Assessment 1 Instructions: Tax Basics

• Analyze official rules and instructions to determine an individual’s tax liability and complete a basic tax return.
  Note: Completing a tax return requires specific steps that need to be executed in a sequence. The assessments in this course are presented in a sequence and must be completed in order. Incorrect entries in this assessment will result in incorrect entries in future assessments. Do not complete Assessment 2 until you have submitted and received faculty feedback for Assessment 1.
  Introduction
  Using an official primary source to obtain answers to tax questions is an essential academic skill and step toward financial literacy. In this assessment you will consult the primary sources available to all citizens from the IRS to identify rules such as the age limit of a dependent child, the amount of earnings that trigger a filing requirement, and whether or not tax software is necessary to purchase for every return.
  Note: The assessments in this course are presented in a sequence and must be completed in order. Do not proceed to Assessment 2 until you have submitted and received faculty feedback for Assessment 1.
  Preparation
  This assessment has two parts.
  
  • Part 1: Submit a Word document in which you analyze official rules and instructions to determine an individual’s tax liability.
  • Part 2: Submit a completed basic tax form.
  • Scenario
    Read the following scenario before beginning the assessment. Then complete the two parts below.
    Your relatives, Jacob and Taylor Weaver, have asked for your help in completing their tax return because they know you took an income tax course at Capella. You caution them that while you plan on eventuallybecoming an accountant, you are no expert. You agree to informally assist them with basic information gleaned from the IRS Web site. At least you know how to find information.
    John Weaver, Jacob and Taylor’s son, is a 17-year-old high school graduate, lives at home, and works part-time at a service station, saving money for college. In 2021, he earned $5,242.00, as reported on his W-2 form. Federal taxes withheld were $940; state taxes withheld were $179.
    He does not know his filing status, or if he even has to file a tax return. He is covered by his parents’ health insurance. His father thinks he can claim John as a dependent. John has no other income. John’s Social Security number is 123-45-6789. His address is 1234 Happy Lane, Happytown, MN 50000.
    Instructions
    Part 1: Provide evidence of requirements for John’s tax return from an official primary resource.
    Use IRS.gov and the IRS Interactive Tax Assistant and Tax Trails tools to find answers to the following tax questions. Copy and paste answers to these questions from the IRS resources into a Word document for submission.
  • What is John’s filing status?
  • Is John required to file a tax return? Determine requirements for mandatory filing of a return.
  • Is John a dependent?
  • What is the simplest tax form to use for John? Use information from an official primary source to select a tax form.
  • How much would John have to pay to file his return electronically?
  • Part 2: Complete John’s tax return.
  • Download the most appropriate form from IRS.gov and complete a tax return for John. Show all calculations in the Word document. 
    • Analyze official rules, instructions, and tax tables to determine the tax owed.
    • Analyze official rules, instructions, and tax tables to determine the amount of a refund.
  • Competencies Measured
    By successfully completing this assessment, you will demonstrate your proficiency in the following course competencies and assessment criteria:
  • Competency 1: Analyze the background of the federal income tax system. 
    • Provide evidence of requirements for a tax return from an official primary source.
    • Determine whether filing a return is mandatory for a scenario.
    • Determine filing status.
    • Determine filing cost for an e-return.
  • Competency 2: Analyze the basics of individual income tax return preparation. 
    • Analyze official rules, instructions, and tax tables to determine the tax owed.
    • Analyze official rules, instructions, and tax tables to determine the amount of a refund.
  • Competency 4: Communicate in a manner that is professional and consistent with expectations for members of the business professions. 
    • Communicate in a manner that is professional and consistent with expectations for members of the business professions.

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