Question

Molly and Mark are wife and husband and earned salaries this year of $12,000 and $64,000, respectively. In addition to their salaries, they received interest of $350 from municipal bonds and $500 from corporate bonds. Mark and Molly also paid $2,500 of qualifying moving expenses, and Marc paid alimony to a prior spouse in the amount of $1,500. Mark and Molly have a 10-year-old son, Matt, who lived with them throughout the entire year. Thus, Marc and Michelle are allowed to claim a $1,000 child tax credit for Matt. Mark and Molly paid $6,000 of expenditures that qualify as itemized deductions and they had a total of $5,500 in federal income taxes withheld from their paychecks during the course of the year.

The year of tax return is 2019.

1. What is Molly and Mark’s gross income?
2. What is Molly and Mark’s adjusted gross income?
3. What is the total amount of Molly and Mark’s deductions from AGI?
4. What is Molly and Mark’s taxable income?
5. What is Molly and Mark’s taxes payable or refund due for the year (use the tax rate schedules)?
6. Complete the first two pages of Molly and Mark’s Form 1040 (download forms from the IRS website).

Answer 1

SOLUTION

1) and 2) Gross income And AGI

Molly Salary	64000
Mark's salary	12000
Interest on corporate bonds	500
Gross Income		76500
Less:
Moving expenses	-2500
Alimony	-1500
Total expenses		-4000
AGI		72500

3) I have taken the deductions for the year 2019

Standard deduction	12700
Itemised deduction	6000
Greater of a and b		12700
Personal and dependancy exemption	4050 * 3	12150
Total deductions		24850

4) Taxable income = AGI - Total deductions = 72500 - 24850 = 47,650

5) Tax liability using 2017 rates

10%*18650 + 15%*(47650 - 18650) = 6,215

Less: Federal tax 0f 5500 and child tax credit = 1000 = 6,500

Tax refund due for the year 2017 = 6500-6215 = $485