Comprehensive Problem 2-2A Terry and Maria Redlin have been married for eight years. Terry is an oil rig maintenance supervisor for Holyann Corporation and Maria works as a cashier for Mynards. Terry's birthdate is February 21, 1990, and Maria's is December 30, 1992. Terry and Maria have a 9-year-old son named Jaime Redlin, born on 3/22/2014 (Social Security number 721-34-1134). Terry and Maria's earnings are reported each of their W-2 Form (see separate tab). Terry took advantage of his employer-provided dependent care assistance program on a small number of days when Jaime was sick and unable to go to school. The value of dependent care assistance was $600. Once each week, Terry is required to work at the site of an oil drilling rig for a 24-hour period to provide on-call maintenance on the rig. On those days, Holyann requires Terry to stay in an apartment building that sits on the oil rig site. Because different maintenance workers stay each night, the building has a cook and dining room that prepares meals for the crew. All crew members must take their meals in the dining room when staying the night. The value of the lodging provided to Terry is $6,000 and the value of the meals provided to Terry is $750. Maria frequently takes advantage of the 10-percent employee discount on merchandise from Mynards. The discount is available to all employees of Mynards and the company still makes a small profit on the items after the discount. Maria estimates her employee discounts in 2023 total $780. Terry and Maria have investment income from a money market account and U.S. Treasury bonds, and municipal bonds as reported on the following Form 1099-INT and brokerage statements (see attached tab). Terry has an ex-wife named Judy Redlin. Pursuant to their January 27, 2016, divorce decree, Terry pays her $200 per month in alimony. All payments were made on time in 2023. Judy's Social Security number is 566-74-8765. During 2023, Terry was in the hospital for a successful operation. His health insurance company reimbursed Terry $4,732 for all of his hospital and doctor bills. In June 2023, 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 South Dakota lottery ticket on impulse during 2023. Her ticket was lucky and she won $1,000. The winning amount was paid to Maria in November 2023, with no income tax withheld. Maria is pursuing a Masters of Business Administration from Lakes Region University. Mynards operates an employee assistance plan that she takes full advantage of. She is also the beneficiary of the $1,000 Mynards Adult Learner Scholarship. All of the scholarship is used to pay for tuition and books. Terry and Maria are eligible for a $2,000 child tax credit in 2023. Required: Complete the Redlin's federal tax return for 2023 on Form 1040, Schedule B, Qualified Dividends and Capital Gains Tax worksheet, and Schedule 1. Form 8812 for the child tax credit does not need to be completed. The Redlin's had health care coverage the entire year. They do not want to make a contribution to the presidential election campaign. Make any other realistic assumptions about any missing data. If an amount box does not require an entry or the amount is zero, enter "0". Enter amounts as positive numbers. If required, round amounts to the nearest dollar. Terry and Maria's earnings are reported on the following Forms W-2: a Employee's social security number Safe, accurate, Visit the IRS website at OMB No. 1545-0008 432-21-2253 FAST! Use IRS e ~ file www.irs.gov/efile b Employer identification number (EIN) 1 Wages, tips, other compensation 2 Federal income tax withheld 21-5432117 45,230.00 5,088.41 Employer's name, address, and ZIP code Social security wages 4 Social security tax withheld Holyann Corporation 46,500.00 2,883.00 800 21st Street SW 5 Medicare wages and tips Medicare tax withheld Watertown, SD 57201 46,500.00 574.25 7 al security tips 8 Allocated tips d Control number 9 10 Dependent care benefits 600.00 e Employee's first name and Last name Suff. 11 Nonqualified plans 12a See instructions for box 12 initial C Terry Redlin 1300 33rd Street SE D 1,270.00 d Watertown, SD 57201 13 Statutory Retirement Third-party 12b employee plan sick pay C 0 0 X DD 8,900.00 d 14 Other 12c FSA Health C $3,050.00 120 C O Employee's address and ZIP code 15 State Employer's 16 State wages, tips, etc. 17 State income tax 18 Local wages, tips, etc. 19 Local income tax 20 Locality name state ID number SD Department of the Treasury-Internal Revenue Service W-2 Wage and Tax Statement 2023Wage and Tax Department of the Treasury-Internal Revenue Service Form W-2 Statement 2023 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 Safe, accurate, Visit the IRS website at OMB No. 1545-0008 FAST! Use IRS e ~ file 444-65-8801 www.irs.gov/efile b Employer identification number (EIN) 1 Wages, tips, other compensation 2 Federal income tax withheld 23-3333123 33,750.00 2,680.00 c Employer's name, address, and ZIP code 3 Social security wages 4 Social security tax withheld Mynards 33,750.00 2,092.50 1200 9th Ave SE, 5 Medicare wages and tips 6 Medicare tax withheld Watertown, SD 57201 33,750.00 489.38 7 Social security tips 8 Allocated tips d Control number 9 10 Dependent care benefits e Employee's first name and initial Last name Suff. 11 Nonqualified plans 12a See instructions for box 12 Maria Redlin 1300 33rd Street SE Watertown, SD 57201 13 Statutory Retirement Third-party 12b employee plan sick pay 0 0 0 14 Other 12 Educ Asst Plan C $5,250.00 12d f Employee's address and ZIP code 15 State Employer's 16 State wages, tips, etc. 17 State income tax 18 Local wages, tips, etc. 19 Local income tax 20 Locality name SD state ID numberTerry and Maria's Form 1099-INT and 2022 Combined Forms 1099 Terry and Maria have interest income as reported on the following 1099-INT: 0 CORRECTED (if checked) PAYER'S name, street address, city or town, state or province, country, ZIP or Payer's RTN (optional) OMB No. 1545-0117 foreign postal code, and telephone no. Form 1099-INT Interest Big Western Bank 426 5th St SE (Rev. January 2022) Income Watertown, SD 57201 1 Interest income For calendar year 20@ $ 801.88 2 Early withdrawal penalty PAYER'S TIN RECIPIENT'S TIN 3 Interest on U.S. Savings Bonds and Treas. Copy B obligations 34-8121888 444-65-8801 $ For Recipient 4 Federal income tax | 5 Investment expenses RECIPIENT'S name . i withheld $ Maria Redlin This is important tax information and is being Foreign tax paid 7 Foreign country or U.S. | hished to the IRS. If Street address (including apt. no.) possession you are required to file a 1300 33rd Street SE return, a negligence Tax-exempt interest | 9 Specified private penalty or other City or town, state or province, country, and ZIP or foreign postal code activity bond interest sanction may be Watertown, SD 57201 $ imposed on you if this income is taxable and the IRS determines that FATCA filing it has not been requirement reported. 10 Market discount 11 Bond premium 12 Bond premium on | 13 Bond premium on |:| Treasury obligations tax-exempt bond $ $ Account number (see instructions) 14 Tax-exempt and 15 State| 16 State 17 State tax withheld tax credit bond CUSIP identification $ no. no. Form 1099-INT (keep for your records) www.irs.gov/Form1099INT Department of the Treasury - Internal Revenue Service 2023 Combined Forms 1099 This is important tax information and is being furnished to the IRS (except as indicated). 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 the IRS determines that it has not been reported Friar Tuck Investments 38 Wall Street, 8th Floor New York, NY 10005 Terry and Maria Redlin 1300 33rd Street SE Watertown, SD 57201 Form 1099-INT Interest Income Box 1 Interest income Box 2 Early withdrawal penalty Copy B for Recipient OMB No. 1545-0110 Account Number Tax ID 4500881661 *axokX.2253 Payer's Federal Tax ID 33-1357246 Financial Adviser/Phone May Marion 888-555-1212 Box 3 interest on U.S Savings Bonds and Treasury obligations Box 4 Federal income tax withheld Box 5 [nvestment interest Box 6 Fareign Tax Paid Box 7 Foreign country or U.S. possession Box 8 Tax-exempt interest Box 9 Specified private activity bond interest Box 10 Market Discount Bond Premium Box 12 Bond Premium on Treasury obligations Box 11 Bond premium on tax-exempt bond Form 1099-DIV Dividend Income Box 1a Total Ordinary dividends Box 1b Qualified dividends Box 2a Total capital gain distr. 1,200.00 1,200.00 60.00 Box 2b Unrecap Sec 1250 gain Box 2c Sec 1202 gain Box 2d Collectibles (28%) gain Box 2e Section 897 ordinary dividends Box 2f Section 897 captial gain Box 3 Nondividend distributions Box 4 Federal income tax withheld Box 5 Section 199A dividends Box 6 Investment expenses Box 7 Foregin taxes paid Box 8 Foregin country of possession Box 9 Cash liquidation distributions Form Department of the Treasury-Internal Revenue Service 1040 U.S. Individual Income Tax Return 2023 OMB No. 1545-0074 IRS Use Only For the year Jan. 1-Dec. 31, 2023, or other tax year beginning ----....... ; 2023, ending --........ ; 20 See separate instructions. Your first name and middle initial Last name Your social security number Terry Redlin 432-21-2253 If joint return, spouse's first name and middle initial Last name Spouse's social security number Maria Redlin 444-65-8801 Home address (number and street). If you have a P.O. box, see instructions. Apt. no. Presidential Election Campaign 1300 33rd Street SE Check here if you, or your spouse if filing jointly, want $3 to go to this City, town, or post office. If you have a foreign address, also complete spaces below. State ZIP code fund. Checking a box below will not Watertown SD 57201 change your tax or refund. Foreign country name Foreign province/state/county Foreign postal code Filing Status At any time during 2023, did you: (a) receive (as a reward, award, or payment for property or Digital services); or (b) sell, exchange, or otherwise dispose of a digital asset (or a financial interest in Assets a digital asset)? (See instructions. ) . . .... . . . . . . . . . . . . . . . . . . . . . . Standard Someone can claim: Deduction You: Age/ Blindness Spouse: Dependents (see instructions) : (2) Social security (3) Relationship (4) Check the box if qualifies for (see instructions): If more than four (1) First name Last name number to you Child tax credit Credit for other dependents dependents, see Jaime Redlin 721-34-1134 Son instructions and check here O Income 1a Total amount from Form(s) W-2, box 1 (see instructions) . .. 1a b Household employee wages not reported on Form(s) W-2 . 1b Attach Form(s) c Tip income not reported on line la (see instructions) . . 1c W-2 here. Also attach Forms d Medicaid waiver payments not reported on Form(s) W-2 (see instructions) . . . . 1d W-2G and e Taxable dependent care benefits from Form 2441, line 26 . . . . . 1e 1099-R if tax was withheld. f Employer-provided adoption benefits from Form 8839, line 29 . . . . . . 1f g Wages from Form 8919, line 6 . . . . . . . . . . . . . 1g If you did not h Other earned income (see instructions) . . . . . . . . . . 1h get a Form i Nontaxable combat pay election (see instructions) . . . 1i W-2, see instructions. z Add lines la through 1h . . . . . . . . . 1z Attach Sch. B if 2a Tax-exempt interest . . . 2a b Taxable interest . . . 2b required 3a Qualified dividends . . . . 3a b Ordinary dividends . . . . . . . 3b 4a IRA distributions . . . . . 4a b Taxable amount . . . . . . . . . 4b Standard 5a Pensions and annuities 5a b Taxable amount . . . . . . . . . 5b Deduction for- 6a Social security benefits 6a b Taxable amount . . . . . . . . 6b Single or Married filing c If you elect to use the lump-sum election method, check here (see instructions) . . . . . separately, $13,850 7 Capital gain or (loss). Attach Schedule D if required. If not required, check here . . . . . x 7 . Married filing 8 Additional income from Schedule 1, line 10 . . 8 jointly or Qualifying 9 Add lines 1z, 2b, 3b, 4b, 5b, 6b, 7, and 8. This is your total income . surviving spouse, 10 Adjustments to income from Schedule 1, line 26 . . . 10 $27,700 Head of 11 Subtract line 10 from line 9. This is your adjusted gross income . . . . . 11 household, $20,800 12 Standard deduction or itemized deductions (from Schedule A) . . . . . . . . . 12SCHEDULE 1 OMB No. 1545-0074 (Form 1040) Additional Income and Adjustments to Income 2023 Department of the Treasury Attach to Form 1040, 1040-SR, or 1040-NR. Attachment Internal Revenue Service Go to www.irs.gov/Form1040 for instructions and the latest information. Sequence No. 01 Name(s) shown on Form 1040, 1040-SR, or 1040-NR Your social security number Terry and Maria Redlin 469-21-5523 Part I Additional Income Taxable refunds, credits, or offsets of state and local income taxes . . 1 2a Alimony received . . 2a b Date of original divorce or separation agreement (see instructions) : 3 Business income or (loss). Attach Schedule C . . . . . . . . . . . . . . 3 4 Other gains or (losses). Attach Form 4797 . . . . . . . . 4 Rental real estate, royalties, partnerships, S corporations, trusts, etc. Attach Schedule E . . . . . . . . . . . . 5 Farm income or (loss). Attach Schedule F . . . . . . . . . 6 7 Unemployment compensation . . . . . . . . . . . . . . 7 8 Other income: a Net operating loss . . 8a b Gambling . . . . . . . 8b c Cancellation of debt . . 8c d Foreign earned income exclusion from Form 2555 . . . . . 8d e Income from Form 8853 . . . . . . f Income from Form 8889 . . . . 8f g Alaska Permanent Fund dividends . .. . . . 8g h Jury duty pay . . . 8h i Prizes and awards . . . . . 8i j Activity not engaged in for profit income 8j k Stock options . .. 8k I Income from the rental of personal property if you engaged in the rental for profit but were not in the business of renting such property . . . 81 m Olympic and Paralympic medals and USOC prize money (see instructions) . . . . . . 8m n Section 951(a) inclusion (see instructions) . . . . . . . . . . 8n o Section 951A(a) inclusion (see instructions) . . . . .. . . . . . 80 p Section 461(1) excess business loss adjustment . . . . 8p q Taxable distributions from an ABLE account (see instructions) . . . . 8q r Scholarship and fellowship grants not reported on Form W-2 .. 8r Nontaxable amount of Medicaid waiver payments included on Form 1040, line 1a or Id . . . .. 8s Pension or annuity from a nonqualifed deferred compensation plan or a nongovernmental section 457 plan . . . . . . . 8t u Wages earned while incarcerated . . . . 8u z Other income. List type and amount: 8z 9 Total other income. Add lines 8a through 8z . . . . . . . . . . . . . . . 9 10 Combine lines 1 through 7 and 9. This is your additional income. Enter here and on Form 1040, 1040-SR, or 1040-NR, line 8 . . . .. . . . . . . . . . . . . 10 For Paperwork Reduction Act Notice, see your tax return instructions. Cat. No. 71479F Schedule 1 (Form 1040) 2023Terry and Maria Redlin Qualified Dividends and Capital Gain Tax Worksheet-Line 16 Keep for Your Records Before you begin: See the earlier instructions for line 16 to see if you can use this worksheet to figure your tax. Before completing this worksheet, complete Form 1040 or 1040-SR through line 15. If you don't have to file Schedule D and you received capital gain distributions, be sure you checked the box on Form 1040 or 1040-SR, line 7. 1. Enter the amount from Form 1040 or 1040-SR, line 15. However, if you are filing Form 2555 (relating to foreign earned income), enter the amount from line 3 of the Foreign Earned Income Tax Worksheet . .. . . . . . . . . . . . . . 1. 2. Enter the amount from Form 1040 or 1040-SR, line 3a* . . . . 2 . 3. Are you filing Schedule D?* D Yes Enter the smaller of line 15 or 16 of Schedule D. If either line 15 or 16 is blank or a loss, enter -0-. } 3 . 60 X NO Enter the amount from Form 1040 or 1040-SR, line 7. 4. Add lines 2 and 3 . . . . . . . . 4. 5. Subtract line 4 from line 1. If zero or less, enter -0-. . . . .. ... . . . . . . . . . . . . .. 5 6. Enter: $44,625 if single or married filing separately, $89,250 if married filing jointly or qualifying widow(er), . . . . . . . . . . . . . . 6 $59,750 if head of household. 7. Enter the smaller of line 1 or line 6 . . 7 8. Enter the smaller of line 5 or line 7 . . . 8 9. Subtract line 8 from line 7. This amount is taxed at 0% . . . 9 10. Enter the smaller of line 1 or line 4 . 10. 11. Enter the amount from line 9 . 11. 12. Subtract line 11 from line 10 . . . .. . . . . . . . . . . . 12. 13. Enter: $492,300 if single, $276,900 if married filing separately, . . . . . . . . . . . . . 13. $553,850 if married filing jointly or qualifying widow(er), $523,050 if head of household. 14. Enter the smaller of line 1 or line 13 . . .. 14. 15. Add lines 5 and 9 . . 15. 16. Subtract line 15 from line 14. If zero or less, enter -0- 16. 17. Enter the smaller of line 12 or line 16 . . . . . . . . . . . . 17. 18. Multiply line 17 by 15% (0.15) . .. . 18. 19. Add lines 9 and 17 . 19. 20. Subtract line 19 from line 10 . . . . 20. 21. Multiply line 20 by 20% (0.20) . .. . . . . . . 21. 22. Figure the tax on the amount on line 5. If the amount on line 5 is less than $100,000, use the Tax Table to figure the tax. If the amount on line 5 is $100,000 or more, use the Tax Computation Worksheet . . . 22. 23. Add lines 18, 21, and 22 . . 23. 24. Figure the tax on the amount on line 1. If the amount on line 1 is less than $100,000, use the Tax Table to figure the tax. If the amount on line 1 is $100,000 or more, use the Tax Computation Worksheet . . . 24. 25. Tax on all taxable income. Enter the smaller of line 23 or 24. Also include this amount on the entry space on Form 1040 or 1040-SR, line 16. If you are filing Form 2555, don't enter this amount on the entry space on Form 1040 or 1040-SR, line 16. Instead, enter it on line 4 of the Foreign Earned Income Tax Worksheet . . . . . . . . . . 25. * If you are filing Form 2555, see the footnote in the Foreign Earned Income Tax Worksheet before completing this line