Federal Taxation I Module 8: Comprehensive Tax Return Project

Jared and Ashley have come to you for help filing their 2018 tax return.

They were married on December 31, 2018 and are both age 40.

They live with their three qualifying children, Nick, Betty, and Roger, who are 12, 14, and 17 years old, respectively.

They have made the following requests:

They wish to file a joint tax return.

If they overpaid their taxes this year, they would like to receive half as a refund and have half applied to next years federal tax return.

Jared and Ashley have the following income items during 2018:

Jareds wages of $50,000

Jareds unemployment compensation of $5,000

Ashleys wages of $60,000

Interest from a city of Chicago bond of $2,000

Interest from a corporate bond of $3,000

Ordinary dividends of $2,000

A $3,000 refund from the State of Illinois for income taxes paid in 2017 Jared and Ashley incurred the following expenses/losses during 2018:

Contributions of $5,500 to each of Jared and Ashleys traditional IRAs, i.e., $11,000 total (they are not covered by any other qualified retirement plans)

Qualified medical expenses of $9,000

Charitable contributions of $4,000

Mortgage interest on the primary residence of $8,000 (mortgage is $200,000)

Property taxes on the primary residence of $6,500

Illinois state and local income taxes paid of $5,500

Federal tax withholding on Jared and Ashleys W-2s of $10,000

They also provide you with the following information about their prior-year return:

On their prior year federal tax return, they claimed itemized deductions.

Jared and Ashley elected to have $139 of their 2017 tax refund applied to 2018.

Question:

1. What amount is reported on the Form 1040 line: federal income tax withheld from Forms W-2 and 1099?

2. What amount is reported on the Form 1040, Schedule 5 line: estimated tax payments and amount applied from prior year return?

3. What amount is reported on the Form 1040 line: total payments (Line 18)?

4. What amount is reported on the Form 1040 line: amount you overpaid

5. What amount is reported on the Form 1040 line: Amount you want to be refunded

Married Filing Jointly \& Surviving Spouse (2018) If Taxable Income Is: Not over $19,050 Over $19,050 but not over $77,400 Over $77,400 but not over $165,000 Over $165,000 but not over $315,000 Over $315,000 but not over $400,000 Over $400,000 but not over $600,000 The Tax Is: 10% of the taxable income $1,905 plus 12% of the excess over $19,050 $8,907 plus 22% of the excess over $77,400 $28,179 plus 24% of the excess over $165,000 $64,179 plus 32% of the excess over $315,000 $91,379 plus 35% of the excess over $400,000