Comprehensive Problem 6-1
Richard and Christine McCarthy have a 19-year-old son (born 10/2/2000; Social Security number 555-55-1212), Jack, who is a full-time student at the University of Key West. Years ago, the McCarthys shifted a significant amount of investments into Jack's name. In 2019, Jack received Forms 1099-INT and 1099-DIV that reported the following:
2019 tax rate Schedule
$11,300 Tandy Corporation Bonds interest Tandy Corporation ordinary dividends 3,400 The dividends are not qualified dividends. In addition, Jack works part-time as a waiter in an upscale seafood restaurant in Miami, Fl. His 2019 Form W-2 reported: Wages $12,800 Federal withholding 1,080 In spite of his fairly large income, the McCarthys provide over 50 percent of his support and claim Jack as a dependent in 2019. Jack's mailing address is 100 Duval Street, Apt. #B12, Key West, FL 33040. Richard's Social Security number is 100-10-9090. Required: Complete Jack McCarthy's Form 1040, Schedule B, Form 8615, and the Tax Computation Worksheet from the Form 8615. Make realistic assumptions about any missing data. The taxpayer had health insurance coverage for the entire year and does not want to make a contribution to the presidential election campaign. 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 (unless instructed otherwise on the tax form). Form Last name Last name B12 Department of the Treasury-Internal Revenue Service (99) 1040 U.S. Individual Income Tax Return 2019 OMB No. 1545-0074 IRS Use Only Filing Status Single If you checked the MFS box, enter the name of 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 Your social security number Jack McCarthy 555-55-1212 If joint return, spouse's first name and middle initial Spouse's social security number Home address (number and street). If you have a P.O. box, see instructions. Apt. no. Presidential Election 100 Duval Street Campaign Check here if you, or your spouse City, town or post office, state, and ZIP code. If you have a foreign address, also complete spaces below if filing jointly, want $3 to go to (see instructions). this fund. Checking a box below Key West, FL 33040 will not change your tax or refund. None Foreign country name Foreign province/state/county Foreign postal code If more than four dependents, see instructions and here Standard Someone can claim: You as a dependent Deduction You: None Age/Blindness Spouse: None Dependents (see instructions): (2) Social security number (3) Relationship to you (4) Vif qualifies for see instructions): (1) First name Child tax credit Credit for other dependents Last name . . . 1 12,800 2a 2b 11,300 3,400 3b 4b 1 Wages, salaries, tips, etc. Attach Form(s) W-2. b Taxable interest. Attach Sch. B 2a Tax-exempt interest. if required b Ordinary dividends. Attach 3a Qualified dividends... Sch. B if required 4a IRA distributions ..... 4a b Taxable amount C Pensions and annuities 4c d Taxable amount. 5a Social security benefits 5a b Taxable amount 6 Capital gain or loss). Attach Schedule D if required. If not required, check here 7a Other income from Schedule 1, line 9......... b Add lines 1, 2b, 3b, 45, 40, 56, , and 7a. This is your total income 4d Standard Deduction for- Single or Married filing separately, $12,200 Married filing jointly or Qualifying widow(er), $24,400 Head of bebeld 5b 6 7a . 1 7b 27,500 da Adilistments to income from Schedule 1. line 27 8 8b 27,500 9 12,200 Head of household 8a Adjustments to income from Schedule 1, line 22... $18,350 b Subtract line 8a from line 7b. This is your adjusted gross income If you checked any box under Standard deduction or itemized deductions (from Standard Schedule A) Deduction, see instructions. 10 Qualified business income deduction. Attach Form 8995 or Form 8995-A.... 11a Add lines 9 and 10 ... b Taxable income. Subtract line 11a from line 3b For Disclosure, Privacy Act, and Paperwork Reduction Act Notice, see separate instructions. 10 11a 12,200 11b 15,300 Cat. No. 11320B Form 1040 (2019) 13a 14 14 15 15 16 16 18a Form 1040 (2019) Jack McCarthy 555-55-1212 Page 2 12a Tax (see inst.) Check if any from Form(s): 108814 2 4972 30 12a 3,281 X b Add Schedule 2, line 3, and line 122 and enter the total. 12b 13a Child tax credit or credit for other dependents ... b Add Schedule 3, line 7, and line 132 and enter the total 13b Subtract line 13b from line 12b. If zero or less, enter-O-.. Other taxes, including self-employment tax, from Schedule 2, line 10 Add lines 14 and 15. This is your total tax....... 17 Federal income tax withheld from Forms W-2 and 1099 17 1,080 If you have a 18 Other payments and refundable credits: ...... qualifying child attach Sch. EIC. a Earned income credit (EIC) If you have b Additional child tax credit. Attach Schedule 8812 18b nontaxable combat pay, see c American opportunity credit from Form 8863, line 8 18c instructions d Schedule 3, line 14........ 18d e Add lines 18a through 18d. These are your total other payments and refundable credits 19 Add lines 17 and 18e. These are your total payments. 1,080 20 Refund If line 19 is more than line 16, subtract line 16 from line 19. This is the amount you overpaid.. 21a Amount of line 20 you want refunded to you. If Form 8888 is attached, check here Direct deposit? Routing number c Type: Checking - Savings See instructions. d Account number 22 Amount of line 20 you want applied to your 2020 estimated 22 Amount Amount you owe. Subtract line 19 from line 16. For details on how to pay, see instructions .. 23 You Owe Estimated tax penalty (see instructions) | 24 Third Party Do you want to allow another person (other than your paid preparer) to discuss this return with a Yes. Complete below. the IRS? See instructions. Designee 18e 19 20 21a tax- 23 24 No SCHEDULE B Interest and Ordinary Dividends OMB No. 1545-0074 (Form 1040 or 1040-SR) 2019 Department of the Treasury Go to www.irs.gov/ Schedule for instructions and the latest information. Attachment Internal Revenue Service (99) Attach to Form 1040 or 1040-SR. Sequence No. 08 Name(s) shown on return Your social security number Jack McCarthy 555-55-1212 Part 1 List name of payer. If any interest is from a seller-financed mortgage and the Amount buyer used the property as a personal residence, see the instructions and list this Interest interest first. Also, show that buyer's social security number and address 1 Tandy Corp. Bonds 11,300 (See instructions and the instructions for Forms 1040 and 1040-SR, line 25.) 1 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. 2 11,300 3 2 Add the amounts on line 1 3 Excludable interest on series EE and I U.S. savings bonds issued after 1989. Attach Form 8815....... 4 Subtract line 3 from line 2. Enter the result here and on Form 1040 or 1040-SR, line 2b. Note: If line 4 is over $1,500, you must complete Part III. 5 List name of payer Tandy Corp. 4 11,300 Amount Part II 3,400 Ordinary Dividends (See instructions and the instructions for Forms 1040 and 1040-SR, line 3b.) 5 Note: If you received a Form 1099-DIV or substitute statement from a brokerage firm, list the firm's name as the payer and enter the ordinary dividends shown on that form. 6 Add the amounts on line 5. Enter the total here and on Form 1040 or 1040-SR, line 3b. 6 3,400 Note: If line 6 is over $1,500, you must complete Part III. Volote bicat fubadur 500 falla internet disordiscidonda (1) bad Nart ITT 1. 1. 5,400 2. 14,700 X . 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 2019 Line 7 Tax Computation Worksheet Keep for Your Records Add Form 8615, line 6, and $2,600. 2. Enter the smaller of Form 8615, line 4, or line 1 3. Enter the smaller of line 2 or the amount listed below for your filing status. Single or married filing separately $9,700. Head of household $13,850........ 4. Multiply line 3 by 10% (0.10). 5. Enter the smaller of line 2 or the amount listed below for your filing status. Single or married filing separately-$39,475. Head of household-$52,850........ 6. Subtract line 3 from line 5. If zero or less, enter-O- 7. Multiply line 5 by 12% (0.12).......... 8. Enter the smaller of line 2 or $84,200 9. Subtract line 5 from line 8. If zero or less, enter-O- 10. Multiply line 9 by 22% (0.22). 11. Add Form 8615, line 6, and $9,300...... 12. Enter the smaller of Form 8615, line 4, or line 11. 13. Enter the smaller of line 12 or the amount listed below for your filing status. .. Single or married filing separately $160,725. Head of household-$160,700 ....... 14. Subtract line 8 from line 13. If zero or less, enter - - 15. Multiply line 14 by 24% (0.24).. 16. Enter the smaller of line 12 or $204,100 17. Subtract line 13 from line 16. If zero or less, enter-O- 18. Multiply line 17 by 32% (0.32). 19. Add Form 8615, line 6, and $12.750..... 19. 20. Enter the smaller of Form 8615, line 4, or line 19. 21. Enter the smaller of line 20 or the amount listed below for your filing status. Single or head of household - $510,300. Married filing separately-$305,175 ... 22. Subtract line 16 from line 21. If zero or less, enter-O- 23. Multiply line 22 by 35% (0.35). 23. 24. Subtract line 21 from Form 8615, line 4. If zero or less, enter-O- 25. Multiply line 24 by 37% (0.37).. 26. Add lines 4, 7, 10, 15, 18, 23, and 25. Stop. If the Qualified Dividends and Capital Gain Tax Worksheet, Schedule D Tax Worksheet, or Schedule ] (Form 1040 or 1040-SR) is used to figure your tax, see the instructions, earlier. Otherwise, enter the result here and on Form 8615, line 7.. 13. 14. 15. 16. 17. 18. 20. 21. 22. 24. 25. 26. $11,300 Tandy Corporation Bonds interest Tandy Corporation ordinary dividends 3,400 The dividends are not qualified dividends. In addition, Jack works part-time as a waiter in an upscale seafood restaurant in Miami, Fl. His 2019 Form W-2 reported: Wages $12,800 Federal withholding 1,080 In spite of his fairly large income, the McCarthys provide over 50 percent of his support and claim Jack as a dependent in 2019. Jack's mailing address is 100 Duval Street, Apt. #B12, Key West, FL 33040. Richard's Social Security number is 100-10-9090. Required: Complete Jack McCarthy's Form 1040, Schedule B, Form 8615, and the Tax Computation Worksheet from the Form 8615. Make realistic assumptions about any missing data. The taxpayer had health insurance coverage for the entire year and does not want to make a contribution to the presidential election campaign. 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 (unless instructed otherwise on the tax form). Form Last name Last name B12 Department of the Treasury-Internal Revenue Service (99) 1040 U.S. Individual Income Tax Return 2019 OMB No. 1545-0074 IRS Use Only Filing Status Single If you checked the MFS box, enter the name of 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 Your social security number Jack McCarthy 555-55-1212 If joint return, spouse's first name and middle initial Spouse's social security number Home address (number and street). If you have a P.O. box, see instructions. Apt. no. Presidential Election 100 Duval Street Campaign Check here if you, or your spouse City, town or post office, state, and ZIP code. If you have a foreign address, also complete spaces below if filing jointly, want $3 to go to (see instructions). this fund. Checking a box below Key West, FL 33040 will not change your tax or refund. None Foreign country name Foreign province/state/county Foreign postal code If more than four dependents, see instructions and here Standard Someone can claim: You as a dependent Deduction You: None Age/Blindness Spouse: None Dependents (see instructions): (2) Social security number (3) Relationship to you (4) Vif qualifies for see instructions): (1) First name Child tax credit Credit for other dependents Last name . . . 1 12,800 2a 2b 11,300 3,400 3b 4b 1 Wages, salaries, tips, etc. Attach Form(s) W-2. b Taxable interest. Attach Sch. B 2a Tax-exempt interest. if required b Ordinary dividends. Attach 3a Qualified dividends... Sch. B if required 4a IRA distributions ..... 4a b Taxable amount C Pensions and annuities 4c d Taxable amount. 5a Social security benefits 5a b Taxable amount 6 Capital gain or loss). Attach Schedule D if required. If not required, check here 7a Other income from Schedule 1, line 9......... b Add lines 1, 2b, 3b, 45, 40, 56, , and 7a. This is your total income 4d Standard Deduction for- Single or Married filing separately, $12,200 Married filing jointly or Qualifying widow(er), $24,400 Head of bebeld 5b 6 7a . 1 7b 27,500 da Adilistments to income from Schedule 1. line 27 8 8b 27,500 9 12,200 Head of household 8a Adjustments to income from Schedule 1, line 22... $18,350 b Subtract line 8a from line 7b. This is your adjusted gross income If you checked any box under Standard deduction or itemized deductions (from Standard Schedule A) Deduction, see instructions. 10 Qualified business income deduction. Attach Form 8995 or Form 8995-A.... 11a Add lines 9 and 10 ... b Taxable income. Subtract line 11a from line 3b For Disclosure, Privacy Act, and Paperwork Reduction Act Notice, see separate instructions. 10 11a 12,200 11b 15,300 Cat. No. 11320B Form 1040 (2019) 13a 14 14 15 15 16 16 18a Form 1040 (2019) Jack McCarthy 555-55-1212 Page 2 12a Tax (see inst.) Check if any from Form(s): 108814 2 4972 30 12a 3,281 X b Add Schedule 2, line 3, and line 122 and enter the total. 12b 13a Child tax credit or credit for other dependents ... b Add Schedule 3, line 7, and line 132 and enter the total 13b Subtract line 13b from line 12b. If zero or less, enter-O-.. Other taxes, including self-employment tax, from Schedule 2, line 10 Add lines 14 and 15. This is your total tax....... 17 Federal income tax withheld from Forms W-2 and 1099 17 1,080 If you have a 18 Other payments and refundable credits: ...... qualifying child attach Sch. EIC. a Earned income credit (EIC) If you have b Additional child tax credit. Attach Schedule 8812 18b nontaxable combat pay, see c American opportunity credit from Form 8863, line 8 18c instructions d Schedule 3, line 14........ 18d e Add lines 18a through 18d. These are your total other payments and refundable credits 19 Add lines 17 and 18e. These are your total payments. 1,080 20 Refund If line 19 is more than line 16, subtract line 16 from line 19. This is the amount you overpaid.. 21a Amount of line 20 you want refunded to you. If Form 8888 is attached, check here Direct deposit? Routing number c Type: Checking - Savings See instructions. d Account number 22 Amount of line 20 you want applied to your 2020 estimated 22 Amount Amount you owe. Subtract line 19 from line 16. For details on how to pay, see instructions .. 23 You Owe Estimated tax penalty (see instructions) | 24 Third Party Do you want to allow another person (other than your paid preparer) to discuss this return with a Yes. Complete below. the IRS? See instructions. Designee 18e 19 20 21a tax- 23 24 No SCHEDULE B Interest and Ordinary Dividends OMB No. 1545-0074 (Form 1040 or 1040-SR) 2019 Department of the Treasury Go to www.irs.gov/ Schedule for instructions and the latest information. Attachment Internal Revenue Service (99) Attach to Form 1040 or 1040-SR. Sequence No. 08 Name(s) shown on return Your social security number Jack McCarthy 555-55-1212 Part 1 List name of payer. If any interest is from a seller-financed mortgage and the Amount buyer used the property as a personal residence, see the instructions and list this Interest interest first. Also, show that buyer's social security number and address 1 Tandy Corp. Bonds 11,300 (See instructions and the instructions for Forms 1040 and 1040-SR, line 25.) 1 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. 2 11,300 3 2 Add the amounts on line 1 3 Excludable interest on series EE and I U.S. savings bonds issued after 1989. Attach Form 8815....... 4 Subtract line 3 from line 2. Enter the result here and on Form 1040 or 1040-SR, line 2b. Note: If line 4 is over $1,500, you must complete Part III. 5 List name of payer Tandy Corp. 4 11,300 Amount Part II 3,400 Ordinary Dividends (See instructions and the instructions for Forms 1040 and 1040-SR, line 3b.) 5 Note: If you received a Form 1099-DIV or substitute statement from a brokerage firm, list the firm's name as the payer and enter the ordinary dividends shown on that form. 6 Add the amounts on line 5. Enter the total here and on Form 1040 or 1040-SR, line 3b. 6 3,400 Note: If line 6 is over $1,500, you must complete Part III. Volote bicat fubadur 500 falla internet disordiscidonda (1) bad Nart ITT 1. 1. 5,400 2. 14,700 X . 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 2019 Line 7 Tax Computation Worksheet Keep for Your Records Add Form 8615, line 6, and $2,600. 2. Enter the smaller of Form 8615, line 4, or line 1 3. Enter the smaller of line 2 or the amount listed below for your filing status. Single or married filing separately $9,700. Head of household $13,850........ 4. Multiply line 3 by 10% (0.10). 5. Enter the smaller of line 2 or the amount listed below for your filing status. Single or married filing separately-$39,475. Head of household-$52,850........ 6. Subtract line 3 from line 5. If zero or less, enter-O- 7. Multiply line 5 by 12% (0.12).......... 8. Enter the smaller of line 2 or $84,200 9. Subtract line 5 from line 8. If zero or less, enter-O- 10. Multiply line 9 by 22% (0.22). 11. Add Form 8615, line 6, and $9,300...... 12. Enter the smaller of Form 8615, line 4, or line 11. 13. Enter the smaller of line 12 or the amount listed below for your filing status. .. Single or married filing separately $160,725. Head of household-$160,700 ....... 14. Subtract line 8 from line 13. If zero or less, enter - - 15. Multiply line 14 by 24% (0.24).. 16. Enter the smaller of line 12 or $204,100 17. Subtract line 13 from line 16. If zero or less, enter-O- 18. Multiply line 17 by 32% (0.32). 19. Add Form 8615, line 6, and $12.750..... 19. 20. Enter the smaller of Form 8615, line 4, or line 19. 21. Enter the smaller of line 20 or the amount listed below for your filing status. Single or head of household - $510,300. Married filing separately-$305,175 ... 22. Subtract line 16 from line 21. If zero or less, enter-O- 23. Multiply line 22 by 35% (0.35). 23. 24. Subtract line 21 from Form 8615, line 4. If zero or less, enter-O- 25. Multiply line 24 by 37% (0.37).. 26. Add lines 4, 7, 10, 15, 18, 23, and 25. Stop. If the Qualified Dividends and Capital Gain Tax Worksheet, Schedule D Tax Worksheet, or Schedule ] (Form 1040 or 1040-SR) is used to figure your tax, see the instructions, earlier. Otherwise, enter the result here and on Form 8615, line 7.. 13. 14. 15. 16. 17. 18. 20. 21. 22. 24. 25. 26
