Note: This problem is for the 2018 tax year Alice J. and Bruce M. Byrd are married taxpayers who file a joint return. Their Social Security numbers are 123-45-6789 and 111-11- 1112, respectively. Alice's birthday is September 21, 1971, and Bruce's is June 27, 1970. They live at 473 Revere Avenue, Lowell, MA 01850. Alice is the office manager for Lowell Dental Clinic, 433 Broad Street, Lowell, MA 01850 (employer identification number 98- 7654321), Bruce is the manager of a Super Burgers fast-food outlet owned and operated by Plymouth Corporation, 1247 Central The following information is shown on their Wage and Tax Statements (Form W-2) for 2018 Description Wages, tips, other compensation Federal income tax withheld Social Security wages Social Security tax withheld Medicare wages and tips Medicare tax withheld State State wages, tips, etc. State income tax withheld Alice Bruce Line $62,100 5,300 62,100 3,850 62,100 900 Massachusetts Massachusetts 62,100 3,100 58,000 4,500 58,000 3,596 58,000 841 15 16 17 58,000 2,950 The Byrds provide over half of the support of their two children, Cynthia (born January 25, 1994, Social Security number 123-45-6788) and John (born February 7, 1998, Social Security number 123-45-6786). Both children are full-time students and live with the Byrds except when they are away at college. Cynthia earned $6,200 from a summer internship in 2018, and John earned $3,800 from a part-time job During 2018, the Byrds provided 60% of the total support of Bruce's widower father, Sam Byrd (born March 6, 1942, Social Security number 123-45-6787). Sam lived alone and covered the rest of his support with his Social Security benefits. Sam died in November, and Bruce, the beneficiary of a policy on Sam's life, received life insurance proceeds of $1,600,000 on December 28 The Byrds had the following expenses relating to their personal residence during 2018: Property taxes Qualified interest on home mortgage (acquisition $5,000 8,700 During 2018, the Byrds provided 60% of the total support of Bruce's widower father, Sam Byrd (born March 6, 1942, Social Security number 123-45-6787), Sam lived alone and covered the rest of his support with his Social Security benefits. Sam died in November, and Bruce, the beneficiary of a policy on Sam's life, received life insurance proceeds of $1,600,000 on December 28 The Byrds had the following expenses relating to their personal residence during 2018: Property taxes Qualified interest on home mortgage (acquisition indebtedness) Repairs to roof Utilities Fire and theft insurance The Byrds had the following medical expenses for 2018: Medical insurance premiums Doctor bill for Sam incurred in 2017 and not paid until 2018 Operation for Sanm Prescription medicines for Sam Hospital expenses for Sam Reimbursement from insurance company, received in 2018 The medical expenses for Sam represent most of the 60% that Bruce contributed toward his father's support. Other relevant information follows: $5,000 8,700 5,750 4,100 1,900 $4,500 7,600 8,500 900 3,500 3,600 . when they filed their 2017 state return in 2018, the Byrds paid additional state income tax of $900 . During 2018, Alice and Bruce attended a dinner dance sponsored by the Lowell Police Disability Association (a qualified charitable organization). The Byrds paid $300 for the tickets. The cost of comparable entertainment would normally be 50 . The Byrds contributed $5,000 to Lowell Presbyterian Church and gave used clothing (cost of $1,200 and fair market value of $350) to the Salvation Army. All donations are supported by receipts, and the clothing is in very good condition . Via a crowdfunding site (gofundme.com), Alice and Bruce made a gift to a needy family who lost their home in a fire ($400). In addition, they made several cash gifts to homeless individuals downtown (estimated to be $65) .In 2018, the Byrds received interest income of $2,750, which was reported on a Form 1099-INT from Second National Bank, 125 Oak Street, Lowell, MA 01850 (Employer Identification Number 98-7654322) . The home mortgage interest was reported on Form 1098 by Lowell Commercial Bank, P.O. Box 1000, Lowell, MA 01850 (Employer Identification Number 98-7654323). The mortgage (outstanding balance of $425,000 as of January 1, 2018) was taken out by the Byrds on May 1, 2014 Alice's employer requires that all employees wear uniforms to work. During 2018, Alice spent $850 on new uniforms and $566 orn laundry charges . Bruce paid $400 for an annual subscription to the Journal of Franchise Management and $741 for annual membership dues to his professional association . Neither Alice's nor Bruce's employer reimburses for employee expenses . . Bruce paid 400 for an annual subscription to the Journal of Franchise Management and 741 for annual membership dues to his professional association . Neither Alice's nor Bruce's employer reimburses for employee expenses . The Byrds do not keep the receipts for the sales taxes they paid and had no major purchases subject to sales tax All members of the Byrd family had health insurance coverage for all of 2018 .This year the Byrds gave each of their children $2,000, which was then deposited into their Roth IRAs Alice and Bruce paid no estimated Federal income tax. Neither Alice nor Bruce wants to designate $3 to the Presidential Election Campaign Fund Required: Compute the Alice J, and Bruce M. Byrd's Federal income tax for 2018. by providing the following information that would be reported on Form 1040, Schedules A and B. If they have overpaid, they want the amount to be refunded to them . Make realistic assumptions about any missing data If an amount box does not require an entry or the answer is zero, enter "O" Enter all amounts as positive numbers It may be necessary to consider the information provided on other schedules before completing Form 1040 information . When computing the tax liability, do not round your immediate calculations. If required, round your final answers to the nearest dollar Form 1040 Information Provide the following that would be reported on the Byrd's Form 1040: 1. Filing status and dependents: The taxpayers' filing status: Married filing jointly Indicate whether the following individuals can be claimed as a dependent by Alice and Bruce Cynthia: No V Sam Yes John Yes 2. Calculate taxable gross income 122,850 3. Calculate the total deductions for AGI 0 4. Calculate adjusted gross income 122,850 5. Calculate the greater of the standard deduction or itemized deductions 6. Calculate total taxable income. 7. Calculate the income tax liability. 8. Calculate any other taxes due 0 9. Calculate the total tax credits available. 10. Calculate total withholding and tax payments 11. Calculate the amount overpaid (refund): 0 12. Calculate the amount of taxes owed: Feedback Check Mty WWor The calculation of taxable income begins with gross income. Gross income includes all income, unless the tax law provides for a specific exclusion. Individual taxpayers have two categories of deductions: (1) deductions for adjusted gross income (deductions from gross income to arrive at adjusted gross income) and (2) deductions from adjusted gross income. As a general rule, personal expenditures are disallowed as deductions in arriving at taxable income. However, Congress allows specified personal expenses as deductions from AGI (commonly referred to as itemized deductions). AGI is an important subtotal that serves as the basis for computing percentage limitations on certain itemized deductions such as medical expenses, charitable contributions, and certain casualty losses Schedule A Information Provide the following that would be reported on the Alice and Bruce Byrd's Schedule A: 1. Calculate the deduction allowed for medical and dental expenses. (Round computations to the nearest dollar.) 12,186 V 2. Calculate the allowable deduction for taxes 3. Calculate the deduction for interest. 4. Calculate the charitable deduction allowed. 5,600 V 5. Calculate total itemized deductions. Feedbad Check My Work Partially correct Schedule B Information Provide the following that would be reported on the Alice and Bruce Byrd's Schedule B: 1. Calculate the interest amount: 2. Calculate the ordinary dividends: 0 Feedback Check MyW0k Partially correct 2018 Tax Rate Schedules 2018 Tax Rate Schedules Use the 2018 Tax Rate Schedules to compute the tax Note: Because the tax rate schedules are used instead of the tax tables, the amount of tax computed may vary slightly from the amount listed in the tables. This variation occurs because the tax for a particular income range in the tax table is based on the midpoint amount. 2018 Tax Rate Schedules Single-Schedule X If taxable income is: Over- Head of household-Schedule Z If taxable income is: Over- of the amount over- of the amount over But not over But not The tax is: The tax is: over- $9,525 38,700 82,500 $0 9,525 38,700 $0 13,600 51,800 $13,600 10% $952.50 + 12% 4,453.50 + 22% 10% $1,360.00 +12% 5,944.00 + 22% 51,800 13,600 9,525 38,700 82,500 51,800 2018 Tax Rate Schedules Use the 2018 Tax Rate Schedules to compute the tax Note: Because the tax rate schedules are used instead of the tax tables, the amount of tax computed may vary slightly from the amount listed in the tables. This variation occurs because the tax for a particular income range in the tax table is based on the midpoint amount. 2018 Tax Rate Schedules Single-Schedule X If taxable income is: Head of household-Schedule T If taxable income is: amount amount ho over- over- over- over- $0 $9,525 $952.50 + 12% 4,453.50 + 22% 14,089.50 + 24% 32,089.50 + 32V% 45,689.50 + 35% 150,689.50 + 37% 9,525 38,700 82,500 157,5000 200,000 500,000 51,800 82,500 157,500 200,000 500,000 $1,360.00 +12% 13,600 51,800 82,500 30,698.00 + 32%157,500 44,298.00 +35% 200,000 149,298.00 + 37%%500,000 82,500 157,500 200,000 500,000 5,944.00 + 22% 82,500 157,500 200,000 500,000 12,698.00 + 24% 157,500 200,000 500,000 Married filing jointly or Qualifying widow(er)-Schedule Y-1 If taxable income is: Married filing separately-Schedule Y-2 If taxable income is: amount amount ho over- over- over- over- $0 $19,050 77,400 165,000 315,000 400,000 600,000 $1,905.00 + 12% 8,907.00 + 22V% 28,179.00 + 24V% 64,179.00 + 32% 91,379.00 + 35% 161,379.00 + 37% 9,525 38,700 82,500 32,089.50 + 32%157,500 45,689.50 +35% 200,000 80,689.50+37% 300,000 $952.50 + 12% 4,453.50 + 22% 14,089.50 + 24% 19,050 19,050 77,400 165,0000 315,000 400,000 600,000 82,500 157,500 200,000 300,000 165,000 315,000 400,000 600,000 157,500 200,000 300,000 Tax Planning For 2018 Alice and Bruce are planning some significant changes for 2019. They have provided you with the following information and asked you to project theirtaxable income and tax liability for 2019. Assume that the Byrds will itemize their deductions next year. The Byrds will invest the $1,600,000 of life insurance proceeds in short-term certificates of deposit (CDs) and use the interest for iving expenses during 2019, They expect to earn interest of $32,000 on the CDs. Bruce has been promoted to regional manager, and his salary for 2019 will be $88,000. He estimates that state income tax withheld will increase by $4,000 and the Social Security tax withheld will be $5,456. Alice, who has been diagnosed with a serious illness, wil take a leave of absence from work during 2019. The estimated cost for her medical treatment is $15,400, of which $6,400 will be reimbursed by their insurance company in 2019. Their medical insurance premiums will increase to $9,769. Property taxes on their residence are expected to increase to $5,100 The Byrds' home mortgage interest expense and charitable contributions are expected to be unchanged from 2018. John will graduate from college in December 2018 and will take a job in New York City in January 2019. His starting salary will be $46,000 In 2019, the deduction for taxes on Schedule A are limited to $10,000 and the medical expenses are reduced by 10% of AGI. Assume that all of the information reported in 2018 will be the same in 2019 unless other information has been presented above. Use the 2018 Tax Rate Schedules. Provide the following that would be reported on the Byrds' Tax Planning For 2018. If required, round any computations to the nearest 1. Calculate the Byrds' projected itemized deductions for 2018: 2. Calculate the Byrds' taxable income: 3. Calculate the Byrds' related tax liability for 2018: Feedback Check My ork Incorrect Note: This problem is for the 2018 tax year Alice J. and Bruce M. Byrd are married taxpayers who file a joint return. Their Social Security numbers are 123-45-6789 and 111-11- 1112, respectively. Alice's birthday is September 21, 1971, and Bruce's is June 27, 1970. They live at 473 Revere Avenue, Lowell, MA 01850. Alice is the office manager for Lowell Dental Clinic, 433 Broad Street, Lowell, MA 01850 (employer identification number 98- 7654321), Bruce is the manager of a Super Burgers fast-food outlet owned and operated by Plymouth Corporation, 1247 Central The following information is shown on their Wage and Tax Statements (Form W-2) for 2018 Description Wages, tips, other compensation Federal income tax withheld Social Security wages Social Security tax withheld Medicare wages and tips Medicare tax withheld State State wages, tips, etc. State income tax withheld Alice Bruce Line $62,100 5,300 62,100 3,850 62,100 900 Massachusetts Massachusetts 62,100 3,100 58,000 4,500 58,000 3,596 58,000 841 15 16 17 58,000 2,950 The Byrds provide over half of the support of their two children, Cynthia (born January 25, 1994, Social Security number 123-45-6788) and John (born February 7, 1998, Social Security number 123-45-6786). Both children are full-time students and live with the Byrds except when they are away at college. Cynthia earned $6,200 from a summer internship in 2018, and John earned $3,800 from a part-time job During 2018, the Byrds provided 60% of the total support of Bruce's widower father, Sam Byrd (born March 6, 1942, Social Security number 123-45-6787). Sam lived alone and covered the rest of his support with his Social Security benefits. Sam died in November, and Bruce, the beneficiary of a policy on Sam's life, received life insurance proceeds of $1,600,000 on December 28 The Byrds had the following expenses relating to their personal residence during 2018: Property taxes Qualified interest on home mortgage (acquisition $5,000 8,700 During 2018, the Byrds provided 60% of the total support of Bruce's widower father, Sam Byrd (born March 6, 1942, Social Security number 123-45-6787), Sam lived alone and covered the rest of his support with his Social Security benefits. Sam died in November, and Bruce, the beneficiary of a policy on Sam's life, received life insurance proceeds of $1,600,000 on December 28 The Byrds had the following expenses relating to their personal residence during 2018: Property taxes Qualified interest on home mortgage (acquisition indebtedness) Repairs to roof Utilities Fire and theft insurance The Byrds had the following medical expenses for 2018: Medical insurance premiums Doctor bill for Sam incurred in 2017 and not paid until 2018 Operation for Sanm Prescription medicines for Sam Hospital expenses for Sam Reimbursement from insurance company, received in 2018 The medical expenses for Sam represent most of the 60% that Bruce contributed toward his father's support. Other relevant information follows: $5,000 8,700 5,750 4,100 1,900 $4,500 7,600 8,500 900 3,500 3,600 . when they filed their 2017 state return in 2018, the Byrds paid additional state income tax of $900 . During 2018, Alice and Bruce attended a dinner dance sponsored by the Lowell Police Disability Association (a qualified charitable organization). The Byrds paid $300 for the tickets. The cost of comparable entertainment would normally be 50 . The Byrds contributed $5,000 to Lowell Presbyterian Church and gave used clothing (cost of $1,200 and fair market value of $350) to the Salvation Army. All donations are supported by receipts, and the clothing is in very good condition . Via a crowdfunding site (gofundme.com), Alice and Bruce made a gift to a needy family who lost their home in a fire ($400). In addition, they made several cash gifts to homeless individuals downtown (estimated to be $65) .In 2018, the Byrds received interest income of $2,750, which was reported on a Form 1099-INT from Second National Bank, 125 Oak Street, Lowell, MA 01850 (Employer Identification Number 98-7654322) . The home mortgage interest was reported on Form 1098 by Lowell Commercial Bank, P.O. Box 1000, Lowell, MA 01850 (Employer Identification Number 98-7654323). The mortgage (outstanding balance of $425,000 as of January 1, 2018) was taken out by the Byrds on May 1, 2014 Alice's employer requires that all employees wear uniforms to work. During 2018, Alice spent $850 on new uniforms and $566 orn laundry charges . Bruce paid $400 for an annual subscription to the Journal of Franchise Management and $741 for annual membership dues to his professional association . Neither Alice's nor Bruce's employer reimburses for employee expenses . . Bruce paid 400 for an annual subscription to the Journal of Franchise Management and 741 for annual membership dues to his professional association . Neither Alice's nor Bruce's employer reimburses for employee expenses . The Byrds do not keep the receipts for the sales taxes they paid and had no major purchases subject to sales tax All members of the Byrd family had health insurance coverage for all of 2018 .This year the Byrds gave each of their children $2,000, which was then deposited into their Roth IRAs Alice and Bruce paid no estimated Federal income tax. Neither Alice nor Bruce wants to designate $3 to the Presidential Election Campaign Fund Required: Compute the Alice J, and Bruce M. Byrd's Federal income tax for 2018. by providing the following information that would be reported on Form 1040, Schedules A and B. If they have overpaid, they want the amount to be refunded to them . Make realistic assumptions about any missing data If an amount box does not require an entry or the answer is zero, enter "O" Enter all amounts as positive numbers It may be necessary to consider the information provided on other schedules before completing Form 1040 information . When computing the tax liability, do not round your immediate calculations. If required, round your final answers to the nearest dollar Form 1040 Information Provide the following that would be reported on the Byrd's Form 1040: 1. Filing status and dependents: The taxpayers' filing status: Married filing jointly Indicate whether the following individuals can be claimed as a dependent by Alice and Bruce Cynthia: No V Sam Yes John Yes 2. Calculate taxable gross income 122,850 3. Calculate the total deductions for AGI 0 4. Calculate adjusted gross income 122,850 5. Calculate the greater of the standard deduction or itemized deductions 6. Calculate total taxable income. 7. Calculate the income tax liability. 8. Calculate any other taxes due 0 9. Calculate the total tax credits available. 10. Calculate total withholding and tax payments 11. Calculate the amount overpaid (refund): 0 12. Calculate the amount of taxes owed: Feedback Check Mty WWor The calculation of taxable income begins with gross income. Gross income includes all income, unless the tax law provides for a specific exclusion. Individual taxpayers have two categories of deductions: (1) deductions for adjusted gross income (deductions from gross income to arrive at adjusted gross income) and (2) deductions from adjusted gross income. As a general rule, personal expenditures are disallowed as deductions in arriving at taxable income. However, Congress allows specified personal expenses as deductions from AGI (commonly referred to as itemized deductions). AGI is an important subtotal that serves as the basis for computing percentage limitations on certain itemized deductions such as medical expenses, charitable contributions, and certain casualty losses Schedule A Information Provide the following that would be reported on the Alice and Bruce Byrd's Schedule A: 1. Calculate the deduction allowed for medical and dental expenses. (Round computations to the nearest dollar.) 12,186 V 2. Calculate the allowable deduction for taxes 3. Calculate the deduction for interest. 4. Calculate the charitable deduction allowed. 5,600 V 5. Calculate total itemized deductions. Feedbad Check My Work Partially correct Schedule B Information Provide the following that would be reported on the Alice and Bruce Byrd's Schedule B: 1. Calculate the interest amount: 2. Calculate the ordinary dividends: 0 Feedback Check MyW0k Partially correct 2018 Tax Rate Schedules 2018 Tax Rate Schedules Use the 2018 Tax Rate Schedules to compute the tax Note: Because the tax rate schedules are used instead of the tax tables, the amount of tax computed may vary slightly from the amount listed in the tables. This variation occurs because the tax for a particular income range in the tax table is based on the midpoint amount. 2018 Tax Rate Schedules Single-Schedule X If taxable income is: Over- Head of household-Schedule Z If taxable income is: Over- of the amount over- of the amount over But not over But not The tax is: The tax is: over- $9,525 38,700 82,500 $0 9,525 38,700 $0 13,600 51,800 $13,600 10% $952.50 + 12% 4,453.50 + 22% 10% $1,360.00 +12% 5,944.00 + 22% 51,800 13,600 9,525 38,700 82,500 51,800 2018 Tax Rate Schedules Use the 2018 Tax Rate Schedules to compute the tax Note: Because the tax rate schedules are used instead of the tax tables, the amount of tax computed may vary slightly from the amount listed in the tables. This variation occurs because the tax for a particular income range in the tax table is based on the midpoint amount. 2018 Tax Rate Schedules Single-Schedule X If taxable income is: Head of household-Schedule T If taxable income is: amount amount ho over- over- over- over- $0 $9,525 $952.50 + 12% 4,453.50 + 22% 14,089.50 + 24% 32,089.50 + 32V% 45,689.50 + 35% 150,689.50 + 37% 9,525 38,700 82,500 157,5000 200,000 500,000 51,800 82,500 157,500 200,000 500,000 $1,360.00 +12% 13,600 51,800 82,500 30,698.00 + 32%157,500 44,298.00 +35% 200,000 149,298.00 + 37%%500,000 82,500 157,500 200,000 500,000 5,944.00 + 22% 82,500 157,500 200,000 500,000 12,698.00 + 24% 157,500 200,000 500,000 Married filing jointly or Qualifying widow(er)-Schedule Y-1 If taxable income is: Married filing separately-Schedule Y-2 If taxable income is: amount amount ho over- over- over- over- $0 $19,050 77,400 165,000 315,000 400,000 600,000 $1,905.00 + 12% 8,907.00 + 22V% 28,179.00 + 24V% 64,179.00 + 32% 91,379.00 + 35% 161,379.00 + 37% 9,525 38,700 82,500 32,089.50 + 32%157,500 45,689.50 +35% 200,000 80,689.50+37% 300,000 $952.50 + 12% 4,453.50 + 22% 14,089.50 + 24% 19,050 19,050 77,400 165,0000 315,000 400,000 600,000 82,500 157,500 200,000 300,000 165,000 315,000 400,000 600,000 157,500 200,000 300,000 Tax Planning For 2018 Alice and Bruce are planning some significant changes for 2019. They have provided you with the following information and asked you to project theirtaxable income and tax liability for 2019. Assume that the Byrds will itemize their deductions next year. The Byrds will invest the $1,600,000 of life insurance proceeds in short-term certificates of deposit (CDs) and use the interest for iving expenses during 2019, They expect to earn interest of $32,000 on the CDs. Bruce has been promoted to regional manager, and his salary for 2019 will be $88,000. He estimates that state income tax withheld will increase by $4,000 and the Social Security tax withheld will be $5,456. Alice, who has been diagnosed with a serious illness, wil take a leave of absence from work during 2019. The estimated cost for her medical treatment is $15,400, of which $6,400 will be reimbursed by their insurance company in 2019. Their medical insurance premiums will increase to $9,769. Property taxes on their residence are expected to increase to $5,100 The Byrds' home mortgage interest expense and charitable contributions are expected to be unchanged from 2018. John will graduate from college in December 2018 and will take a job in New York City in January 2019. His starting salary will be $46,000 In 2019, the deduction for taxes on Schedule A are limited to $10,000 and the medical expenses are reduced by 10% of AGI. Assume that all of the information reported in 2018 will be the same in 2019 unless other information has been presented above. Use the 2018 Tax Rate Schedules. Provide the following that would be reported on the Byrds' Tax Planning For 2018. If required, round any computations to the nearest 1. Calculate the Byrds' projected itemized deductions for 2018: 2. Calculate the Byrds' taxable income: 3. Calculate the Byrds' related tax liability for 2018: Feedback Check My ork Incorrect