1A. Richard McCarthy (born 2/14/1967; Social Security number 100-10-9090) and Christine McCarthy (born 6/1/1969; Social Security number 101-21-3434) have a 19-year-old son Jack, (born 10/2/2002; Social Security number 555-55-1212), who is a full-time student at the University of Key West. The McCarthys also have a 12-year-old daughter Justine, (Social Security number 444-23-1212), who lives with them. The McCarthys can claim a $2,000 child tax credit for Justine and a $500 other dependent credit for Jack. The McCarthys did not receive an EIP in 2021. Richard is the CEO at a paper company. His 2021 Form W-2

Christine is an optometrist and operates her own practice (The Eyes of March) in town as a sole proprietor. The shop address is 1030 Morgan Highway, Clarks Summit, PA 18411 and the business code is 621320. Christine keeps her books on the cash basis and her bookkeeper provided the following information:

Christine came into contact with a client that had COVID-19 and was unable to work September 2024, September 2730, and October 1st, 4th, and 5th (12 total days), under orders of state health officials. Her employees were unaffected. Her 2020 net earnings from self-employment were $45,212.

The McCarthys have a nanny/housekeeper whom they paid $12,600 during 2021. They did not withhold income or FICA taxes. The McCarthys paid Pennsylvania state unemployment tax of $378 in 2021.

Christine received a 2021 Form 1099-INT from the National Bank of Scranton that listed interest income of $23,500. Note that McCarthys reasonably allocate $751 to state income tax expense for purposes of the net investment income tax.

The McCarthys received a Form 1099-G from Pennsylvania that reported a $477 state income tax refund from 2020. The McCarthys filed a Schedule A in 2020 and had $14,223 of state income tax expense that was limited to a $10,000 deduction.

The McCarthys paid the following in 2021:

Complete the McCarthys federal tax return for 2021. Use Form 1040, Schedule 1, Schedule 2, Schedule 3, Schedule A, Schedule B, Schedule C, Schedule H, Schedule SE, Form 7202, Form 8995, Form 8959, and Form 8960 to complete this tax return. Make realistic assumptions about any missing data and ignore any alternative minimum tax. Do not complete Form 4952, which is used for depreciation.

Vopy D- 10 de ruec wiun cmpioyee o rCUEPAL I ax return. This information is being fumished to the Intemal Revenue Serviset GrosssalesReturnsInventory:BeginninginventoryPurchasesEndinginventoryRentInsuranceProfessionalfeesPayrollPayrolltaxesUtilitiesOfficeexpensesDepreciation$25,000122,00030,0005,000$270,0008,25024,00011,5003,20034,5002,7774,0001,995 Home mortgage interest reported on Form $15,625 1098 on mortgage of less than $750,000 Property taxes 5,500 Estimated state income tax payments 2,400 Estimated Federal income tax payments 4,500 Charitable contributions (all cash) 7,600 Student loan interest 2,690 Vopy D- 10 de ruec wiun cmpioyee o rCUEPAL I ax return. This information is being fumished to the Intemal Revenue Serviset GrosssalesReturnsInventory:BeginninginventoryPurchasesEndinginventoryRentInsuranceProfessionalfeesPayrollPayrolltaxesUtilitiesOfficeexpensesDepreciation$25,000122,00030,0005,000$270,0008,25024,00011,5003,20034,5002,7774,0001,995 Home mortgage interest reported on Form $15,625 1098 on mortgage of less than $750,000 Property taxes 5,500 Estimated state income tax payments 2,400 Estimated Federal income tax payments 4,500 Charitable contributions (all cash) 7,600 Student loan interest 2,690