Comprehensive Problem 2-2A Ray and Maria Gomez have been married for 3 years. Ray is a propane salesman for Palm Oil Corporation and Maria works as a city clerk for the City of McAllen. Ray's birthdate is February 21, 1992 and Maria's is December 30, 1994. Ray and Maria each received a W-2 from their respective employers (see separate tab). Ray and Maria have interest income from McAllen State Bank which is reported a 1099-INT form (see separate tab). In addition, they own U.S. Savings bonds (Series EE). The bonds had a value of $10,000 January 1, 2020, and their value is $10,700 on December 31, 2020. They have not made an election with respect to these bonds. Ray has an ex-wife named Judy Gomez. Pursuant to their January 27, 2015 (pre-2019) divorce decree, Ray pays her $450 per month in alimony. All payments were made on time in 2020. Judy's Social Security number is 566-74-8765. During 2020, Ray was in the hospital for a successful operation. His health insurance company reimbursed Ray $4,732 for all of his hospital and doctor bills. In June 2020, Maria's father died. Under a life insurance policy owned and paid for by her father, Maria was paid death benefits of $25,000. She used $7,800 to cover a portion of the funeral costs for her father. Maria bought a Texas lottery ticket on impulse during 2020. Her ticket was lucky and she won $4,432. The winning amount was paid to Maria in November 2020, with no income tax withheld. Palm Oil Corporation provides Ray with a company car to drive while he is working. The Corporation spent $5,000 to maintain this vehicle during 2020. Ray never uses the car for personal purposes. Ray and Maria received a $2,400 EIP in 2020. Ray and Maria's earnings are reported on the following Forms W-2: Safe, accurate, Visit the IRS website at a Employee's social security number 469-21-5523 OMB No. 1545-0008 IRS en file FAST! Use www.irs.gov/efile b Employer identification number (EIN) 21-7654321 1 Wages, tips, other compensation 30,660.00 2 Federal income tax withheld 2,996.00 4 3 Social security wages 30,660.00 Social security tax withheld 1,900.92 C Employer's name, address, and ZIP code Palm Oil Corporation 11134 E. Pecan Blvd. McAllen, TX 78501 6 5 Medicare wages and tips 30,660.00 7 Social security tips Medicare tax withheld 444.57 8 Allocated tips Copy B-To Be Filed With Employee's FEDERAL Tax Return This information is being furnished to the Internal Revenue Service. a Employee's social security number 444-65-9912 OMB No. 1545-0008 Safe, accurate, FAST! Use IRS e n file Visit the IRS website at www.irs.gov/efile 2 b Employer identification number (EIN) 23-4444321 1 Wages, tips, other compensation 32,500.00 Federal income tax withheld 2,654.00 4 3 Social security wages 32,500.00 Social security tax withheld 2,015.00 C Employer's name, address, and ZIP code City of McAllen 1300 W. Houston Ave. McAllen, TX 78501 6 5 Medicare wages and tips 32,500.00 Medicare tax withheld 471.25 7 Social security tips 8 Allocated tips Ray and Maria have interest income as reported on the following 1099-INT: O CORRECTED (if checked) OMB No. 1545-0112 PAYER'S name, street address, city or town, state or province, country, ZIP or Payer's RTN (optional) foreign postal code, and telephone no. 2020 Interest Income 1 Interest income McAllen State Bank 3302 N. 10th Street McAllen, TX 78501 $ 147.12 Form 1099-INT 2 Early withdrawal penalty PAYER'S TIN RECIPIENT'S TIN 3 Interest on U.S. Savings Bonds and Treas. obligations Copy B 34-7657651 444-65-9912 For Recipient 5 Investment expenses RECIPIENT'S name Maria Gomez 4 Federal income tax withheld $ 6 Foreign tax paid 7 Foreign country or U.S. possession Street address (including apt. no.) 1610 Quince Avenue This is important tax information and is being furnished to the IRS. If you are required to file a return, a negligence penalty or other sanction may be imposed on you if this income is taxable and 8 Tax-exempt interest City or town, state or province, country, and ZIP or foreign postal code McAllen, TX 78701 9 Specified private activity bond interest $ Mint Hi- 11 nantART Form Department of the Treasury-Internal Revenue Service (99) 1040 U.S. Individual Income Tax Return 2020 OMB No. 1545-0074 IRS Use Only Filing Status Married filing jointly Last name Your first name and middle initial Ray Gomez If joint return, spouse's first name and middle initial Maria Last name Gomez Apt. no. Home address (number and street). If you have a P.O. box, see instructions. 1610 Quince Avenue City, town, or post office. If you have a foreign address, also complete State spaces below TX McAllen Your social security number 469-21-5523 Spouse's social security number 444-65-9912 Presidential Election Campaign Check here if you, or your spouse if filing jointly, want $3 to go to this fund. Checking a box below will not change your tax or refund. ZIP code 78701 Foreign country name Foreign province/state/country Foreign postal code At any time during 2020, did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency? No Standard Someone can claim: You as a dependent X Deduction You: Age/Blindness Spouse: X (see instructions): Dependents If more than four (2) Social security (3) Relationship number to you (4) / if qualifies for (see instructions): Child tax credit Credit for other dependents (1) First name Last name Wages, salaries, tips, etc. Attach Form(s) W-2 1 1 63,160 Attach Sch. B if required. 2a Tax-exempt interest .. 2a b Taxable interest . , 2b 147.12 x 3a Qualified dividends .... 3a b Ordinary dividends 3b 4a IRA distributions .... 4a b Taxable amount 4b 5a Pensions and annuities 5a d Taxable amount 5b 6b 6a Social security benefits b Taxable amount Capital gain or loss). Attach Schedule D if required. If not required, check here ... 7 7 Other income from Schedule 1, line 9 8 8 34,164 X Add lines 1, 2b, 3b, 45, 56, 66, 7, and 8. This is your total income 9 9 Standard Deduction for- Single or Married filing separately, $12,400 Married filing jointly or Qualifying widow(er), $24,800 Head of household, $18,650 If you checked any box under Standard Deduction, see instructions. 10 Adjustments to income: a From Schedule 1, line 22 10a b Charitable contributions if you take the standard deduction. See instructions 10b Add lines 10a and 10b. These are your total adjustments to income.. C 10c Subtract line 10c from line 9. This is your adjusted gross income 11 11 Standard deduction or itemized deductions (from Schedule A) 12 12 Qualified business income deduction. Attach Form 8995 or Form 8995-A....... 13 13 Add lines 12 and 13 14 14 Taxable income. Subtract line 14 from line 11. If zero or less, enter -0- 15 15 For Disclosure, Privacy Act, and Paperwork Reduction Act Notice, see separate instructions. Cat. No. 11320B Form 1040 (2020) Form 1040 (2020) Ray Gomez 555-94-9358 Page 2 Tax (see instructions). Check if any from Form(s): 1 0 8814 2 0 4972 30 16 16 Amount from Schedule 2, line 3 17 17 Add lines 16 and 17 18 18 X Child tax credit or credit for other dependents 19 19 Amount from Schedule 3, line 7 20 20 Add lines 19 and 20. 21 21 Subtract line 21 from line 18. If zero or less, enter -0- 22 22 Other taxes, including self-employment tax, from Schedule 2, line 10 23 23 RUU ITE'S ZZ GITU 29. s Is Your Ludi taxi 24 24 > Federal income tax withheld from: ... 25 Form(s) W-2.. a 25a b Form(s) 1099 25b C Other forms (see instructions) 250 Add lines 25a through 25c... d 250 2020 estimated tax payments and amount applied from 2019 return 26 26 If you have a qualifying child, attach Sch. EIC. 27 Earned income credit (EIC) 27 Additional child tax credit. Attach Schedule 8812 28 28 If you have nontaxable combat pay, see instructions. American opportunity credit from Form 8863, line 8 29 29 Recovery rebate credit. See instructions 30 30 Amount from Schedule 3, line 13 31 31 32 Add lines 27 through 31. These are your total other payments and refundable credits .. 32 33 Add lines 250, 26, and 32. These are your total payments 33 overpaid 34 35a Amount of line 34 you want refunded to you. If Form 8888 is attached, check here 35a Direct deposit? b Routing number c Type: : Checking O Savings See instructions. d Account number 36 Amount of line 34 you want applied to your 2021 estimated tax ... 36 Subtract line 33 from line 24. This is the amount you owe now 37 37 Amount You Owe For details on how to pay, see instructions Note: Schedule H and Schedule SE filers, line 37 may not represent all of the taxes you owe for 2020. See Schedule 3, line 12e, and its instructions for details. Estimated tax penalty (see instructions). 38 38 Do you want to allow another person to discuss this return with the IRS? See instructions. Third Party Designee o Yes. Complete below. o No Designee's name Phone no. Personal identification number (PIN) Sign Here Under penalties of perjury, I declare that I have examined this return and accompanying schedules and statements, and to the best of my knowledge and belief, they are true, correct, and complete. Declaration of preparer (other than taxpayer) is based on all information of which preparer has any knowledge. Your signature Date Your occupation If the IRS sent you an Identity Protection PIN, enter it here Joint return? 6 Farm income or (loss). Attach Schedule F 6 7 Unemployment compensation 7 8 Other income. List type and amount Lottery winnings X 8 4,432 X 9 Combine lines 1 through 8. Enter here and on Form 1040, 1040-SR, or 1040-NR, line 8 9 X Part II Adjustments to Income 10 Educator expenses... 10 11 Certain business expenses of reservists, performing artists, and fee-basis government officials. Attach Form 2106 11 12 Health savings account deduction. Attach Form 8889 12 13 Moving expenses for members of the Armed Forces. Attach Form 3903 13 14 Deductible part of self-employment tax. Attach Schedule SE 14 15 15 Self-employed SEP, SIMPLE, and qualified plans. 16 Self-employed health insurance deduction 16 17 Penalty on early withdrawal of savings. 17 18a Alimony paid. 18a b Recipient's SSN. Date of original divorce or separation agreement (see instructions) 19 IRA deduction 19 20 Student loan interest deduction 20 21 21 Tuition and fees deduction. Attach Form 8917 ... 22 Add lines 10 through 21. These are your adjustments to income. Enter here and on Form 1040 or 1040- SR, or 1040-NR, line 10a ....... 22 Comprehensive Problem 2-2A Ray and Maria Gomez have been married for 3 years. Ray is a propane salesman for Palm Oil Corporation and Maria works as a city clerk for the City of McAllen. Ray's birthdate is February 21, 1992 and Maria's is December 30, 1994. Ray and Maria each received a W-2 from their respective employers (see separate tab). Ray and Maria have interest income from McAllen State Bank which is reported a 1099-INT form (see separate tab). In addition, they own U.S. Savings bonds (Series EE). The bonds had a value of $10,000 January 1, 2020, and their value is $10,700 on December 31, 2020. They have not made an election with respect to these bonds. Ray has an ex-wife named Judy Gomez. Pursuant to their January 27, 2015 (pre-2019) divorce decree, Ray pays her $450 per month in alimony. All payments were made on time in 2020. Judy's Social Security number is 566-74-8765. During 2020, Ray was in the hospital for a successful operation. His health insurance company reimbursed Ray $4,732 for all of his hospital and doctor bills. In June 2020, Maria's father died. Under a life insurance policy owned and paid for by her father, Maria was paid death benefits of $25,000. She used $7,800 to cover a portion of the funeral costs for her father. Maria bought a Texas lottery ticket on impulse during 2020. Her ticket was lucky and she won $4,432. The winning amount was paid to Maria in November 2020, with no income tax withheld. Palm Oil Corporation provides Ray with a company car to drive while he is working. The Corporation spent $5,000 to maintain this vehicle during 2020. Ray never uses the car for personal purposes. Ray and Maria received a $2,400 EIP in 2020. Ray and Maria's earnings are reported on the following Forms W-2: Safe, accurate, Visit the IRS website at a Employee's social security number 469-21-5523 OMB No. 1545-0008 IRS en file FAST! Use www.irs.gov/efile b Employer identification number (EIN) 21-7654321 1 Wages, tips, other compensation 30,660.00 2 Federal income tax withheld 2,996.00 4 3 Social security wages 30,660.00 Social security tax withheld 1,900.92 C Employer's name, address, and ZIP code Palm Oil Corporation 11134 E. Pecan Blvd. McAllen, TX 78501 6 5 Medicare wages and tips 30,660.00 7 Social security tips Medicare tax withheld 444.57 8 Allocated tips Copy B-To Be Filed With Employee's FEDERAL Tax Return This information is being furnished to the Internal Revenue Service. a Employee's social security number 444-65-9912 OMB No. 1545-0008 Safe, accurate, FAST! Use IRS e n file Visit the IRS website at www.irs.gov/efile 2 b Employer identification number (EIN) 23-4444321 1 Wages, tips, other compensation 32,500.00 Federal income tax withheld 2,654.00 4 3 Social security wages 32,500.00 Social security tax withheld 2,015.00 C Employer's name, address, and ZIP code City of McAllen 1300 W. Houston Ave. McAllen, TX 78501 6 5 Medicare wages and tips 32,500.00 Medicare tax withheld 471.25 7 Social security tips 8 Allocated tips Ray and Maria have interest income as reported on the following 1099-INT: O CORRECTED (if checked) OMB No. 1545-0112 PAYER'S name, street address, city or town, state or province, country, ZIP or Payer's RTN (optional) foreign postal code, and telephone no. 2020 Interest Income 1 Interest income McAllen State Bank 3302 N. 10th Street McAllen, TX 78501 $ 147.12 Form 1099-INT 2 Early withdrawal penalty PAYER'S TIN RECIPIENT'S TIN 3 Interest on U.S. Savings Bonds and Treas. obligations Copy B 34-7657651 444-65-9912 For Recipient 5 Investment expenses RECIPIENT'S name Maria Gomez 4 Federal income tax withheld $ 6 Foreign tax paid 7 Foreign country or U.S. possession Street address (including apt. no.) 1610 Quince Avenue This is important tax information and is being furnished to the IRS. If you are required to file a return, a negligence penalty or other sanction may be imposed on you if this income is taxable and 8 Tax-exempt interest City or town, state or province, country, and ZIP or foreign postal code McAllen, TX 78701 9 Specified private activity bond interest $ Mint Hi- 11 nantART Form Department of the Treasury-Internal Revenue Service (99) 1040 U.S. Individual Income Tax Return 2020 OMB No. 1545-0074 IRS Use Only Filing Status Married filing jointly Last name Your first name and middle initial Ray Gomez If joint return, spouse's first name and middle initial Maria Last name Gomez Apt. no. Home address (number and street). If you have a P.O. box, see instructions. 1610 Quince Avenue City, town, or post office. If you have a foreign address, also complete State spaces below TX McAllen Your social security number 469-21-5523 Spouse's social security number 444-65-9912 Presidential Election Campaign Check here if you, or your spouse if filing jointly, want $3 to go to this fund. Checking a box below will not change your tax or refund. ZIP code 78701 Foreign country name Foreign province/state/country Foreign postal code At any time during 2020, did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency? No Standard Someone can claim: You as a dependent X Deduction You: Age/Blindness Spouse: X (see instructions): Dependents If more than four (2) Social security (3) Relationship number to you (4) / if qualifies for (see instructions): Child tax credit Credit for other dependents (1) First name Last name Wages, salaries, tips, etc. Attach Form(s) W-2 1 1 63,160 Attach Sch. B if required. 2a Tax-exempt interest .. 2a b Taxable interest . , 2b 147.12 x 3a Qualified dividends .... 3a b Ordinary dividends 3b 4a IRA distributions .... 4a b Taxable amount 4b 5a Pensions and annuities 5a d Taxable amount 5b 6b 6a Social security benefits b Taxable amount Capital gain or loss). Attach Schedule D if required. If not required, check here ... 7 7 Other income from Schedule 1, line 9 8 8 34,164 X Add lines 1, 2b, 3b, 45, 56, 66, 7, and 8. This is your total income 9 9 Standard Deduction for- Single or Married filing separately, $12,400 Married filing jointly or Qualifying widow(er), $24,800 Head of household, $18,650 If you checked any box under Standard Deduction, see instructions. 10 Adjustments to income: a From Schedule 1, line 22 10a b Charitable contributions if you take the standard deduction. See instructions 10b Add lines 10a and 10b. These are your total adjustments to income.. C 10c Subtract line 10c from line 9. This is your adjusted gross income 11 11 Standard deduction or itemized deductions (from Schedule A) 12 12 Qualified business income deduction. Attach Form 8995 or Form 8995-A....... 13 13 Add lines 12 and 13 14 14 Taxable income. Subtract line 14 from line 11. If zero or less, enter -0- 15 15 For Disclosure, Privacy Act, and Paperwork Reduction Act Notice, see separate instructions. Cat. No. 11320B Form 1040 (2020) Form 1040 (2020) Ray Gomez 555-94-9358 Page 2 Tax (see instructions). Check if any from Form(s): 1 0 8814 2 0 4972 30 16 16 Amount from Schedule 2, line 3 17 17 Add lines 16 and 17 18 18 X Child tax credit or credit for other dependents 19 19 Amount from Schedule 3, line 7 20 20 Add lines 19 and 20. 21 21 Subtract line 21 from line 18. If zero or less, enter -0- 22 22 Other taxes, including self-employment tax, from Schedule 2, line 10 23 23 RUU ITE'S ZZ GITU 29. s Is Your Ludi taxi 24 24 > Federal income tax withheld from: ... 25 Form(s) W-2.. a 25a b Form(s) 1099 25b C Other forms (see instructions) 250 Add lines 25a through 25c... d 250 2020 estimated tax payments and amount applied from 2019 return 26 26 If you have a qualifying child, attach Sch. EIC. 27 Earned income credit (EIC) 27 Additional child tax credit. Attach Schedule 8812 28 28 If you have nontaxable combat pay, see instructions. American opportunity credit from Form 8863, line 8 29 29 Recovery rebate credit. See instructions 30 30 Amount from Schedule 3, line 13 31 31 32 Add lines 27 through 31. These are your total other payments and refundable credits .. 32 33 Add lines 250, 26, and 32. These are your total payments 33 overpaid 34 35a Amount of line 34 you want refunded to you. If Form 8888 is attached, check here 35a Direct deposit? b Routing number c Type: : Checking O Savings See instructions. d Account number 36 Amount of line 34 you want applied to your 2021 estimated tax ... 36 Subtract line 33 from line 24. This is the amount you owe now 37 37 Amount You Owe For details on how to pay, see instructions Note: Schedule H and Schedule SE filers, line 37 may not represent all of the taxes you owe for 2020. See Schedule 3, line 12e, and its instructions for details. Estimated tax penalty (see instructions). 38 38 Do you want to allow another person to discuss this return with the IRS? See instructions. Third Party Designee o Yes. Complete below. o No Designee's name Phone no. Personal identification number (PIN) Sign Here Under penalties of perjury, I declare that I have examined this return and accompanying schedules and statements, and to the best of my knowledge and belief, they are true, correct, and complete. Declaration of preparer (other than taxpayer) is based on all information of which preparer has any knowledge. Your signature Date Your occupation If the IRS sent you an Identity Protection PIN, enter it here Joint return? 6 Farm income or (loss). Attach Schedule F 6 7 Unemployment compensation 7 8 Other income. List type and amount Lottery winnings X 8 4,432 X 9 Combine lines 1 through 8. Enter here and on Form 1040, 1040-SR, or 1040-NR, line 8 9 X Part II Adjustments to Income 10 Educator expenses... 10 11 Certain business expenses of reservists, performing artists, and fee-basis government officials. Attach Form 2106 11 12 Health savings account deduction. Attach Form 8889 12 13 Moving expenses for members of the Armed Forces. Attach Form 3903 13 14 Deductible part of self-employment tax. Attach Schedule SE 14 15 15 Self-employed SEP, SIMPLE, and qualified plans. 16 Self-employed health insurance deduction 16 17 Penalty on early withdrawal of savings. 17 18a Alimony paid. 18a b Recipient's SSN. Date of original divorce or separation agreement (see instructions) 19 IRA deduction 19 20 Student loan interest deduction 20 21 21 Tuition and fees deduction. Attach Form 8917 ... 22 Add lines 10 through 21. These are your adjustments to income. Enter here and on Form 1040 or 1040- SR, or 1040-NR, line 10a ....... 22