80.2K

Verified Solution

Link Copied!

Need help figuring out AGI, Taxable Income, and Tax Refund due. Please incluse steps please. Thanks.

Don Megan Sally Bobby Social Security Number 111-11-1111 222-22-2222 333-33-3333 Date of Birth 7/21/1982 11/16/1986 3/25/2009 02/26/2014 The Draper family resides at 3190 Laurel Farms Road, Murfreesboro, TN 37130. An in-depth interview with Don and Megan, coupled with a review of all their documentation, reveals the following information for the current year: Megan worked throughout the year for Shepard and Associates as a paralegal. Megan's W-2 indicates gross wages of 542,750 and income tax withholding of $8,423. (You may omit the requirement to attach a copy of the W-2 to the tax return.) Don's extensive travel caused him to reconsider his career. He left the employment of asus International as of 1/4/2019 and started his own business doing all types of computer-related work locally. He operates this business as a sole proprietorship (under the business name Quality IT Solutions) from the basement of his home. Don collected revenues of S198,650 and paid the following expenses related to this business: Employee wage expense Payroll tax expense Repairs and maintenance Supplies expense S35,600 7,600 9.654 5.935 All these expenses pass the 12-month rule test for tax recognition in 2019. Additionally. Don fully documented business-related mileage of 1.254 miles that he put on his personal vehicle driving to various job sites. This is a service business, so Don had no cost of goods sold. He also elected to forego any deduction for the business use of his home (i.e. the home office deduction), and he opted to use the standard mileage rate to account for his business transportation expenses rather than his actual costs. (You may omit the requirement to complete Part IV of Schedule C.) Don knew his decision to pursue self-employment had tax consequences, so he came to you earlier in the year to ask for your help. You advised him to make estimated tax payments on Form 1040-ES totaling $30.000 to prepay an estimate of his self- employment and income tax liability. Don followed your advice and made timely estimated tax payments by completing and filing Form 1040-ES throughout 2019. Don and Megan received a Form 1099-INT from Bank of America indicating they earned a total of 5642 in interest income on their joint savings account. The Drapers sold 3000 shares of Quantum Corp stock for S4 per share on January 12. 2019. They originally paid $2.50 per share when they purchased the stock on September 20, 2002. This information was reported to the Drapers on Form 1099-B. Additionally, all information including basis was reported to the IRS. Therefore, Form 8949 is not required. Don occasionally travels to Florida for work. When there, he always goes to the dog track. Don is a habitual loser at the track, but on his last trip, he laid odds on Ping Pong Bounce, a winning greyhound, and collected S2,000 at the track. Don keeps good records from his betting adventures and can support previous losses at the track of $550. The Drapers also received a Form 1098 from Regions Bank indicating they paid a total of S15.261 in home mortgage interest. The loan qualified as acquisition debt, and the average outstanding principal balance of S310,000. They also paid $6.125 in real property taxes on this home and $2,700 interest on personal debt (i.e. a car loan and credit cards). The Drapers gave $8,200 to the American Red Cross for disaster relief. The Red Cross is an organization officially recognized by the IRS as a nonprofit, tax exempt entity. Don and Megan had no liability for Tennessee income tax, but they paid sales tax on all applicable, personal purchases. (Search for the sales tax deduction calculator" on the IRS website, and use it to simplify the calculation of their deductible sales tax. Assume the Drapers had no additional large purchases that were subject to sales tax in 2019.) The Draper family had a total of $15.555 in out-of-pocket medical expenses and 51.600 in tax return preparation fees to Don's CPA. The Drapers paid $3,000 in tuition and fees and 581 for books for Megan to attend classes at a qualified educational institution. Megan is working toward a Master's degree on a part-time basis. Don and Megan paid $2.900 for Sally's care after school and when school was not in session and S6,100 for Bobby's day care. The provider of this care is as follows: Happy Child Daycare (Fed ID # 12-3333333) 565 Greenleaf Lane, Murfreesboro, TN 37130. Additional Notes: Don and Megan have adequate documentation to support each of the aforementioned expenses (except as otherwise noted), and they have no carryforwards from previous years that will impact their return for the current year. Round all amounts presented on the tax return to the nearest dollar and leave the "cents" column blank. Any lines on the tax return that you don't need to use should be left blank - do not enter zeros. These taxpayers have no AMT liability, so you may omit Form 6251. Everyone in the household had health insurance for the entire year. The coverage came through Megan's employer. Don and Megan did not own any foreign bank accounts or investments. If any underpayment of taxes exists, assume that Don and Megan paid in the appropriate percentage based on prior year taxes and are therefore not subject to any underpayment penalties. Don Megan Sally Bobby Social Security Number 111-11-1111 222-22-2222 333-33-3333 Date of Birth 7/21/1982 11/16/1986 3/25/2009 02/26/2014 The Draper family resides at 3190 Laurel Farms Road, Murfreesboro, TN 37130. An in-depth interview with Don and Megan, coupled with a review of all their documentation, reveals the following information for the current year: Megan worked throughout the year for Shepard and Associates as a paralegal. Megan's W-2 indicates gross wages of 542,750 and income tax withholding of $8,423. (You may omit the requirement to attach a copy of the W-2 to the tax return.) Don's extensive travel caused him to reconsider his career. He left the employment of asus International as of 1/4/2019 and started his own business doing all types of computer-related work locally. He operates this business as a sole proprietorship (under the business name Quality IT Solutions) from the basement of his home. Don collected revenues of S198,650 and paid the following expenses related to this business: Employee wage expense Payroll tax expense Repairs and maintenance Supplies expense S35,600 7,600 9.654 5.935 All these expenses pass the 12-month rule test for tax recognition in 2019. Additionally. Don fully documented business-related mileage of 1.254 miles that he put on his personal vehicle driving to various job sites. This is a service business, so Don had no cost of goods sold. He also elected to forego any deduction for the business use of his home (i.e. the home office deduction), and he opted to use the standard mileage rate to account for his business transportation expenses rather than his actual costs. (You may omit the requirement to complete Part IV of Schedule C.) Don knew his decision to pursue self-employment had tax consequences, so he came to you earlier in the year to ask for your help. You advised him to make estimated tax payments on Form 1040-ES totaling $30.000 to prepay an estimate of his self- employment and income tax liability. Don followed your advice and made timely estimated tax payments by completing and filing Form 1040-ES throughout 2019. Don and Megan received a Form 1099-INT from Bank of America indicating they earned a total of 5642 in interest income on their joint savings account. The Drapers sold 3000 shares of Quantum Corp stock for S4 per share on January 12. 2019. They originally paid $2.50 per share when they purchased the stock on September 20, 2002. This information was reported to the Drapers on Form 1099-B. Additionally, all information including basis was reported to the IRS. Therefore, Form 8949 is not required. Don occasionally travels to Florida for work. When there, he always goes to the dog track. Don is a habitual loser at the track, but on his last trip, he laid odds on Ping Pong Bounce, a winning greyhound, and collected S2,000 at the track. Don keeps good records from his betting adventures and can support previous losses at the track of $550. The Drapers also received a Form 1098 from Regions Bank indicating they paid a total of S15.261 in home mortgage interest. The loan qualified as acquisition debt, and the average outstanding principal balance of S310,000. They also paid $6.125 in real property taxes on this home and $2,700 interest on personal debt (i.e. a car loan and credit cards). The Drapers gave $8,200 to the American Red Cross for disaster relief. The Red Cross is an organization officially recognized by the IRS as a nonprofit, tax exempt entity. Don and Megan had no liability for Tennessee income tax, but they paid sales tax on all applicable, personal purchases. (Search for the sales tax deduction calculator" on the IRS website, and use it to simplify the calculation of their deductible sales tax. Assume the Drapers had no additional large purchases that were subject to sales tax in 2019.) The Draper family had a total of $15.555 in out-of-pocket medical expenses and 51.600 in tax return preparation fees to Don's CPA. The Drapers paid $3,000 in tuition and fees and 581 for books for Megan to attend classes at a qualified educational institution. Megan is working toward a Master's degree on a part-time basis. Don and Megan paid $2.900 for Sally's care after school and when school was not in session and S6,100 for Bobby's day care. The provider of this care is as follows: Happy Child Daycare (Fed ID # 12-3333333) 565 Greenleaf Lane, Murfreesboro, TN 37130. Additional Notes: Don and Megan have adequate documentation to support each of the aforementioned expenses (except as otherwise noted), and they have no carryforwards from previous years that will impact their return for the current year. Round all amounts presented on the tax return to the nearest dollar and leave the "cents" column blank. Any lines on the tax return that you don't need to use should be left blank - do not enter zeros. These taxpayers have no AMT liability, so you may omit Form 6251. Everyone in the household had health insurance for the entire year. The coverage came through Megan's employer. Don and Megan did not own any foreign bank accounts or investments. If any underpayment of taxes exists, assume that Don and Megan paid in the appropriate percentage based on prior year taxes and are therefore not subject to any underpayment penalties

Answer & Explanation Solved by verified expert

See Answer