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.