Comprehensive Problem 5-1

John Williams (birthdate August 2, 1974) is a single taxpayer, and he lives at 1324 Forest Dr., Reno, NV 89501. His Social Security number is 555-94-9358. John's earnings and withholdings as the manager of a local casino for 2016 are reported on his Form W-2:

a Employee's social security number 555-94-9358

OMB No. 1545-0008

Safe, accurate, FAST! Use

IRSe ~ file

Visit the IRS website at www.irs.gov/efile

b

Employer identification number (EIN) 31-1459656

1

Wages, tips, other compensation 194,000.00

2

Federal income tax withheld 32,000.00

c

Employer's name, address, and ZIP code Lucky Ace Casino 700 N. Sierra Street Reno, NV 89503

3

Social security wages 118,500.00

4

Social security tax withheld 7,347.00

5

Medicare wages and tips 194,000.00

6

Medicare tax withheld 2,813.00

7

Social security tips

8

Allocated tips

d

Control number

9

10

Dependent care benefits

e

Employee's first name and initial John Williams 1324 Forest Drive Reno, NV 89501

Last name

Suff.

11

Nonqualified plans

12a

See instructions for box 12

C o d e

13

Statutory employee	Retirement plan	Third-party sick pay

12b

C o d e

14

Other

12c

C o d e

12d

C o d e

f

Employee's address and ZIP code

15 State NV	Employer's state ID number	16	State wages, tips, etc.	17	State income tax	18	Local wages, tips, etc.	19	Local income tax	20	Locality name

Form W-2

Wage and Tax Statement

2016

Department of the TreasuryInternal Revenue Service

Copy BTo Be Filed With Employee's FEDERAL Tax Return.

This information is being furnished to the Internal Revenue Service.

John's other income includes interest on a savings account at Nevada National Bank of $13,575.

John pays his ex-wife, Sarah McLoughlin, $4,000 per month. When their 12-year-old child (in the wife's custody) reaches 18, the payments are reduced to $2,750 per month. His ex-wife's Social Security number is 554-44-5555.

In 2016, John purchased a new car and so he kept track of his sales tax receipts during the year. His actual sales tax paid is $3,560, which exceeds the estimated amount per the IRS tables.

During the year, John paid the following amounts (all of which can be substantiated):

Credit card interest	$1,760
Auto loan interest	4,300
Auto insurance	900
Property taxes on personal residence	2,640
Blue Cross health insurance premiums	2,800
Other medical expenses	790
Income tax preparation fee	900
Charitable contributions:
Boy Scouts	1,350
St. Matthews Church	3,100
U. of Nevada (Reno) Medical School	26,900
Nevada Democratic Party	250
Fund-raising dinner for the Reno Auto Museum	100
(value of dinner is $25)

John also received the following Form 1098:

CORRECTED (if checked)

RECIPIENT'S/LENDER'S name, street address, city or town, state or province, country, ZIP or foreign postal code, and telephone no. Reno Bank & Trust 49 Commerce Street Reno, NV 89501

*Caution: The amount shown may not be fully deductible by you. Limits based on the loan amount and the cost and value of the secured property may apply. Also, you may only deduct interest to the extent it was incurred by you, actually paid by you, and not reimbursed by another person.

OMB No. 1545-0901 2016 (Rev. July 2016) Form 1098

Mortgage Interest Statement

1 Mortgage interest received from payer(s)/borrower(s)* $ 18,900.00

Copy B For Payer/Borrower The information in boxes 1 through 9 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 the IRS determines that an underpayment of tax results because you overstated a deduction for this mortgage interest or for these points, reported in boxes 1 and 6; or because you didn't report the refund of interest (box 4); or because you claimed a non-deductible item.

RECIPIENT'S/LENDER'S federal identification number 33-1234569

PAYER'S/BORROWER'S taxpayer identification no. 555-94-9358

2 Outstanding mortgage principal as of 1/1/2016 $594,400.00

3 Mortgage origination date 03/01/2001

4 Refund of overpaid interest $

5 Mortgage insurance premiums $

PAYER'S/BORROWER'S name John Williams

6 Points paid on purchase of principal residence $

Street address (including apt. no.) 1324 Forest Drive

7 Is address of property securing mortgage same as PAYER'S/BORROWER'S address?
If Yes, box is checked
If No, see box 8 or 9, below

City or town, state or province, country, and ZIP or foreign postal code Reno, NV 89501

10 Other

8 Address of property securing mortgage

Account number (see instructions)

9 If property securing mortgage has no address, below is the description of the property

Form 1098

(keep for your records)

www.irs.gov/form1098

Department of the Treasury - Internal Revenue Service

Click here to access the tax schedule to use for this problem.

Required:

Complete John's federal tax return for 2016. Use Form 1040, Schedule A, and Schedule B, to complete this tax return. Make realistic assumptions about any missing data.

Enter all amounts as positive numbers. If an amount box does not require an entry or the answer is zero, enter "0". If required round any dollar amount to the nearest dollar.

Form 1040

Department of the TreasuryInternal Revenue Service (99) U.S. Individual Income Tax Return

2016

OMB No. 1545-0074

IRS Use Only

For the year Jan. 1Dec. 31, 2016, or other tax year beginning

, 2016, ending

, 20

See separate instructions.

Your first name and initial John

Last name Williams

Your social security number 555-94-9358

If a joint return, spouse's first name and initial

Last name

Spouse's social security number

Home address (number and street). If you have a P.O. box, see instructions. 1324 Forest Drive

Apt. no.

Make sure the SSN(s) above and on line 6c are correct.

City, town or post office, state, and ZIP code. If you have a foreign address, also complete spaces below (see instructions). Reno, NV 89501

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. You Spouse

Foreign country name

Foreign province/state/country

Foreign postal code

Filing Status

Single

Exemptions	6a	Yes	Yourself. If someone can claim you as a dependent, do not check box 6a . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	}	Boxes checked on 6a and 6b
b	No	Spouse . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	No. of children on 6c who: lived with you
	c	Dependents:	(2) Dependent's social security number	(3) Dependent's relationship to you	(4) If child under age 17 qualifying for child tax credit (see instructions)
	(1)Firstname	Lastname	did not live with you due to divorce or separation (see instructions)
If more than four dependents, see instructions and check here
					Dependents on 6c not entered above
						Add numbers on lines above
d	Total number of exemptions claimed . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income Attach Form(s) W-2 here. Also attach Forms W-2G and 1099-R if tax was withheld. If you did not get a W-2, see instructions.	7	Wages, salaries, tips, etc. Attach Form(s) W-2 . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
8a	Taxable interest. Attach Schedule B if required . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8a
b	Tax-exempt interest. Do not include on line 8a . . . . . . .	8b
9a	Ordinary dividends. Attach Schedule B if required . . . . . . . . . . . . . . . . . . . . . . . . . .	9a
b	Qualified dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9b
10	Taxable refunds, credits, or offsets of state and local income taxes . . . . . . . . . . . . .	10
11	Alimony received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	11
12	Business income or (loss). Attach Schedule C or C-EZ . . . . . . . . . . . . . . . . . . . . . .	12
13	Capital gain or (loss). Attach Schedule D if required. If not required, check here		13
14	Other gains or (losses). Attach Form 4797 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	14
15a	IRA distributions . . . . . . . .	15a			b	Taxable amount . . .	15b
16a	Pensions and annuities . .	16a			b	Taxable amount . . .	16b
17	Rental real estate, royalties, partnerships, S corporations, trusts, etc. Attach Schedule E	17
18	Farm income or (loss). Attach Schedule F . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	18
19	Unemployment compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	19
20a	Social security benefits	20a			b	Taxable amount . . .	20b
21	Other income. List type and amount _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _	21
22	Combine the amounts in the far right column for lines 7 through 21. This is your total income	22
Adjusted Gross Income	23	Educator expenses . . . . . . . . . . . . . . . . . . . . . . .	23
24	Certain business expenses of reservists, performing artists, and fee-basis government officials. Attach Form 2106 or 2106-EZ	24
25	Health savings account deduction. Attach Form 8889 . . . .	25
26	Moving expenses. Attach Form 3903 . . . . . . . . . . . . . . . .	26
27	Deductible part of self-employment tax. Attach Schedule SE	27
28	Self-employed SEP, SIMPLE, and qualified plans . . . . . . .	28
29	Self-employed health insurance deduction . . . . . . . . . . .	29
30	Penalty on early withdrawal of savings . . . . . . . . . . . . . .	30
31a	Alimony paid b Recipient's SSN 554-44-5555	31a
32	IRA deduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	32
33	Student loan interest deduction . . . . . . . . . . . . . . . . . .	33
34	Tuition and fees. Attach Form 8917 . . . . . . . . . . . . .	34
35	Domestic production activities deduction. Attach Form 8903	35
36	Add lines 23 through 35 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	36
37	Subtract line 36 from line 22. This is your adjusted gross income . . . . . . . . . . .		37

For Disclosure, Privacy Act, and Paperwork Reduction Act Notice, see separate instructions.

Cat. No. 11320B

Form 1040 (2016)

Form 1040 (2016)

John Williams

555-94-9358

Page 2

38

Amount from line 37 (adjusted gross income)

38

Tax and Credits

39a

Check if:

{

You were born before January 2, 1952, Blind. Spouse was born before January 2, 1952, Blind.

}

Total boxes checked 39a

b

If your spouse itemizes on a separate return or you were a dual-status alien, check here 39b . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Standard Deduction for

People who check any box on line 39a or 39b or who can be claimed as a dependent, see instructions.

All others:

Single or Married filing separately, $6,300

Married filing jointly or Qualifying widow(er), $12,600

Head of household, $9,300

40

Itemized deductions (from Schedule A) or your standard deduction (see left margin)

40

41

Subtract line 40 from line 38 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

41

42

Exemptions. If line 38 is $155,650 or less, multiply $4,050 by the number on line 6d. Otherwise, see instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

42

43

Taxable income. Subtract line 42 from line 41. If line 42 is more than line 41, enter -0-

43

44

Tax (see instructions). Check if any from: a Form(s) 8814 b Form 4972 c

44

45

Alternative minimum tax (see instructions). Attach Form 6251 . . . . . . . . . . . . . . .

45

46

Excess advance premium tax credit repayment. Attach Form 8962 . . . . . . . . . . . . . .

46

47

Add lines 44, 45, and 46 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

47

48

Foreign tax credit. Attach Form 1116 if required . . . . . . . . . . . . .

48

49

Credit for child and dependent care expenses. Attach Form 2441

49

50

Education credits from Form 8863, line 19 . . . . . . . . . . . . . . . .

50

51

Retirement savings contributions credit. Attach Form 8880 . . .

51

52

Child tax credit. Attach Schedule 8812, if required . . . . . . . . . . .

52

53

Residential energy credits. Attach Form 5695 . . . . . . . . . . . . .

53

54

Other credits from Form: a 3800 b 8801 c

54

55

Add lines 48 through 54. These are your total credits . . . . . . . . . . . . . . . . . . . . . . . . .

55

56

Subtract line 55 from line 47. If line 55 is more than line 47, enter -0- . . . . . . . . . . . .

56

Other Taxes

57

Self-employment tax. Attach Schedule SE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

57

58

Unreported social security and Medicare tax from Form: a 4137 b 8919 . . . . . . . .

58

59

Additional tax on IRAs, other qualified retirement plans, etc. Attach Form 5329 if required

59

60a

Household employment taxes from Schedule H . . . . . . . . . . . . . . . . . . . . . . . . . . . .

60a

b

First-time homebuyer credit repayment. Attach Form 5405 if required . . . . . . . . . . . .

60b

61

Health care: individual responsibility (see instructions)

Full-year coverage

61

62

Taxes from: a Form 8959 b Form 8960 c Instructions; enter code(s) _ _ __ _ _

62

63

Add lines 56 through 62. This is your total tax . . . . . . . . . . . . . . . . . . . . . . . . . . . .

63

Payments	64	Federal income tax withheld from Forms W-2 and 1099 . . . . . .	64
If you have a qualifying child, attach Schedule EIC.	65	2016 estimated tax payments and amount applied from 2015 return	65
66a	Earned income credit (EIC) . . . . . . . . . . . . . . . . . . . . . . . .	66a
b	Nontaxable combat pay election . . . . . . .	66b
67	Additional child tax credit. Attach Schedule 8812 . . . . . . . . . . . .	67
	68	American opportunity credit from Form 8863, line 8 . . . . . . . . . .	68
	69	Net premium tax credit. Attach Form 8962 . . . . . . . . . . . . . . . .	69
	70	Amount paid with request for extension to file . . . . . . . . . . . . . .	70
	71	Excess social security and tier 1 RRTA tax withheld . . . . . . . . . .	71
	72	Credit for federal tax on fuels. Attach Form 4136 . . . . . . . . . . . .	72
	73	Credits from Form:a 2439 b Reserved c 8885 d		73
	74	Add lines 64, 65, 66a, and 67 through 73. These are your total payments . . . . . . .		74

Refund

75

If line 74 is more than line 63, subtract line 63 from line 74. This is the amount you overpaid

75

76a

Amount of line 75 you want refunded to you. If Form 8888 is attached, check here

76a

Direct deposit? See instructions.

b

Routing number

c Type: Checking Savings

d

Account number

77

Amount of line 75 you want applied to your 2017 estimated tax

77

Amount You Owe

78

Amount you owe. Subtract line 74 from line 63. For details on how to pay, see instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

78

79

Estimated tax penalty (see instructions) . . . . . . . . . . . . . . . . . .

79

Third Party Designee

Do you want to allow another person to discuss this return with the IRS (see instructions)? Yes. Complete below. No

Designee's name

Phone 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 John Williams

Date

Your occupation Manager

Daytime phone number

Spouse's signature. If a joint return, both must sign.

Date

Spouse's occupation

If the IRS sent you an Identity Protection PIN, enter it here (see inst.)

Paid Preparer Use Only		Print/Type preparer's name	Preparer's signature	Date	Check if self-employed	PTIN
Firm's name	Firm's EIN
Firm's address	Phone no.
www.irs.gov/form1040	Form 1040 (2016)

SCHEDULE A (Form 1040) Department of the Treasury Internal Revenue Service (99)	Itemized Deductions Information about Schedule A and its separate instructions is at www.irs.gov/schedulea. Attach to Form 1040.	OMB No. 1545-0074
2016 Attachment Sequence No. 07

Name(s) shown on Form 1040 John Williams	Your social security number 555-94-9358
		Caution: Do not include expenses reimbursed or paid by others.
Medical and Dental Expenses	1	Medical and dental expenses (see instructions) . . . . . . . . . . . . . .	1
2	Enter amount from Form 1040, line 38	2
3	Multiply line 2 by 10% (0.10). But if either you or your spouse was born before January 2, 1952, multiply line 2 by 7.5% (0.075) instead
3
4	Subtract line 3 from line 1. If line 3 is more than line 1, enter -0- . . . . . . . . . . . . . . . . . . . .	4
Taxes You Paid	5	State and local
	a Income taxes, or	}	. . . . . . . . . . . . . . . . . . . . . . .	5
	b General Sales Taxes
6	Real estate taxes (see instructions) . . . . . . . . . . . . . . . . . . .	6
7	Personal property taxes . . . . . . . . . . . . . . . . . . . . . . . . . .	7
8	Other taxes. List type and amount _ _ _ _ _ _ _ _ _ _ _ _ _ _
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _	8
9	Add lines 5 through 8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
Interest You Paid Note: Your mortgage interest deduction may be limited (see instructions).	10	Home mortgage interest and points reported to you on Form 1098	10
11	Home mortgage interest not reported to you on Form 1098. If paid to the person from whom you bought the home, see instructions and show that person's name, identifying no., and address _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
	_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _	11
12	Points not reported to you on Form 1098. See instructions for special rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	12
13	Mortgage insurance premiums (see instructions) . . . . . . . . . . . . .	13
14	Investment interest. Attach Form 4952 if required. (See instructions.)	14
15	Add lines 10 through 14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	15
Gifts to Charity If you made a gift and got a benefit for it, see instructions.	16	Gifts by cash or check. If you made any gift of $250 or more,
see instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	16
17	Other than by cash or check. If any gift of $250 or more, see instructions. You must attach Form 8283 if over $500 . . . . . .	17
18	Carryover from prior year . . . . . . . . . . . . . . . . . . . . . . . . . .	18
19	Add lines 16 through 18 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	19
Casualty and Theft Losses	20	Casualty or theft loss(es). Attach Form 4684. (See instructions.) . . . . . . . . . . . . . . . .	20
Job Expenses and Certain Miscellaneous Deductions	21	Unreimbursed employee expensesjob travel, union dues, job education, etc. Attach Form 2106 or 2106-EZ if required.
(See instructions.) _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _	21
22	Tax preparation fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	22
23	Other expensesinvestment, safe deposit box, etc. List type and amount _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
	_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _	23
24	Add lines 21 through 23 . . . . . . . . . . . . . . . . . . . . . . . . . . .	24
25	Enter amount from Form 1040, line 38	25
26	Multiply line 25 by 2% (0.02) . . . . . . . . . . . . . . . . . . . . . . . .	26
27	Subtract line 26 from line 24. If line 26 is more than line 24, enter -0- . . . . . . . . . . . . .	27
Other Miscellaneous Deductions	28	Otherfrom list in instructions. List type and amount _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
	28

Total Itemized Deductions	29	Is Form 1040, line 38, over $155,650?
		No. Your deduction is not limited. Add the amounts in the far right column for lines 4 through 28. Also, enter this amount on Form 1040, line 40.	}	. . . . . . .	29
		Yes. Your deduction may be limited. See the Itemized Deductions Worksheet in the instructions to figure the amount to enter.
30	If you elect to itemize deductions even though they are less than your standard deduction, check here . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

For Paperwork Reduction Act Notice, see Form 1040 instructions.

Cat. No. 17145C

Schedule A (Form 1040) 2016

SCHEDULE B (Form 1040A or 1040) Department of the Treasury Internal Revenue Service (99)	Interest and Ordinary Dividends Attach to Form 1040A or 1040. Information about Schedule B and its instructions is at www.irs.gov/scheduleb.	OMB No. 1545-0074
2016 Attachment Sequence No. 08

Name(s) shown on return John Williams	Your social security number 555-94-9358
Part I Interest (See instructions on back and the instructions for Form 1040A, or Form 1040, line 8a.) Note: If you received a Form 1099-INT, Form 1099-OID, or substitute statement from a brokerage firm, list the firm's name as the payer and enter the total interest shown on that form.	1	List name of payer. If any interest is from a seller-financed mortgage and the buyer used the property as a personal residence, see instructions on back and list this interest first. Also, show that buyer's social security number and address		Amount
	1
2	Add the amounts on line 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	2
3	Excludable interest on series EE and I U.S. savings bonds issued after 1989. Attach Form 8815 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3
4	Subtract line 3 from line 2. Enter the result here and on Form 1040A, or Form 1040, line 8a . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
	Note:If you received a Form 1099-DIV or substitute statement from a brokerage firm, list the firms name as the payer and enter the ordinary dividends shown on that form. If line 4 is over $1,500, you must complet