Apply the rules associated with inclusions and exclusions to an individual’s gross income and apply another set of code rules to determine a taxpayer’s AGI.
Note: Completing a tax form 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 previous assessments will result in incorrect entries in future assessments. Do not complete Assessment 3 until you have submitted and received faculty feedback for Assessment 2.
“I don’t know what to do or where to turn in this taxation matter. Somewhere there must be a book that tells all about it, where I could go to straighten it out in my mind. But I don’t know where the book is, and maybe I couldn’t read it if I found it.”— Warren G. Harding, the 29th President of the United States, 1921-1923.
About now, you may be nodding your head in agreement with President Harding’s quote about the complexity of the tax code, with its many inclusions and exclusions. What started out as a simple document, designed to raise capital to make the new nation independent from the British Empire, has evolved over the centuries and decades into a complex maze of rules and regulations.
Nowhere is that more pronounced than in the rules for including and excluding income in the calculation of a taxpayer’s adjusted gross income (AGI) for income tax purposes. Gross income is commonly defined as the amount of a company’s or a person’s income before all reductions, except that which is specifically excluded by the Internal Revenue Code, before taking deductions or taxes into account. Since not all of an individual’s personal income is subject to taxation, one must crack open the voluminous tax codebook to discover exclusions from the tax collector’s grasp.
Understanding the ever-changing rules for including and excluding income in the calculation of a taxpayer’s adjusted gross income (AGI) for income tax purposes is a skill that is developed through practice.
Note: The assessments in this course are presented in a sequence and must be completed in order. In Assessments 2-5, you will work step-by-step toward completing a 1040 tax return and all the necessary related forms, based on a provided scenario. Do not complete Assessment 3 until you have submitted and received faculty feedback for Assessment 2. Incorrect entries in Assessment 2 affect the entries in Assessment 3.
For this assessment, use information and publications from IRS.gov and the other IRS resources linked below to determine the adjusted gross income (AGI) for Jacob and Taylor Weaver, based on the provided scenario:
The primary purpose of the Internal Revenue Service is to raise revenue for the government. However, the U.S. Congress has chosen to exempt certain income from taxation, such as scholarships, gifts, life insurance proceeds, municipal bond interest, and employee fringe benefits.
Jacob and Taylor Weaver, ages 45 and 42 respectively, are married and are filing jointly in 2021.
Complete the following:
By successfully completing this assessment, you will demonstrate your proficiency in the following course competencies and assessment criteria:
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