Jim and Anna Hilton (SS# xxx-xxx-xxx and yyy-yyy-yy) are married and have one child, Tina who is dependent but does not qualify for the child tax credit. Jenny's SS# is bbb-bb-bbbb and she is currently in college. Jim works as a high school teacher (will take the educator expenses) and contributed to a qualified IRA and has no tax limitations on the deduction. Anna runs a craft business from their home. Anna’s employer portion of the self-employment tax on Anna’s income is $831 which is the deductible amount and no schedule SE is needed for this return. Anna was divorced on June 30, 2020, and received $ 1,200 in alimony in 2021.

Note: Neither Jim nor Anna is blind or over age 65, and they plan to take the standard deduction and file their tax return with the IRS as a married filing joint.

Jim and Anna's income and expenses are:

Income:
Jim’s salary is 59,100
Anna’s business income 21,765
Interest from savings account 2,366
Interest from municipal bond funds 920

Gambling winnings 4,100

Anna’s alimony received 1,200

IRA distributions (50% taxable) 5,400

Expenditures:
Federal income tax withheld from Jim’s wages 13,700
State income tax withheld from Jim’s wages 6,400
Social Security tax withheld from Jim’s wages 7,482
Anna self-employment tax (50% adjustment to income) 1,662 – (No schedule SE required)
Interest on student loans 2,300
Educator expenses 300

Penalty on early withdrawals of savings 720

IRA deduction 900

Charitable contributions (line 10b in Form 1040) 200

Based on the above information, determine Jim and Anna’s AGI and taxable income for the year and complete only page 1 of Form 1040 (through taxable income, line 15) and Schedule 1 for 2021.

Answer rating: 100% (QA)

IRS 1040 The IRS 1040 form is one of the official documents that ... View the full answer