You are a newly-hired tax professional with H&R Block. It’s April 13, 2021, and the Hoang family has come to you asking for you to do their taxes. Based on the following information: calculate their gross income, AGI, Caroline’s self-employment tax and Section 199A deduction and taxable income – in addition to filling out all necessary tax forms for their tax filing, which is due on April 15, 2021.

Background: Joe and Caroline Hoang are married U.S. citizens and both are 48 years old. They live in Arlington, Va. They have three children Leia, Harrison, and Rey for whom they provide over half of their support (somewhat reluctantly). Leia is 23 and a full time student American University – she lives on campus in one of the dorms. She hopes to graduate soon and join the Peace Corp. She earned $4,500 from a summer internship with Amnesty International. Harrison is 19 and applying to colleges after taking a year off between high school and college. He earned $6,200 in part-time work driving for Uber in 2020. He would have earned more if he had his own car. On the other hand, Rey is 14 and in high school. She has a strong entrepreneurial spirit and wants to be a venture capitalist someday. In the meantime, Rey has a thriving neighborhood babysitting and pet sitting business (Rey’s In-Home Kiddo and Pet Services). In 2020, she had earnings of $6,000 from her business. Disregard necessary alternative minimum tax calculations. Round all calculations to the nearest dollar. Assume Joe had $15,000 of wages withheld from his paychecks and Caroline made quarterly estimated payments amounting to $4,000. Disregard the applicable failure to pay penalty and its associated interest.

1) Joe returned to work in August 2020 after staying home with the kids has $60,000 in wages from his new employer, Anderson Consulting.

2) Caroline is self-employed as realtor in Arlington on a full time basis. Caroline works from an office space she leases from Coldwell Banker, not out of their home. Information about her business is determined below.
Gross Receipts from commissions $80,000
Ordinary and Necessary Business Expenses $40,000
Total Meals and Entertainment Expenses (not included above) $12,000

Note: Caroline’s ordinary and necessary business expenses can be separated as follows: 25% for legal and professional services, 25% for office expenses, 25% for utilities, 25% for rent of other business property.

3) Joe and Caroline have investments which generate the following items:

Wells Fargo Bank Savings Interest $5,000
Virginia State Bond Interest $1,000
United States Treasury Note Interest $4,000

4) Joe has a side business of building and developing board games that the IRS has characterized as a “hobby” for tax purposes. The information for this “hobby” is as follows:

Gross Receipts from customers $10,000
Ordinary and Necessary Business Expenses $15,000

5) Joe and Caroline have the following personal expenses:

Medical expenses $10,000
Deductible state and local taxes $12,000
Deductible Mortgage Interest on their home $9,000
Deductible charitable contributions $2,000

6) In 2019, Joe and Caroline had a combined AGI of $100K

Answer rating: 100% (QA)

Gross Income Joe and Caroline Hoangs gross income is 153500 This is calculated by taking the sum of the following amounts Joes wages of 60000 Carolines commissions of 80000 Wells Fargo Bank Savings In... View the full answer