Question

David Miller (age 34) and his wife, Emily Miller (age 33), reside at 293 E. Main Street in Sterling, MA, 01564 with their two children whom they fully support: Catherine (age 13) and Michael (age 11).
During the year, Emily worked full-time as a customer service representative at a
local bank and earned $37,600. Her employer withheld the following from her
wages:
Federal income tax $2,250.00
State income tax 1,124.60
Social security tax 2,331.20
Medicare tax 545.20
ROTH IRA contribution 5,500.00
David attended college full-time for 5 months and part-time (at least half time) for
7 months in pursuit of a bachelor’s degree in accounting. He attended the
University of Massachusetts, which is located at 600 University Drive in Amherst,
MA 01003. David received a tax-free scholarship that paid for most of his college
expenses, however, he did pay $900 for tuition and fees. The college did not send
David a Form 1098-T for these payments, however, he does have documentation
to substantiate his expenditures. This will be the first year that David has claimed
any education credits; he does not have any other degrees.
The Millers had other income consisting of the following:
Interest on CDs at Platinum Savings Bank $600
Municipal bond interest (state of MA) $2,000
Qualified

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How many qualifying dependents do the taxpayers have?
Which filing status should the taxpayers use?
What is the amount of wages that the taxpayers should report on Form 1040?
What is the amount of taxable interest that the taxpayers should report on Form 1040?
What is the amount of tax-exempt interest that the taxpayers should report on Form 1040?
What is the amount of qualified dividends that the taxpayers should report on Form 1040?
What is the tax rate that should be applied to those qualified dividends?
What is the amount of the AGI?
What is the amount of the basic standard deduction?
What is the amount of the additional standard deduction?
What is the amount of taxable income that the taxpayers have?
What is their tax liability?
Child and dependent care credit
Do the taxpayers qualify for the child and dependent care credit?
If yes, complete the following questions. If no, skip to Education credits.
Amount of qualifying expenses eligible for credit?
Applicable percentage (from table)
Amount of child and dependent care credit that can be taken
Education credits
Do the taxpayers qualify for any education credits?
If yes, complete the following questions. If no, skip to Retirement Savings Contribution credit.
Which education credit do the taxpayers qualify for?
Amount of non-refundable education credit that can be taken
Amount of refundable education credit that can be taken
Retirement Savings Contribution Credit
Do the taxpayers qualify for the Retirement Savings Contribution credit?
If yes, complete the following questions. If no, skip to Child Tax credit.
Amount of contribution eligible for credit
Applicable percentage (from table)
Amount of retirement savings contribution credit that can be taken
Child Tax Credit (non-refundable)
Do the taxpayers qualify for the Child Tax credit?
If yes, complete the following questions. If no, skip to Additional Child Tax credit.
Number of qualifying children?
Amount of initial credit?
Amount of non-refundable child tax credit that can be taken
Additional child tax credit
Do the taxpayers qualify for the Additional Child Tax credit?
If yes, complete the following questions. If no, skip to Earned Income credit.
Amount remaining after non-refundable credit is taken?
IRS limit for refundable portion?
15% of earned income above $2,500?
Amount of refundable child tax credit that can be taken
Earned income credit
Does the taxpayer qualify for the earned income credit?
If yes, complete the following question. If no, skip to Additional amount due (or refund amount)
Amount of earned income credit that can be taken
Additional amount due (or refund amount)
Amount of federal income tax withheld
Will the taxpayer be getting a refund, or do they owe additional tax?
What is the amount?

Answer 1