REQUIRED TAX RETURN PROBLEM

Required: Use the computer software package to complete form 1040 for the following taxpayers for 2020. Make assumptions regarding any information not given.

Dr. Ivan Incisor and his wife Irene are married and file a joint return for 2020. Ivans SS# is 123-45-6789 and his birthday is 4/1/1967. Irenes SS# is 123-65-3214 and her birthday is 6/1/1970. They live at 1234 Main Street, Modesto, CA 95350.

The Incisors have three children. Seth is 15 years old and his SS# is 235-88-4455 and his DOB is 6/5/2005. Sara is 18 years old and her SS# is 235-99-7777 and her DOB is 7/5/2002. Shawn is 3 years old and his SS# is 555-58-4411 and his DOB is 1/5/2017.

The Incisors lived in California the entire year. In the prior year, the Incisors filed a form 1040 and filed as MFJ.

The Incisors all had health insurance provided by Ivans employer for the entire year.

Ivan and Irene have savings account interest income of $390 from Bank of America.

Ivan and Irene have City of Modesto Bond interest of $300.

Dr. Incisor is a dentist and his form W-2 from Bitedown Dental Group is as follows:

Wages 110,000

Federal withholding 11,000

Social Security withholding 6,500

Medicare withholding 1,540

State (CA) withholding 6,800

Irene works at a dental lab Teeth are Us and her W-2 is as follows:

Wages 45,000

Federal withholding 4,500

Social Security withholding 2,790

Medicare withholding 650

State (CA) withholding 2,500

Ivan and Irene have dividend income as follows:

Pepsi Stock 400 all qualified

Corporate Mutual Fund 600 all qualified

Ivan and Irene have the following deductions:

Medical and dental expenses 2,000

Prescription eyeglasses 500

Mortgage interest (Wells Fargo Bank) 2,500

Credit card interest 800

Contributions to Catholic Church 10,000

Noncash contributions to Salvation Army 350

Property tax on home 2,000

Auto insurance 700

Auto loan interest 450

Sara started her first year of college at State University in September of 2020. Ivan and Irene paid 7,000 for her tuition and 800 for books. Sara received a 1,000 scholarship which was completely used for tuition.

Input the remaining information and make sure to determine which educational tax benefit is best for Ivan and Irene.

Complete the federal return calculations only. Be sure to put your name on it and turn in by the last class. You can turn in paper copies or email to me. If email, please put Required Return in the subject line.

Total gross (taxable) income: _______________________________

What is the amount, if any, of for AGI deductions: ________________________________________

AGI: ______________________________________________________________________

Total medical after 7.5% haircut: _______________________________________________

Total potential itemized deductions: ____________________________________________

Which should they choose, itemized or standard: __________________________________

And how much: ___________________________________

Taxable income: _____________________________________________________________

Tax amount (be sure to separate ordinary income and capital gains):

Ordinary income tax: ________________________________

Capital gains tax: ___________________________________

Total tax: _________________________________________

Total credits: ___________________________________________________________________

Total net tax: ____________________________________________________________________

Withholding/Payments: ___________________________________________________________

Net tax due/(refund): _______________________________________________________________