior’s review that includes a time- log, a carryforward memo for next year’s return preparation team . This project adds client interaction to the traditional tax compliance case to reinforce both the technical and communication skills valued in professional practice, including the formulation of questions for the client that allows students to practice discussing technical topics in a non-technical manner and underscores the required balance between attitudes of client advocacy stressed in professional tax practice and legal requirements for ‘‘good - faith’’ tax return reporting. Introduction and Background Scott and Kourtney Smith have been clients of Footem and Fillem, LLP (F&F) for the past few years. F&F's EIN is 77-8268593. Their phone number is 806-798-1936 and each staff has a PIN as preparer of P00382575. Scott owns a real estate business, Smith Realty, which he operates as a sole proprietorship. Kourtney is an elementary school teacher. The couple has also received investment income in recent years, including royalties from an oil and gas property. F&F is a CPA firm that provides tax and assurance services. To ensure quality in all services, the firm has established best practices for staff, seniors, and partners to follow when providing services to both tax and assurance clients. The senior accountant (“senior”) performs a preliminary review of information provided by the client (commonly referred to as ‘‘PBC’’ materials), and this information is forwarded to a team of staff accountants (“staff team”) for further review. The staff can request two (2) meetings with the senior to ask any questions about the client and suggest any additional information that might be necessary to request from the client to complete the current year tax return. The senior either answers the staff team’s questions directly or approves questions to be asked of the client. This best practice was established to ensure that client interactions are always useful and productive. After the staff team has submitted their list of questions , they will “ meet ” with the client ask their questions and gather additional information. This meeting is an important time for the staff team to develop client interaction skills, particularly in conveying technical information in a non-technical manner. The information from the client meeting allows the staff team to complete the tax return, which is then delivered to the senior along a time log of the time spent, and a carryforward memo detailing key information from the current year for next year’s staff team . As a staff accountant for F&F, you are assigned individually (if that is your choice) or with other staff accountants (a team of up to 3) to prepare a personal income tax return and supporting schedules, forms, statements, and documentation for Mr. and Mrs. Smith for the current tax year (2022 in this case, labeled ‘‘CY’’) in accordance with the firm’s best practices described above. You will be provided with prior year (2020 in this case, labeled ‘‘PY’’) case file. To complete the case, your team will generate questions based on the initial information provided, meet face-to-face with the clients, and submit a completed CY federal income tax return for the senior’s review that includes a time - log, a carryforward memo for next year’s return preparation team. This case requires a heightened level of critical thinking and reinforces both the technical and communication skills valued in professional practice. The development of questions for the client will

SPRING 2023 Original Case developed by Michaele L. Morrow - Suffolk University & Shane R. Stinson - The University of Alabama 2 allow you to practice discussing technical topics in a non-technical way and to understand the required balance between attitudes of client advocacy stressed in professional tax practice and legal requirements for ‘‘good - faith’’ tax return reporting. Details about the case assignment are provided below and in the supporting materials. Requirements Task 1 : Review current and prior year information; begin preparation of the tax return. Your first task in this project is to familiarize yourself with the clients and their file in order to prepare the current year tax return. This will require your review and understanding of different documents uploaded to Canvas from your senior, as discussed below: Student Handouts for Project Uploaded to Canvas Student Handout 1: 2023 Letter from Client – a letter from Kourtney Smith about some of their major life events this year Student Handout 2: 2022 PBC Tax Documents – Forms received by the client from various third-parties that provide details for the specific type of transaction the client(s) experienced during 2022. Student Handout 3: 2022 PBC Tax Information – Smith Realty’s income statement and a listing of clients’ personal expenses Student Handout 4: 2022 Carryforward Memo to 2023 – memo from last year lists issues that arose during the 2021 engagement for the preparation of the 2021 federal income tax return. Student Handout 5: Time Log Template Student Handout 6: Tax Return Project Team Member Evaluation A review of the above listed items should help you begin preparing the 2022 tax return and workpapers. It should also help you generate any questions about any additional documentation needed or whether certain items that applied in the prior year still apply this year. Please prepare as much of the 2022 tax return as you can with the information provided and make a list of questions for your senior and/or the client. Each team member will upload the list to Canvas via Assignments to begin Task 2. Note that you will only have one opportunity to meet with the client during Task 2, so you should try to be extremely thorough in Task 1. As you prepare this year’s return, include only the following forms and schedules, all of which can be found at http://www.irs.gov: • Form 1040 • Schedules 1, 2, and 3 • Schedules A, B, C, D, E, and SE • Form 2441 Child Dependent Credit • Form 3800 GBC • Form 8582 Passive Activity Losses • Form 8936 Qualified Plug-In Electric Drive Motor Vehicle Credit, • Form 8949 Sale of Capital Assets • Form 8995 QBI SIMPLIFIED • Form 8879 E Form Signatures Task 2 : Senior Meeting – Class on Wednesday, March 22, 2023 The second task for this project is to meet with the senior to discuss any questions you many have before meeting with the clients, Scott and Kourtney Smith. You might have questions about the engagement in general, client information that might be missing, and/or clarification of information

SPRING 2023 Original Case developed by Michaele L. Morrow - Suffolk University & Shane R. Stinson - The University of Alabama 3 initially provided by the client. Your senior will answer any questions that he/she can before your client meeting but not answer questions for the client. Any questions for the client directly must be submitted via Canvas assignments on the due date in the syllabus before the client meeting. Task 3 : Client Meeting – Class on Monday, April 10. 2023 Next, you have one meeting with the client to ask questions and request information. Keep in mind that you are not allowed to ask any question not approved by your senior so make sure that your list of questions is comprehensive. Remember that you are representing F&F in this meeting, so be sure to smile and introduce yourself, greet the client in a respectful way, and keep all interactions professional. Make sure to thank them at the end of the meeting. Task 4 : Prepare the tax return, carryforward memo, time log, and your staff team evaluations. Upload all documents to Canvas by Monday, May 15, 2023. The carryforward memo for the engagement file is to assist the staff team who prepares next year’s tax return for Scott and Kourtney Smith. Refer to last year’s carryforward memo for help with formatting and content and note that two primary goals of the memo are to (1) document items that were particularly challenging and/or unusual compared to the prior year and (2) provide details of any items that were excluded and/or phased out when preparing the current year return. A time log summarizes of the total time spent per staff working on the client’s tax return and carryforward memo. In practice, public accounting staff must keep a log of the time spent on each task so that the firm knows how much to bill its clients. Your team will need to create a log of all hours spent working on these clients. If team members jointly complete a task, then the hours spent on that task should only be counted once. Case Learning Objectives The overarching goal of the Mr. and Mrs. Smith case is to expand classroom tax education by illustrating to students how class topics translate to the preparation of a tax return and work papers for an actual client. The case has five specific learning objectives: 1. Think critically in the context of individual taxation. 2. Interact with team members, superiors, and clients in preparation for a professional career. 3. Prepare professional quality documentation, specifically time log, tax return and accompanying statements and a carryforward memo, in the context of tax return preparation. 4. Ask questions of superiors and clients to identify missing information and to better understand specific individual tax problems. 5. Apply tax rules and principles through preparation of an individual tax return and supporting schedules. Student Roles for Task 1 For Task 1, each student team should first review the case instructions, background materials, as well as the prior year return before beginning an initial draft of the current year return. You use the initial set of current year PBC documentation supplied in the Tax Return Project Canvas Module to work through as much of the Smiths’ 1040 as they can to compile a list of items that are either missing or require further discussion with the senior or client. Student Roles for Task 2 For Task 2, the instructor (playing the role of senior) will meet with all students during class to discuss any items and issues about the project. After this task, the students should prepare and upload a list of CLIENT questions that each team plans on asking during the client meeting. Student Roles for Task 3

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SPRING 2023 Original Case developed by Michaele L. Morrow - Suffolk University & Shane R. Stinson - The University of Alabama 4 For Task 3, the instructor (playing the role of the client) will meet with all students during class to answer any questions, which may lead to more information from the client. After this meeting, students should have information necessary to prepare the project. Student Roles for Task 4 For Task 4, students should prepare and finalize the tax return, forms, accompanying schedules and statements, time log, team member evaluations, and carryforward memo. EACH STUDENT MUST UPLOAD ALL REQUIRED DOCUMENTS TO CANVAS or no points will be awarded.

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