Chapter 2: Learning Activity

Scenario - Charlie and Cindy Clergy

Prepare a 2022 tax return for Charlie and Cindy Clergy.

Charlie Clergy (age 44, DOB: 5/2/78, SSN: 453-00-9863), whose Form W-2s and 1099s follow, is an ordained minister in the Episcopal Church. His wife, Cindy (age 46, DOB: 7/18/76, SSN: 453- 00-9864), a hair stylist, has financial information which follows. Neither wishes to designate $3 of their taxes for the Presidential Election Campaign Fund. The Clergys were covered by health insurance for the entire year.

During the year, Charlie performed weddings and funerals, for which he received honorariums totaling $2,300. He had no expenses related to this income because he performed all the ceremonies in the church. Charlie has not filed Form 4361.

Mr. Clergy's vehicle was placed in service on 1/2/2016. Mr. Clergy uses the standard mileage rate for his vehicle. The vehicle was available off-duty and the couple had another vehicle available for use. Mr. Clergy kept records detailing his mileage (incurred evenly throughout the year) and it is summarized below.

The Clergys own their home. Mr. Clergy's church paid their house payment and homeowners insurance, which resulted in a parsonage allowance of $12,164. The church also paid an allowance for Mr. Clergy's utilities in the amount of $2,166. The annual fair rental value of the home is $13,000.

The Clergys did not itemize last year. Mr. Clergy paid timely estimated taxes in the amount of $1,400 for federal per quarter and $400 for state per quarter. All estimated taxes were paid on their respective due dates, except for the last payment, which was paid on 12/31/2022.

Vehicle Information:
Total miles driven	36,280
Miles driven to visit parishioners' homes & hospitals (divided equally per month)	12,108
Commuting miles driven (daily commuting distance is 1 mile)	250
Other miles driven	23,922

Other Expenses:

Mortgage interest $ 6,392 Utility bills $ 2,166

Car expenses 4,000 Personal property taxes 194

Church contributions 4,322 Real estate taxes 745

IaEmployee's social security number453-00-9863	OMB No.1545-0008 Safe, accurate,Visitthe IRSwebsite at FAST!Use~~nr~ www.irs.gov/efi/e
bEmployer identification number (EIN)45-1112564	1Wages, tips, other compensation23216.00	2Federal income tax withheld
cEmployer's n address, and ZIP code Episcopal Church 5874 Hope Lane Your City, Your State - Your Zip	3Social security wages	4Social security tax withheld
5Medicare wages and tips	6Medicare tax withheld
7Social security tips	8Allocated tips
dControl number	9	I	10Dependent care benefits
eEmployee's first name and initial Last name Suff.Charlie Clergy fEmployee's address and ZIP code 1601 Devonshire Court Your City, Your State - Your Zip	11Nonqualified plans	12aSee instructions for box 12 C o d e I
13Statutory Retirement Third-party Employee plan sick pay	12b C o d e I
14Other Housing Allowance: 12164.00 Utilities Allowance: 2166.00	12c C o d e I
12d C o d e I
15State Employer's state ID numberYSI45-1112564	16State wages, tips, etc.23216.00	17State income tax1392.96	18Local wages, tips, etc.	19Local income tax	20Locality name
I

Wage and Tax FormW-2Statement

Copy B - To Be Filed with Employee's FEDERAL Tax Return.

This information is being furnished to the Internal Revenue Service.

20XX

Department of the Treasury - Internal Revenue Service

Copyright 2023, The Income Tax School, Inc. - All Rights Reserved

SQLA - 2.7

bEmployer identification number (EIN)54-2214451

IaEmployee's social security number453-00-9864

OMB No.1545-0008

Safe,accurate, VisittheIRSwebsite atFAST!Use~~nr~www.irs.gov/efi/e

1Wages, tips, other compensation18942.00

2Federal income tax withheld2841.30

cEmployer's name, address, and ZIP code

Classic Beauty Salon 1945 Wiggs Road Your City, Your State -Your Zip

3Social security wages 18942.00

4Social security tax withheld1174.40

5Medicare wages and tips18942.00

6Medicare tax withheld 274.66

7Social security tips

8Allocated tips

dControl number9I_J

10Dependent care benefits

eEmployee's first name and initial Last name Suff.Cindy Clergy

fEmployee's address and ZIP code

1601 Devonshire Court Your City, Your State - Your Zip

11Nonqualified plans

12aSee instructions for box 12

C o d e

I

13Statutory Retirement Third-party employee plan sick pay

12b

C o d e

I

14Other

12c

C o d e

I

12d

C o d e

I

15State Employer's state ID numberYSI54-2214451

16State wages, tips, etc.18942.00

17State income tax1136.52

18Local wages, tips, etc.

19Local income tax

20Locality name

I

Wage and Tax FormW-2Statement

Copy B - To Be Filed with Employee's FEDERAL Tax Return.

PAYER'S name, street address, city or town, state or province, country, ZIP or foreign postal code, and telephone no. Fidelity First Savings & Loan 9856 Johnson Street Your City, Your State - Your Zip	Payer's RTN (optional)	OMB No. 1545-0112 XXForm1099-INT ~@
1Interest income$678.00
2Early withdrawal penalty$
PAYER'S federal identification number 54-3333333	RECIPIENT'S identification number 453-00-9863
3Interest on U.S. Savings bonds and Treas. obligations$
RECIPIENT'S name Charlie and Cindy Clergy Street address (including apt. no.) 1601 Devonshire Court City or town, state or province, country and ZIP or foreign postal code Your City, Your State - Your Zip	4Federal income tax withheld$	5Investment expenses$
6Foreign tax paid$	7Foreign country or U.S. possession
8Tax-exempt interest$	9Specified private activity bond interest $
10Market Discount$	11Bond premium$
	FATCA filing requirement
12Bond premium on Treasury obligations$	13Bond premium on tax-exempt bond$
Account number (see instructions) 0000-89749-R2589	14Tax-exempt and tax credit bond CUSIP no.	15State	16State identification no.

Form1099-INT

Interest Income

Copy BFor Recipient

This is important tax information and is being furnished to the Internal Revenue Service. If you are required to file a return, a negligence penalty or other sanction may be imposed on you if this income is taxable and the IRS determines that it has not been reported.

17State tax withheld$ $

Department of the Treasury - Internal Revenue Service

Interest Income

Copy BFor Recipient

This is important tax information and is being furnished to the Internal Revenue Service. If you are required to file a return, a negligence penalty or other sanction may be imposed on you if this income is taxable and the IRS determines that it has not been reported.

17State tax withheld$ $

Department of the Treasury - Internal Revenue Service

PAYER'S name, street address, city or town, state or province, country, ZIP or foreign postal code, and telephone no. Nations Bank 8235 McGuire Avenue Your City, Your State - Your Zip	Payer's RTN (optional)	OMB No. 1545-0112 ~@XXForm1099-INT
1Interest income$98.00
2Early withdrawal penalty$
PAYER'S federal identification number 54-4444444	RECIPIENT'S identification number 453-00-9863
3Interest on U.S. Savings bonds and Treas. obligations$
RECIPIENT'S name Charlie and Cindy Clergy Street address (including apt. no.) 1601 Devonshire Court City or town, state or province, country and ZIP or foreign postal code Your City, Your State - Your Zip	4Federal income tax withheld$	5Investment expenses$
6Foreign tax paid$	7Foreign country or U.S. possession
8Tax-exempt interest$	9Specified private activity bond interest $
10Market Discount$	11Bond premium$
	FATCA filing requirement
12Bond premium on Treasury obligations$	13Bond premium on tax-exempt bond$
Account number (see instructions) 359-7811-SAV	14Tax-exempt and tax credit bond CUSIP no.	15State	16State identification no.

Form1099-

Answer the following question based on the tax return you prepared for Charlie and Clergy. Select the adjusted gross income (AGI):

a) $45,234 b) $42,158 c) $44,458 d) $42,936