INSTRUCTIONS

• Based on the facts below, prepare for Shelli Thomson her US (federal) individual income tax return (Form 1040), her Schedule A (Itemized Deductions), and Schedule 3 (Additional Credits and Payments).You can use either the forms and schedules posted on Canvas or download the forms and schedules from irs.gov.
• You are to include a paper stating the reasons why you:
  • Included and did not include amounts in income;
  • Deducted and did not deduct amounts from income;
  • Claimed and did not claim tax credits; and
  • Claimed the standard deduction or itemized the deductions.

FACTS

1. On June 1 of the current year, Shelli Thomson started a new job as a chemist for Sargent Chemical Corp
2. Prior to starting her new job, she received unemployment payment from January 1 to May 31
3. In Jan of the current year, Shelli filed for bankruptcy
4. Shelli Thomson's
   1. Birthday is January 1, 1970
   2. Social Security number is 111-11-1113;
   3. Address is 7605 Walnut Street, Los Angeles, CA 90013
   4. Tax return filing status is head of household
   5. Her ordinary income tax rate is 10%.
5. The following information is about Shelli's daughter, Amy, whose adoption was finalized on January 31of the current year. Amy's
   1. Birthday is January 1, 2019
   2. Social Security number is 111-11-1115
   3. Address is 7605 Walnut Street, Los Angeles, CA 90013
   4. Cannot be claimed as a dependent of another taxpayer
   5. She has lived Shelli from February 1 of the current year to December 31 of the current year
   6. Shelli provided 100% of her support
6. On the Form 1040, multiply the total amount of income you entered on the Form 1040 by 10% (Shelli's income tax rate) and enter that amount on the Form 1040.
7. The standard deduction for the current year is $12,000
8. During the current year, Shelli:
   1. Earned $50,000 in wages as a chemist. Her employer, Sargent Chemical Corp, did not withhold federal and state income taxes from her wages
   2. Received $5,000 in unemployment payments. Federal and state taxes were not withheld from her unemployment payments.
   3. Received $1,000 in cancellation of debt (COD) income because, as part of the bankruptcy proceedings, the credit card company, Comerica, forgave the $1,000 balance on her credit card
   4. Received $200 of interest on her savings bank account
   5. Paid $8,000 in out-of-pocket medical expenses including co-pays for prescription drugs and doctor appointments
   6. Paid property (real estate) taxes of $5,000 to the city of Los Angeles
   7. Paid $10,000 in home mortgage interest on her home mortgage. Her mortgage was $100,000 and was secured by her home
   8. Incurred a $2,000 theft loss. The theft did not occur in a federally declared disaster area
   9. Incurred a $3,000 casualty loss after her home was damaged by a tornado in a federally declared disaster area
   10. Donated $200 in cash to a tax-exempt charity
   11. Paid $1,000 to the adoption agency as part of the process of adopting Amy . Shelli's employer did not reimburse her for this expense
   12. Paid $500 to Little Lamb Nursery School to care of Amy on the days she worked. Her employer did not reimburse her for this expense