TAX YEAR 2022 FORM 1040 and Form 540 PROBLEM

Complete a 2022 Form 1040, based upon the below fact pattern. Show the amount of refund or amount owed.

Complete a 2022 Form 540 California State Tax Return thru taxable income only.

Answer questions 51-54 based upon the returns you have prepared.

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-Susan and Bill Hassenhof have W-2 Wages totaling $98,000. Total Federal Tax Withheld was $10,000 and Total State Income Tax Withheld was $3,000. Code DD (Employer paid health insurance) on each W-2 is $3,000

-Bill is an accounts payable clerk and Susan is a high school math teacher. They want to file Married Filing Joint

-They do not rent and they live in Orange County

-Bill received unearned income (interest) of $500 from the Bernay Madeoff Bank in Trust

-Bill tried his luck at Super Duper Guaranteed to Win Bingo in 2022. He wagered $2750 and lost it all

-The Hassenhofs want to take the largest deduction they can in 2022, either the Standard Deduction OR Itemized Deduction

-Susan was born May 1, 1975, and Bill was born on April 1, 1975. Neither one is blind

-Susan sent her Mom $600 to help her Mom pay her property tax bill. Susan cannot and does not claim her Mom as a dependent

-Bill owes the IRS $1,200 from his 2019 Tax Return. He is paying $100 a month on this debt

-Susan helped her friend start a business. The friend plans on paying Susan $6,000 for all the work she did. This payment will be made in December 2023

-Bill got arrested for driving with a suspended license, no insurance, no current registration, reckless driving, using a cell phone while driving, open container in vehicle, leaving the scene of an accident, and resisting arrest. He spent 6 days in jail and calculated he lost $1,900 in wages since he could not work while he was locked up. Bill paid the court $1,200 for the fine and enrolled in an anger management course which cost him $700.

-Susan sued a former employer for Intentional Infliction of Emotional Distress in 2022. She was awarded $25,000 by the court. Susan has not received a check for the $25,000 award. The former employer has filed an appeal and the case is now with the U.S. 9^th Circuit Court of Appeals. Susans attorney told her she may win the case.

-Bills 401K Account had a balance of $625,000 as of January 1, 2022

-Bill wanted to start a weed cutting business in 2022. He applied for a business loan and was approved for same in late 2022 for $40,000. Interest rate will be 6%, term is 10 years, and the loan funded on December 31, 2022

-In 2022, Susan sold a Gold and Silver Chess Set she owned to an art dealer she knows. The Chess Set was purchased for $5,600 on February 20, 2022, and Susan sold it for $10,600 on December 12, 2022.

-Bill and Susan had a rental home they sold in 2021. In 2022, they returned a $800 security deposit to the tenant after the tenant moved out.

-Bill and Susan paid $140 in 2022 for their B.P.O Elks Club membership. The Elks is a fraternal organization. Bill and Susan go to the Elks to dance, have dinners, drink, and socialize.

--Susan took their dog Ace to the vet in 2022 and paid $1,800 for the vet bill to fix the dogs paw

-Susan decided in 2022 to become a self-employed tutor. She taught 4 kids business planning and was paid $200. Her business expenses were $25 for business cards, $100 for business travel, and $150 for pencils, paper, and study guides.

-In 2022, Bill volunteered for Its me, Not You, a Qualified Charitable Organization. He logged 300 hours and calculated he drove 1,000 miles for charity related travel from July 1 to Dec 31

-In 2022, Bill recommended to his best friend Tomas, to buy stock in Property Keeping, Inc. Tomas made $3,000 on the stock and to show his appreciation, bought a $15 bottle of wine as a gift, and gave it to Bill when Tomas, his wife Alexi, and the Hassenhofs got together for their annual couples Thanksgiving dinner.

-Susan was called to Jury Duty in 2022. She was paid $180 for her service and did NOT have to give her jury duty pay to her employer. Bill asked Susan if she would donate the $180 to Its me, Not You. Susan cashed the check and donated $180 to the charity.

-Bill won a $2,000 cash prize from a local grocery store in 2022. Bill said he did NOT get a W-2 or a Form 1099 for the $2,000 he won.

-In 2022, Susan received a call from the Mission Hilltop Shopping Mall Manager and was told she won a tool set worth $400. Susan told the manager she had plenty of tools and refused the prize she was offered.

1. What is the amount on Form 1040, Line 9, Total Income?

$105,901

$105,605

$88,451

2. Based upon the Form 1040 you prepared for the Hassenhof's, what is the amount of Taxable Income on Line 15?

$79,705

$45,002

$102,402

$89,202

3. Based upon the Form 1040 you prepared for the Hassenhof's, what is the refund amount shown on Line 34, Form 1040?

$8,333

$5,333

$844

4. Based upon the Form 540 you prepared for the Hassenhof's, what is the Taxable Income shown on Line 19, Form 540?

$86,000

$95,201

$86,444

$82,314