REQUIRED FORMS TO PREPARE AND SUBMIT: FORM 1040, SCHEDULES 1, A, & D , FORM 8812 & 8949

TAX RETURN PROBLEM # 2 USE 2021 TAX YEAR! Jerry and Lisa Washington are married taxpayers, ages 44 and 42, respectively, who file a joint return for 2021. They live at 1121 Fifth Avenue, NY, NY 10000. Jerry is an assistant manager at Washington's Motor Inn, and Lisa is a teacher at the local Elementary School. They present you with W-2 forms that reflect the following information: Jerry Lisa Salary $68,000 $56,000 Federal tax withheld 6,770 6,630 State income tax withheld 1,400 1,100 FICA (Social Security and Medicare) 4216 SS 3472 SS withheld 986 Medi 812 Medi Social Security numbers 111-11- 123-45- 1112 6789 Lisa is the custodial parent of two children from a previous marriage who reside with the Washingtons throughout the school year. The children, Larry and Jane Place, reside with their father, Bill, during the summer. Relevant information for the children follows: Larry Jane Age 19 18 Social Security numbers 123-45-6788 123-45-6787 Months spent with Washingtons 9 9 Under the divorce decree, Bill pays child support of $150 per month per child during the nine months the children live with the Washingtons. Bill says that he spends $200 per month per child during the three summer months they reside with him. Lisa and Jerry can document that they provide $2,000 support per child per year. The divorce decree is silent as to which parent can claim the exemptions for the children. In August, Jerry and Lisa added a suite to their home to provide more comfortable accommodations for Hannah Small (123-45-6786), Lisa's mother, who had moved in with them in February 2020 after the death of Lisa's father. Not wanting to borrow money for this addition, Jerry sold 300 shares of Acme Corporation stock for $50 per share on May 3, 2021, and used the proceeds of $15,000 to cover construction costs. The Washingtons had purchased the stock on April 29, 2015, for $25 per share. They received dividends of $750 on the jointly owned stock a month before the sale. Hannah, who is 66 years old, received $7,500 in Social Security benefits during the year, of which she gave the Washingtons $2,000 to use toward household expenses and deposited the remainder in her personal savings account. The Washingtons determine that they have spent $2,500 of their own money for food, clothing, medical expenses, and other items for Hannah. They do not know what the rental value of Hannah's suite would be, but they estimate it would be at least $300 per month. Interest paid during the year included the following: Home mortgage interest (paid to Manhattan Federal Savings & Loan) $7,890 Interest on an automobile loan (paid to Manhattan National Bank) 1,660 Interest on Citibank Visa card 620 The mortgage originated Jan. 2, 2010. The current outstanding principal is $500,000 In July, Jerry hit a submerged rock while boating. Fortunately, he was uninjured after being thrown from the boat and landing in deep water. However, the boat, which was uninsured, was destroyed. Jerry had paid $25,000 for the boat in June 2019, and its value was appraised at $18,000 on the date of the accident. The Washingtons paid doctor and hospital bills of $12,700 and were reimbursed $2,000 by their insurance company. They spent $640 for prescription drugs and medicines and $5,904 for premiums on their health insurance policy. They have filed additional claims of $1,200 with their insurance company and have been told they will receive payment for that amount in January 2022. Included in the amounts paid for doctor and hospital bills were payments of $380 for Hannah and $850 for the children Additional information of potential tax consequence follows: Real estate taxes paid $6,850 Sales taxes paid (per table) 1,379 Refund of New York State income tax for 2020 (the Washingtons itemized on their 1,520 2020 Federal tax return, and their total state and local taxes were less than $10,000) Total NYS Income Taxes Withheld in 2021 2,500 Appraised value of books donated to public library 740 REQUIRED: Compute net tax payable or refund due for the Washingtons for 2021. If the Washingtons have overpaid, the amount is to be credited toward their taxes for 2022. TAX RETURN PROBLEM # 2 USE 2021 TAX YEAR! Jerry and Lisa Washington are married taxpayers, ages 44 and 42, respectively, who file a joint return for 2021. They live at 1121 Fifth Avenue, NY, NY 10000. Jerry is an assistant manager at Washington's Motor Inn, and Lisa is a teacher at the local Elementary School. They present you with W-2 forms that reflect the following information: Jerry Lisa Salary $68,000 $56,000 Federal tax withheld 6,770 6,630 State income tax withheld 1,400 1,100 FICA (Social Security and Medicare) 4216 SS 3472 SS withheld 986 Medi 812 Medi Social Security numbers 111-11- 123-45- 1112 6789 Lisa is the custodial parent of two children from a previous marriage who reside with the Washingtons throughout the school year. The children, Larry and Jane Place, reside with their father, Bill, during the summer. Relevant information for the children follows: Larry Jane Age 19 18 Social Security numbers 123-45-6788 123-45-6787 Months spent with Washingtons 9 9 Under the divorce decree, Bill pays child support of $150 per month per child during the nine months the children live with the Washingtons. Bill says that he spends $200 per month per child during the three summer months they reside with him. Lisa and Jerry can document that they provide $2,000 support per child per year. The divorce decree is silent as to which parent can claim the exemptions for the children. In August, Jerry and Lisa added a suite to their home to provide more comfortable accommodations for Hannah Small (123-45-6786), Lisa's mother, who had moved in with them in February 2020 after the death of Lisa's father. Not wanting to borrow money for this addition, Jerry sold 300 shares of Acme Corporation stock for $50 per share on May 3, 2021, and used the proceeds of $15,000 to cover construction costs. The Washingtons had purchased the stock on April 29, 2015, for $25 per share. They received dividends of $750 on the jointly owned stock a month before the sale. Hannah, who is 66 years old, received $7,500 in Social Security benefits during the year, of which she gave the Washingtons $2,000 to use toward household expenses and deposited the remainder in her personal savings account. The Washingtons determine that they have spent $2,500 of their own money for food, clothing, medical expenses, and other items for Hannah. They do not know what the rental value of Hannah's suite would be, but they estimate it would be at least $300 per month. Interest paid during the year included the following: Home mortgage interest (paid to Manhattan Federal Savings & Loan) $7,890 Interest on an automobile loan (paid to Manhattan National Bank) 1,660 Interest on Citibank Visa card 620 The mortgage originated Jan. 2, 2010. The current outstanding principal is $500,000 In July, Jerry hit a submerged rock while boating. Fortunately, he was uninjured after being thrown from the boat and landing in deep water. However, the boat, which was uninsured, was destroyed. Jerry had paid $25,000 for the boat in June 2019, and its value was appraised at $18,000 on the date of the accident. The Washingtons paid doctor and hospital bills of $12,700 and were reimbursed $2,000 by their insurance company. They spent $640 for prescription drugs and medicines and $5,904 for premiums on their health insurance policy. They have filed additional claims of $1,200 with their insurance company and have been told they will receive payment for that amount in January 2022. Included in the amounts paid for doctor and hospital bills were payments of $380 for Hannah and $850 for the children Additional information of potential tax consequence follows: Real estate taxes paid $6,850 Sales taxes paid (per table) 1,379 Refund of New York State income tax for 2020 (the Washingtons itemized on their 1,520 2020 Federal tax return, and their total state and local taxes were less than $10,000) Total NYS Income Taxes Withheld in 2021 2,500 Appraised value of books donated to public library 740 REQUIRED: Compute net tax payable or refund due for the Washingtons for 2021. If the Washingtons have overpaid, the amount is to be credited toward their taxes for 2022