Comprehensive Problem. Andy and Marcia Tufts, both age 35, are married with two

Question

Comprehensive Problem. Andy and Marcia Tufts, both age 35, are married with two dependent children and file a joint return. Assume the children do not qualify for the child tax credit (Ch. 9). From the following information, compute their tax owed or refund due for 2018.

1) Prepare a 2018 Form 1040 and Schedule A for Andy and Marcia Tufts (assume the Tufts are choosing to itemize deductions)

Additional Facts:

Name            SS #               Address
Andy Tufts       123-45-6789    123 Main Street, Cincinnati, Ohio 45202
Marcia Tufts    234-56-7890     123 Main Street, Cincinnati, Ohio 45202

Ignore the children names and SS#s on the first page of form 1040.

Ignore child tax credit on line 12 of form 1040 (2018 draft).

No need to fill out Schedule 1 for IRA contribution deduction.

All dividends are ordinary dividends, not qualified dividends. Ignore line 20 and 21 on 1040 form

Andy's salary Federal income tax withheld Marcia's salary Federal income tax withheld Andy's contribution to an IRA (assume IRA is deductible for AGI) Dividends received from domestic corporations Medical expenses for doctors and hospitals Premiums for health insurance Prescription drugs and medicines Eyeglasses for one of the children Interest on home mortgage Interest on credit cards Real property taxes on residence State income taxes Fee for preparation of tax returns Union dues and subscriptions $50,000 4,000 42,000 5,000 2,000 950 8,200 2,600 800 175 12,800 300 6,300 5,800 125 480

Explanation / Answer

income total = $92,000

Minus AGI deduction

for AGI $2000

Plus Dividends $950

AGI = 90,950

Less standard or itemized deduction which is larger

Standard = $11,900

Itemized Schedule A = Medical expense 4200

Health Premiums 2600

Eye glasses 175

Mortgage interest 7800

Real estate taxes 2300

State income taxes 2800

Tax prep fees 125

Union dues 480 = $20,480

90,950- 20,480 = 70,470

Less exemptions of 4 * 3800 = 15,200

Taxable income = $55,270

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