This problem is for the 2021 tax year.

Lance H. and Wanda B. Dean are married and live at 431 Yucca Drive, Santa Fe, NM 87501.Lance works for the convention bureau of the local Chamber of Commerce, while Wanda is employed part-time as a paralegal for a law firm. Social Security Number* Birth Date Lance Dean (age 42) 123-45-6786 12/16/1978 Wanda Dean (age 40) 123-45-6787 08/08/1980

*In the interest of privacy and to protect against taxpayer identification misuse, Social Security numbers used throughout the textbook have been replaced with fictitious numbers.

During 2021, the Deans had the following receipts:

Salaries ($60,000 for Lance, $42,000 for Wanda) $102,000 Interest income City of Albuquerque general purpose bonds $1,000 Ford Motor Company bonds 1,100 Ally Bank certificate of deposit 400 2,500 Annual gifts from parents 26,000 Lottery winnings 600 Federal income tax refund (for tax year 2021) 400

The Deans had the following expenditures for 2021:

Medical expenses (not covered by insurance) $7,200 Taxes Property taxes on personal residence $3,600 State of New Mexico income tax (includes amount withheld from wages during 2021) 4,200 7,800 Interest on home mortgage (First National Bank) 6,000 Charitable contributions (cash) 3,600 Life insurance premiums (policy on Lance's life) 1,200 Contribution to traditional IRA (on Wanda's behalf) 6,000

Traffic fines 300 Contribution to the reelection campaign fund of the mayor of Santa Fe 500 Funeral expenses for Wayne Boyle 6,300

Life insurance premiums, traffic fines, political contributions, and funeral costs are not deductible. A contribution to a traditional IRA is a deduction for AGI.

Additional Provisions for 2020 and 2021. As a result of COVID-19 related legislation, charitable contributions made in the 2020 and 2021 tax years enjoy additional tax benefits. (Hint: what year is the tax form for?)

a. In both 2020 and 2021, the deduction limit for cash contributions is increased to 100 percent of AGI (from 60 percent of AGI).

b. In 2021, individuals who do not itemize are allowed to claim a from AGI deduction of up to $300 for charitable contributions made in cash ($600 for married couples filing jointly); this deduction is in addition to the taxpayers standard deduction

Federal income tax withheld is $4,900 (Lance) and $1,800 (Wanda). The proper amount of Social Security and Medicare tax was withheld.

Assume that the Deans are eligible for a recovery rebate credit of $1,000.

They do not own and did not use any virtual currency during the year, and they do not want to contribute to the Presidential Election Campaign Fund.

Required:

Determine the Federal income tax for 2021 for the Deans on a joint return by completing the appropriate forms. Use Form 1040 and Schedule 1 to complete this tax return. If an overpayment results, it is to be refunded to them. Note: For 2021, non-itemizers may deduct up to $300 of cash charitable contributions.