taxation
FORM 1040 TAX YEAR 2019 DATA
THEIR ADDRESS IS 121 COOKE STREET EAST PROVIDENCE, RI 02914.
THOMAS 037-40-1234 PETER 356-87-7411
RITA 698-44-4444 ADDISON 585-41-1189
OTHER INFORMATION:
INCOME:
THOMAS'S SALARY:
TAXABLE WAGES 116,000 GROSS INCOME
FEDERAL INCOME TAX WITHHELD 11,200 TAX PAYMENT
STATE INCOME TAX WITHHELD 3,500 ITEMIZED DEDUCTION
INTEREST INCOME FROM SANTANDER BANK. 2,100 GROSS INCOME
INTEREST INCOME FROM MUNICIPAL BONDS. 3,500 NOT TAXABLE
2,500 GROSS INCOME
10,000 NOT TAXABLE
RITA MADE FOUR QUARTERLY ESTIMATED TAX PAYMENTS OF $300. 1,200 TAX PAYMENT
24,000 GROSS INCOME - REVENUE
DEDUCTIONS:
THESE ARE RITA'S BUSINESS EXPENSES FROM HER CONSULTING BUSINESS:
BUSINESS MEALS EXPENSE 2,000 GROSS INCOME - EXPENSE
OFFICE EXPENSE 600 GROSS INCOME - EXPENSE
TELEPHONE 750 GROSS INCOME - EXPENSE
EQUIPMENT RENTAL 1,200 GROSS INCOME - EXPENSE
INTERNET 500 GROSS INCOME - EXPENSE
ADVERTISING 750 GROSS INCOME - EXPENSE
TRAVEL 1,600 GROSS INCOME - EXPENSE
RENT 4,800 GROSS INCOME - EXPENSE
HOME OFFICE DEDUCTION (SIMPLIFIED METHOD, 300 SQ. FT.) 1,500 GROSS INCOME - EXPENSE
ITEMIZED DEDUCTIONS:
REAL ESTATE TAXES 8,100 ITEMIZED DEDUCTION
AUTOMOBILE TAXES 800 ITEMIZED DEDUCTION
HOME MORTGAGE INTEREST ON $350,000 MORTGAGE 8,300 ITEMIZED DEDUCTION
CASH CHARITABLE CONTRIBUTIONS 700 ITEMIZED DEDUCTION
OUT-OF-POCKET MEDICAL EXPENSES PAID 5,000 ITEMIZED DEDUCTION
RITA CONTRIBUTED TO A TRADITIONAL IRA. 3,000 DEDUCTION BEFORE AGI
RITA IS SELF-EMPLOYED AS A CONSULTANT. SHE USES THE CASH BASIS. THIS IS HER
GROSS RECEIPTS TOTAL.
QUALIFIED DIVIDEND INCOME FROM VANGUARD FUNDS.
RITA RECEIVED A GIFT FROM HER UNCLE FOR HER 40TH BIRTHDAY.
THOMAS AND RITA SMITH ARE MARRIED. THEY ALWAYS FILE A JOINT TAX RETURN.
THEY HAVE TWO CHILDREN. THEIR SON, PETER, IS FOUR YEARS OLD AND THEIR
DAUGHTER, ADDISON, IS 12 YEARS OLD. THOMAS IS 38 AND RITA IS 40. THOMAS IS
A SALESMAN AND RITA IS A CONSULTANT.
THE TWO CHILDREN
QUALIFY FOR THE CHILD
TAX CREDIT.
SOLUTION:
GROSS INCOME
SALARY 116,000
INTEREST INCOME 2,100
DIVIDEND INCOME 2,500
SELF-EMPLOYMENT INCOME 11,300
TOTAL INCOME 131,900
DEDUCTIONS BEFORE AGI
50% SELF-EMPLOYMENT TAX 799
IRA CONTRIBUTION 3,000
(3,799)
ADJUSTED GROSS INCOME (AGI) 128,101
ITEMIZED DEDUCTIONS
MEDICAL 5,000 LIMITED -
TAXES (STATE TAX, REAL ESTATE TAX, CAR TAX) 12,400 LIMITED 10,000
MORTGAGE INTEREST 8,300 8,300
DONATIONS 700 700
TOTAL ITEMIZED DEDUCTIONS 19,000
STANDARD DEDUCTION OR ITEMIZED DEDUCTIONS (HIGHER) (24,400)
QUALIFIED BUSINESS INCOME DEDUCTION [(11,300 SCHEDULE C-799 SE TAX DEDUCTION) X 20%] (2,100)
TAXABLE INCOME 101,601
INCOME TAX CALCULATION
DIVIDEND INCOME (TAX RATE BASED ON TAXABLE INCOME) 2,500 15% 375
FIRST TWO TAX BRACKETS 78,950 10% AND 12% 9,086
MARGINAL TAX BRACKET 20,151 22% 4,433
101,601
GROSS INCOME TAX LIABILITY 13,894
CHILD TAX CREDIT (4,000)
OTHER TAXES (SELF-EMPLOYMENT TAX) 11,300 92.35% 15.3% 1,597
TAX PAYMENTS:
FEDERAL INCOME TAX WITHHELD 11,200
ESTIMATED TAX PAYMENTS 1,200
(12,400)
TAX DUE (REFUND) (909)