Assume the taxpayer does NOT wish to contribute to the Presidential Election Fund, unless otherwise stated in the problem. In addition, the taxpayers did NOT receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency during the year. Derrick and Ani Jones are married taxpayers, filing jointly, and have a son named Jackson. They live at 474 Rustic Drive, Spokane, WA 99201. Ani works as the director of information systems at Washington Community College District (WCCD). Derrick is a stay-at-home dad. Their SSNs are Derrick, 412-34-5670; Ani, 412-34-5671; and Jackson, 412-34-5672. Their birth dates are as follows: Derrick, June 7, 1981; Ani, March 20, 1982; and Jackson, October 10, 2014. The Joneses own their home and paid $15,000 in mortgage interest during the year to Chase Bank and property taxes of $3,200. Assume they have no other deductible expenses. The Form W-2 Ani received from WCCD contained the following information: Wages Federal W/H Social security wages Social security W/H (box 1) = (box 2) = (box 3) (box 4) $ 79,002.50 = $ 7,000.14 $ 79,002.50 $ 4,898.16 Medicare wages (box 5) Medicare W/H (box 6) = $ 79,002.50 $ 1,145.54 In addition, the Joneses own a small, four-unit rental at 12345 Rainbow Way, Sultan, WA 98294. The rental was purchased and placed in service on July 1, 2008, and was rented for the entire year. The following income and expense information relates to the rental activity. For the purpose of this return problem, do not consider passive activity rules or limitations. Rental income Real estate taxes State sales taxes Utilities Mortgage interest Depreciation Repairs and maintenance Required: $ 24,000 2,000 1,349 1,500 3,800 7,200 1,300 Prepare the Joneses' federal tax return for 2021. Use Form 1040, Schedule 1, Schedule E, Schedule 8812, and Form 8995. Assume they do not qualify for any credits other than the child care credit. If using tax software, the software will calculate Child Tax Credit automatically. For any missing information, make reasonable assumptions. The net rental income qualifies for the 20 percent qualified business income deduction. Use the appropriate Tax Tables or Tax Rate Schedules. Note: List the names of the taxpayers in the order in which they appear in the problem. Input all the values as positive numbers. Instructions can be found on certain cells within the forms. Round your final answers to the nearest whole dollar amount. Do not skip rows, while entering in Dependents section of Form 1040 PG1. 1040 PG 1 1040 PG 2 Schedule 1 Schedule E Schedule 8812 Form 8995 Page 1 of Form 1040. Use provided information and follow instructions on form. Form 1040 Department of the Treasury-Internal Revenue Service (99) U.S. Individual Income Tax Return 2021 Single Married filing jointly Filing Status Check only one box. OMB No. 1545-0074 IRS Use Only-Do not write or staple in this space. Qualifying widow(er) (QW) Married filing separately (MFS) Head of household (HOH) If you checked the MFS box, enter the name of your spouse. If you checked the HOH or QW box, enter the child's name if the qualifying person is a child but not your dependent. Your first name and middle initial If joint return, spouse's first name and middle initial Home address (number and street). If you have a P.O. box, see instructions. City, town, or post office. If you have a foreign address, also complete spaces below. Last name Last name Apartment number Your social security number (Enter as xxx-xx-xxxx) Spouse's social security number (Enter as xxx-xx-xxxx) Presidential Election Campaign Check here if you, or your spouse if filing jointly, want $3 to go to this fund. Checking a box below will not change your tax or refund. Foreign country name Foreign province/state/county Foreign postal code At any time during 2021, did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency? You Spouse Yes No Standard Someone can claim: You as a dependent Your spouse as a dependent Deduction Spouse itemizes on a separate return or you were a dual-status alien Age/Blindness Dependents You: Were born before January 2, 1957 Are blind Spouse: (see instructions): (2) Social security number Was bom before January 2, 1957 (3) Relationship to you Is blind (4) if qualifies for (see instructions): If more than four dependents, see instructions and check here (1) First name Last name (Enter as xxx-XX-XXXX) Child tax credit Credit for other dependents 1 1 Wages, salaries, tips, etc. Attach Form(s) W-2 Attach Schedule B if 2a Tax-exempt interest 2a b Taxable interest 2b required. 3a Qualified dividends 3a b Ordinary dividends 3b 4a IRA distributions 5a Pensions and annuities 6a Social security benefits 4a b Taxable amount 4b 5a b Taxable amount 5b b Taxable amount At any time during 2021, did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency? Standard Someone can claim: You as a dependent Your spouse as a dependent Deduction Age/Blindness You: Spouse itemizes on a separate return or you were a dual-status alien Dependents If more than four dependents, see instructions and check here Yes No Were born before January 2, 1957 Are blind Spouse: Was born before January 2, 1957 Is blind (2) Social security number (3) Relationship to you (4) if qualifies for (see instructions): (Enter as xxx-XX-XXXX) Child tax credit Credit for other dependents (see instructions): (1) First name Last name 1 Wages, salaries, tips, etc. Attach Form(s) W-2 1 Attach Schedule B if 2a Tax-exempt interest 2a b Taxable interest 2b required. 3a Qualified dividends b Ordinary dividends 3b 4a IRA distributions 4a b Taxable amount 4b 5a Pensions and annuities 5a b Taxable amount 5b 6a Social security benefits b Taxable amount 6b 7 Capital gain or (loss). Attach Schedule D if required. If not required, check here 7 8 8 Other income from Schedule 1, line 10 9 Add lines 1, 2b, 3b, 4b, 5b, 6b, 7, and 8. This is your total income 9 10 Adjustments to income from Schedule 1, line 26 Standard Deduction for- Single or Married filing separately, $12,550 Married filing jointly or Qualifying widow(er), $25,100 Head of household, $18,800 If you checked any box under Standard Deduction, see instructions. 11 Subtract line 10 from line 9. This is your adjusted gross income b Charitable contributions if you take the standard deduction (see instructions) c Add lines 12a and 12b 13 Qualified business income deduction from Form 8995 or Form 8995-A 14 Add lines 12c and 13 10 11 12a Standard deduction or itemized deductions (from Schedule A) 12a 12b 12c 13 14 15 Taxable income. Subtract line 14 from line 11. If zero or less, enter -0- 15 For Disclosure, Privacy Act, and Paperwork Reduction Act Notice, see separate instructions. Cat. No. 11320B Form 1040 (2021) THIS FORM IS A SIMULATION OF AN OFFICIAL U.S. TAX FORM. IT IS NOT THE OFFICIAL FORM ITSELF. DO NOT USE THIS FORM FOR TAX FILINGS 1040 PG 1 1040 PG 2 Schedule 1 Schedule E Schedule 8812 Form 8995 Page 2 of Form 1040. Some information does not carry over from Page 1. Use provided information and follow instructions on form. Form 1040 (2021) 16 Tax (see instructions). Check if any from Form(s): (1) 8814 (2) 4972 (3) 17 Amount from Schedule 2, line 3 Page 2 16 17 18 19 20 21 22 23 24 18 Add lines 16 and 17 19 Nonrefundable child tax credit or credit for other dependents from Schedule 8812 20 Amount from Schedule 3, line 8 21 Add lines 19 and 20 22 Subtract line 21 from line 18. If zero or less, enter -0- 23 Other taxes, including self-employment tax, from Schedule 2, line 21 24 Add lines 22 and 23. This is your total tax 25 Federal income tax withheld from: a Form(s) W-2 b Form(s) 1099 c Other forms (see instructions) d Add lines 25a through 25c 26 2021 estimated tax payments and amount applied from 2020 return If you have a 27a Earned income credit (EIC) 25a 25b 25c 25d 26 27a qualifying child, attach Schedule EIC. Check here if you had not reached the age of 19 by December 31, 2021, and satisfy all other requirements for claiming the EIC. See instructions b Nontaxable combat pay election 27b c Prior year (2019) earned income 27c 28 Refundable child tax credit or additional child tax credit from Schedule 8812 28 29 American opportunity credit from Form 8863, line 8 29 30 Recovery rebate credit. See instructions 30 31 Amount from Schedule 3, line 15 32 Add lines 27a and 28 through 31. These are your total other payments and refundable credits 33 Add lines 25d, 26, and 32. These are your total payments 34 If line 33 is more than line 24, subtract line 24 from line 33. This is the amount you overpaid 31 32 33 34 Refund 35a Amount of line 34 you want refunded to you. If Form 8888 is attached, check here 35a 28 Refundable child tax credit or additional child tax credit from Schedule 8812 29 American opportunity credit from Form 8863, line 8 30 Recovery rebate credit. See instructions 31 Amount from Schedule 3, line 15 32 Add lines 27a and 28 through 31. These are your total other payments and refundable credits 33 Add lines 25d, 26, and 32. These are your total payments 34 If line 33 is more than line 24, subtract line 24 from line 33. This is the amount you overpaid Refund 35a Amount of line 34 you want refunded to you. If Form 8888 is attached, check here b Routing number : d Account number Direct deposit? See instructions. Amount You Owe 36 Amount of line 34 you want applied to your 2022 estimated tax 37 Amount you owe. Subtract line 33 from line 24. For details on how to pay, see instructions 38 Estimated tax penalty (see instructions) Third Party Do you want to allow another person to discuss this return with the IRS? See instructions Designee Designee's name Phone no. Checking 28 29 30 31 32 33 34 35a Savings 36 37 38 Yes. Complete below. No Personal identification number (PIN) Sign Here Joint return? See instructions. Keep a copy for your records. Under penalties of perjury, I declare that I have examined this return and accompanying schedules and statements, and to the best of my knowledge and belief, they are true, correct, and complete. Declaration of preparer (other than taxpayer) is based on all information of which preparer has any knowledge. Your signature Date Spouse's signature. If a joint return, both must sign. Date Your occupation Spouse's occupation If the IRS sent you an Identity Protection PIN, enter it here (see inst.) If the IRS sent your spouse an Identity Protection PIN, enter it here (see inst.) Phone no. Preparer's name Paid Preparer Use Only Firm's name Firm's address Email address Preparer's signature Date PTIN Phone no. Firm's EIN Check if: Self-employed THIS FORM IS A SIMULATION OF AN OFFICIAL U.S. TAX FORM. IT IS NOT THE OFFICIAL FORM ITSELF. DO NOT USE THIS FORM FOR TAX FILINGS OR FOR ANY PURPOSE OTHER THAN EDUCATIONAL 2022 McGraw Hill Education Form 1040 (2021) DepartmenE OF BIG TROUSLY Internal Revenue Service Name(s) shown on Form 1040, 1040-SR, or 1040-NR ARCHIVI VIL TUTU, LUTUTOIN, SZE INTUITIVE Go to www.irs.gov/Form 1040 for instructions and the latest information. Attachment Sequence No. 01 Your social security number Part I Additional Income 1 Taxable refunds, credits, or offsets of state and local income taxes 2a Alimony received b Date of original divorce or separation agreement (see instructions) 3 Business income or (loss). Attach Schedule C 4 Other gains or (losses). Attach Form 4797 5 Rental real estate, royalties, partnerships, S corporations, trusts, etc. Attach Schedule E 6 Farm income or (loss). Attach Schedule F 7 Unemployment compensation 8 Other income: a Net operating loss b Gambling income c Cancellation of debt d Foreign earned income exclusion from Form 2555 e Taxable Health Savings Account distribution f Alaska Permanent Fund dividends g Jury duty pay h Prizes and awards i Activity not engaged in for profit income j Stock options k Income from the rental of personal property if you engaged in the rental for profit but were not in the business of renting such property I Olympic and Paralympic medals and USOC prize money (see instructions) m Section 951(a) inclusion (see instructions) n Section 951A(a) inclusion (see instructions) o Section 461(1) excess business loss adjustment p Taxable distributions from an ABLE account (see instructions) z Other income. List type and amount 9 Total other income. Add lines 8a through 8z 10 Combine lines 1 through 7 and 9. Enter here and on Form 1040, 1040-SR, or 1040-NR, line 8 For Paperwork Reduction Act Notice, see your tax return instructions. Cat. No. 71479F 8a 8b 8c 8d 8e 8f 8g 8h 8i 8j 8k 81 8m 8n 80 8p 8z 1 2a 3 4 5 6 7 9 10 Schedule 1 (Form 1040) 2021 1040 PG 1 1040 PG 2 Schedule 1 Schedule E Schedule 8812 Form 8995 Schedule E of Form 1040. SCHEDULE E (Form 1040) Department of the Treasury Internal Revenue Service (99) Name(s) shown on return Supplemental Income and Loss (From rental real estate, royalties, partnerships, S corporations, estates, trusts, REMICs, etc.) Attach to Form 1040, 1040-SR, 1040-NR, or 1041. Go to www.irs.gov/Schedule for instructions and the latest information. OMB No. 1545-0074 2021 Attachment Sequence No. 13 Your social security number Note: If you are in the business of renting personal property, use Part I Income or Loss From Rental Real Estate and Royalties Schedule C. See instructions. If you are an individual, report farm rental income or loss from Form 4835 on page 2, line 40. A Did you make any payments in 2021 that would require you to file Form(s) 1099? See instructions B If "Yes," did you or will you file required Form(s) 1099? Yes No Yes No 1a A B C 1b A B Physical address of each property (street, city, state, ZIP code) Type of Property (from list below) 2 For each rental real estate property listed above, report the number of fair rental and personal use days. Check the QJV box only if you meet the requirements to file as a qualified joint venture. See instructions. C Type of Property: 1 Single Family Residence 2 Multi-Family Residence Income: 3 Rents received 4 Royalties received Expenses 5 Advertising 6 Auto and travel (see instructions) 7 Cleaning and maintenance 8 Commissions 9 Insurance 10 Legal and other professional fees 11 Management fees 3 Vacation/Short-Term Rental 4 Commercial 12 Mortgage interest paid to banks, etc. (see instructions) 13 Other interest 14 Repairs Properties: 5 Land 6 Royalties Fair Rental Days Personal Use Days QJV A B C A 3 4 5 6 7 8 9 10 11 12 13 14 7 Self-Rental 8 Other (describe) B qualled joint See Instructions. A 3 4 Type of Property: 1 Single Family Residence 2 Multi-Family Residence Income: 3 Rents received 4 Royalties received Expenses 5 Advertising 6 Auto and travel (see instructions) 7 Cleaning and maintenance 8 Commissions 9 Insurance 10 Legal and other professional fees 11 Management fees 3 Vacation/Short-Term Rental 4 Commercial 12 Mortgage interest paid to banks, etc. (see instructions) 13 Other interest 5 Land 6 Royalties Properties: 5 6 7 8 9 10 11 12 14 Repairs 15 Supplies 16 Taxes 17 Utilities 18 Depreciation expense or depletion 19 Other (list) 20 Total expenses. Add lines 5 through 19 13 14 15 16 17 18 19 20 7 Self-Rental 8 Other (describe) B 21 Subtract line 20 from line 3 (rents) and/or 4 (royalties). If result is a (loss), see instructions to find out if you must file Form 6198 21 22 Deductible rental real estate loss after limitation, if any, on Form 8582 (see instructions) 22 23 a Total of all amounts reported on line 3 for all rental properties b Total of all amounts reported on line 4 for all royalty properties c Total of all amounts reported on line 12 for all properties 23a 23b 23c d Total of all amounts reported on line 18 for all properties e Total of all amounts reported on line 20 for all properties 23d 23e 24 25 24 Income. Add positive amounts shown on line 21. Do not include any losses 25 Losses. Add royalty losses from line 21 and rental real estate losses from line 22. Enter total losses here 26 Total rental real estate and royalty income or (loss). Combine lines 24 and 25. Enter the result here. If Parts II, III, IV, and line 40 on page 2 do not apply to you, also enter this amount on Schedule 1 (Form 1040), line 5. Otherwise, include this amount in the total on line 41 on page 2 For Paperwork Reduction Act Notice, see the separate instructions. Cat. No. 11344L 26 Schedule E (Form 1040) 2021 THIS FORM IS A SIMULATION OF AN OFFICIAL U.S. TAX FORM. IT IS NOT THE OFFICIAL FORM ITSELF. DO NOT USE THIS FORM FOR 1040 PG 1 1040 PG 2 Schedule 1 Schedule E Schedule 8812 Form 8995 Schedule 8812. SCHEDULE 8812 (Form 1040) Credits for Qualifying Children and Other Dependents Attach to Form 1040, 1040-SR, or 1040-NR. Go to www.irs.gov/Schedule 8812 for instructions and the latest information. Department of the Treasury Internal Revenue Service (99) Name(s) shown on return Part I-A Child Tax Credit and Credit for Other Dependents 1 Enter the amount from line 11 of your Form 1040, 1040-SR, or 1040-NR 2a Enter income from Puerto Rico that you excluded b Enter the amounts from lines 45 and 50 of your Form 2555 c Enter the amount from line 15 of your Form 4563 d Add lines 2a through 2c 3 Add lines 1 and 2d 4a Number of qualifying children under age 18 with the required social security number b Number of children included on line 4a who were under age 6 at the end of 2021 c Subtract line 4b from line 4a 5 If line 4a is more than zero, enter the amount from the Line 5 Worksheet; otherwise, enter -0- 6 Number of other dependents, including any qualifying children who are not under age 18 or who do not have the required social security number Caution: Do not include yourself, your spouse, or anyone who is not a U.S. citizen, U.S. national, or U.S. resident alien. Also, do not include anyone you included on line 4a. 7 Multiply line 6 by $500 8 Add lines 5 and 7 9 Enter the amount shown below for your filing status. Married filing jointly-$400,000 All other filing statuses-$200,000 10 Subtract line 9 from line 3. If zero or less, enter -0- If more than zero and not a multiple of $1,000, enter the next multiple of $1,000. For example, if the result is $425, enter $1,000; if the result is $1,025, enter $2,000, etc. 11 Multiply line 10 by 5% (0.05) 2a 2b 2c OMB No. 1545-0074 2021 Attachment Sequence No. 47 Your social security number 1 2d 3 4a 4b 4c 5 6 7 8 9 10 11 Multiply line o by savv 8 Add lines 5 and 7 9 Enter the amount shown below for your filing status. Married filing jointly-$400,000 All other filing statuses-$200,000 10 Subtract line 9 from line 3. If zero or less, enter -0- If more than zero and not a multiple of $1,000, enter the next multiple of $1,000. For example, if the result is $425, enter $1,000; if the result is $1,025, enter $2,000, etc. 11 Multiply line 10 by 5% (0.05) 12 Subtract line 11 from line 8. If zero or less, enter -0- 13 Check all the boxes that apply to you (or your spouse if married filing jointly). A Check here if you (or your spouse if married filing jointly) have a principal place of abode in the United States for more than half of 2021 B Check here if you (or your spouse if married filing jointly) are a bona fide resident of Puerto Rico for 2021 Filers Who Check a Box on Line 13 Part I-B Caution: If you did not check a box on line 13, do not complete Part I-B; instead, skip to Part I-C. 14a Enter the smaller of line 7 or line 12 b Subtract line 14a from line 12 c If line 14a is zero, enter -0-; otherwise, enter the amount from the Credit Limit Worksheet A d Enter the smaller of line 14a or line 14c e Add lines 14b and 14d f Enter the aggregate amount of advance child tax credit payments you (and your spouse if filing jointly) received for 2021. See your Letter(s) 6419 for the amounts to include on this line. If you are missing Letter 6419, see the instructions before entering an amount on this line Caution: If the amount on this line doesn't match the aggregate amounts reported to you (and your spouse if filing jointly) on your Letter(s) 6419, the processing of your return will be delayed. g Subtract line 14f from line 14e. If zero or less, enter -0- on lines 14g through 14i and go to Part III h Enter the smaller of line 14d or line 14g. This is your credit for other dependents. Enter this amount on line 19 of your Form 1040, 1040-SR, or 1040-NR i Subtract line 14h from line 14g. This is your refundable child tax credit. Enter this amount on line 28 of your Form 1040, 1040-SR, or 1040-NR Cat. No. 59761M For Paperwork Reduction Act Notice, see your tax return instructions. 8 9 10 11 12 14a 14b 14c 14d 14e 14f THIS FORM IS A SIMULATION OF AN OFFICIAL U.S. TAX FORM. IT IS NOT THE OFFICIAL FORM ITSELF. DO NOT USE THIS FORM FOR TAX FILINGS OR FOR ANY PURPOSE OTHER THAN EDUCATIONAL. 2022 McGraw-Hill Education. 14g 14h 14i Schedule 8812 (Form 1040) 2021 1040 PG 1 1040 PG 2 Schedule 1 Schedule E Schedule 8812 Form 8995 Form 8995. Form 8995 Department of the Treasury Internal Revenue Service Name(s) shown on return Qualified Business Income Deduction Simplified Computation Attach to your tax return. Go to www.irs.gov/Form8995 for instructions and the latest information. OMB No. 1545-0123 2021 Attachment Sequence No. 55 Identifying number(xxx-xx-xxxx) Note. You can claim the qualified business income deduction only if you have qualified business income from a qualified trade or business, real estate investment trust dividends, publicly traded partnership income, or a domestic production activities deduction passed through from an agricultural or horticultural cooperative. See instructions. Use this form if your taxable income, before your qualified business income deduction, is at or below $163,300 ($326,600 if married filing jointly), and you aren't a patron of an agricultural or horticultural cooperative. (a) Trade, business, or aggregation name b) Taxpayer identification number (c) Qualified business income or (loss) iv V 2 3 Total qualified business income or (loss). Combine lines 1i through 1v, column (c) Qualified business net (loss) carryforward from the prior year 2 (Enter as negative) 3 4 Total qualified business income. Combine lines 2 and 3. If zero or less, enter -0- 4 5 Qualified business income component. Multiply line 4 by 20% (0.20) 5 6 7 Qualified REIT dividends and publicly traded partnership (PTP) income or (loss) (see instructions) Qualified REIT dividends and qualified PTP (loss) carryforward from the prior year 6 (Enter as negative) 7 8 Total qualified REIT dividends and PTP income. Combine lines 6 and 7. If zero or less, enter -0- 8 9 REIT and PTP component. Multiply line 8 by 20% (0.20) 9 10 Qualified business income deduction before the income limitation. Add lines 5 and 9 10 11 Taxable income before qualified business income deduction 11 12 Net capital gain (see instructions) 12 13 Subtract line 12 from line 11. If zero or less, enter -0- 13 14 Income limitation. Multiply line 13 by 20% (0.20) 15 16 Qualified business income deduction. Enter the lesser of line 10 or line 14. Also enter this amount on the applicable line of your return Total qualified business (loss) carryforward. Combine lines 2 and 3. If greater than zero, enter -0- 17 Total qualified REIT dividends and PTP (loss) carryforward. Combine lines 6 and 7. If greater than zero, enter -0- For Privacy Act and Paperwork Reduction Act Notice, see instructions. Cat. No. 37806C TUIG CORMICA CIMULATION OF AN OFFICIAL ILS TAX CODM. IT IS NOT THE OFFICIAL FODMITGELE DO NOT USE. 14 15 (Enter as negative) 16 (Enter as negative) 17 Form 8995 (2021)