Question

Prepare them using the necessary forms/schedules using the IRS website (IRS.gov) and go to the “Forms and Publications link. Use the 2019 forms since the 2020 forms are not yet available. (Note because of this both returns are for tax year 2019 and not 2020, including appropriate amounts).

1) Lance H. and Wanda B. Dean are married and live at 431 Yucca Drive, Santa Fe, NM 87501. Lance works for the Convention Bureau of the local Chamber of Commerce, while Wanda is employed part-time as a paralegal for a law firm.

During 2019 the Deans recorded the following receipts:

Salaries

       Lance                                              $60,000

       Wanda                                             41,000

Interest income:

       City of Albuquerque Revenue Bonds                    1,000

       Ford Motor Company Bonds                           1,100

       Ally Bank Certificate of deposit                        400

Child support payments from John Allen                     7,200

Annual gifts from parents                             26,000

Settlement from Roadrunner Touring Company        90,000

Lottery winnings                                         600

Federal income tax refund for tax year 2018                   400

Wanda was previously married to John Allen. When they divorced in 2013, Wanda was awarded custody of their two children, Penny and Kyle. (Note: Wanda has never issued a Form 8332 Waiver). Under the divorce decree, John was obligated to pay alimony and child support. The alimony payments were to terminate if Wanda remarried.

In July, while going to lunch in downtown Santa Fe, Wanda was injured by a tour bus. As the bus driver was clearly at fault, the owner of the bus, Roadrunner Touring Co. paid her medical expenses, including a one week stay in the hospital. To avoid a lawsuit Roadrunner also transferred $90,000 cash in settlement of personal injuries she sustained.

The Deans made the following expenditures in 2019:

Medical expenses not covered by insurance                     $7,200

Taxes:

       Property taxes                                        3,600

       New Mexico State income taxes (includes

              amounts withheld from wages in 2019)       4,200

Interest on home mortgage                                  6,000

Contribution to charities                              3,600

Life insurance premiums on Lance’s life                   1,200

Contribution to traditional IRA (for Wanda)                    5,000

Traffic fines                                                300

Contribution to the reelection campaign of the

      Mayor of Santa Fe                                               500

Funeral expenses for Wayne Boyle                           6,300

       The life insurance policy was taken out by Lance several years ago and designates Wanda as the beneficiary. As a part-time employee, Wanda is excluded from coverage under her employer’s pension plan. Consequently, she provides for her own retirement with a traditional IRA at a local trust company. Because the mayor is a member of the local chamber of commerce, Lance felt compelled to make the political contribution.

      

The Dean household includes the following, for whom they provide more than half of the support.

               Name                       Soc. Sec. #                    Birth Date

       Lance Dean (age 42)               123-45-6786              12/16/1977

Wanda Dean (age 40)                123-45-6787              08/08/1979

Penny Allen (Age 19)                123-45-6788              10/09/2000

Kyle Allen (age 16)                   123-45-6789              05/03/2003

Wayne Dean (age 75)                123-45-6785              06/15/1944

       Penny graduated from high school on May 10, 2019 and is undecided about college. This year she earned $8,500 (placed in a savings account) playing a harp in the lobby of a local hotel. Wayne is Wanda’s widower father who died on December 20, 2019. For the past few years, Wayne qualified as a dependent of the Deans.

      

Federal income tax withheld was $3,900 for Lance and $1,800 for Wanda. The proper amount of Social Security and Medicare tax was withheld.

      

Determine the 2019 Federal income tax for the Deans, who file a joint return, by completing all appropriate forms. They do not own and did not use any virtual currency during the year. Neither wants to contribute to the Presidential Election Campaign Fund. If they overpaid their taxes they want that amount refunded to them.

Answer 1

Salaries. = 101000

Interest(after tds) = 1550

Dividend(after tds) = 950

Gift from parents. = exempt

Compensation from road

Runner company. = 90000

Lottery( after 30% tds) = 420

It refund. =400

Total. =194320

Deduction:

Interest on home mortgage. =(6000)

Chruch pledge. =(3600)

Life insurance premiume. =(1200)

Contribution to ira. =(5000)

Contribution to reelection fund=(500)

Net income. =178020

Note:

1) withheld tax should be deducted from tax payable determind.

2) penny income from her ability so it should not be clubbed with her parents income.