Tax Return Problem $3$

Kathy and Rob Alvarez obtained a divorce effective May $1,2017,$ and there have been no revisions to the original agreement since that

time. In accordance with the divorce decree, Kathy is required to pay $$2,450$ per month until their only child turns $18$ in three years; then

the payments will be reduced to $$1,500$ per month. Rob has full custody of the child and appropriately takes the child tax credit.

Furthermore, Kathy was to transfer title of their house, which had a cost of $$250,000$ and a fair value of $$510,000$ on the date of transfer,

to Rob and was to continue making the monthly mortgage payments of $$1,525$ on behalf of Rob. Kathy works for a large oil distributor in

Santa Fe$,$ NM$,$ and after the divorce lives at $1132$ Northgate Avenue, Santa Fe$,$ NM $87501.$ Kathy's Social Security number is $412-34-5671$

$($date of birth $11/4/1989),$ and Rob's Social Security number is $412-34-5670($date of birth $8/14/1987).$

Her W$-2$ contained the following information:

Wages $(box1)=$$$85,100\mathrm{.}25$

Federal$\frac{W}{H}(box2)=$$$4,572\mathrm{.}18$

Social Security wages $(box3)=$$$85,100\mathrm{.}25$

Social Security$\frac{W}{H}(box4)=$$$5,276\mathrm{.}22$

Medicare wages $(box5)=$$$85,100\mathrm{.}25$

Medicare$\frac{W}{H}(box6)=$$$1,233\mathrm{.}95$

She also received a Form $1099-$INT from First New Mexico Bank with $$256$ of interest income in box $1.$ In addition, Kathy made a timely

$$2,500$ contribution to her new HSA account.

Prepare a $2023$ Form $1040$ and a Schedule $1,$ as well as a Form $8889,$ for Kathy. For the Form $8889,$ Kathy is to be considered an eligible

individual with the same insurance coverage for the entire year. Complete tax return problem $3$ at the end of chapter $4.$ The return you are preparing is for Kathy Alvarez. Please use the TaxAct software to complete the return. Please make the following changes$/$additions to the material in the textbook:

Change the address of this taxpayer to Pewaukee, WI$.$ Assume Kathy$$s employer is located in Wisconsin.

Kathy also received $$1,000$ of municipal interest income.

Kathy also received $$900$ of U$.$S$.$ Government interest.

Kathy had $$2,000$ of Wisconsin withholding on his wages.