Comprehensive Problem 8-85 (LO 8-1, LO 8-2, LO 8-3, LO 8-4, LO 8-5)

[The following information applies to the questions displayed below.]

John and Sandy Ferguson got married eight years ago and have a seven-year-old daughter, Samantha. In 2019, John worked as a computer technician at a local university earning a salary of $152,000, and Sandy worked part-time as a receptionist for a law firm earning a salary of $29,000. John also does some Web design work on the side and reported revenues of $4,000 and associated expenses of $750. John's business is not a specified business for the purpose of QBI deduction. The Fergusons received $800 in qualified dividends and a $200 refund of their state income taxes. The Fergusons always itemize their deductions and their itemized deductions were well over the standard deduction amount last year. The Fergusons had qualifying insurance for purposes of the Affordable Care Act (ACA). Use Exhibit 8-9, Tax Rate Schedule, Dividends and Capital Gains Tax Ratesfor reference.

The Fergusons reported making the following payments during the year:

• State income taxes of $4,400. Federal tax withholding of $21,000.
• Alimony payments to John's former wife of $10,000 (divorced in 2014).
• Child support payments for John's child with his former wife of $4,100.
• $12,200 of real property taxes.
• Sandy was reimbursed $600 for employee business expenses she incurred. She was required to provide documentation for her expenses to her employer.
• $3,600 to Kid Care day care center for Samantha's care while John and Sandy worked.
• $14,000 interest on their home mortgage ($400,000 acquisition debt).
• $3,000 interest on a $40,000 home-equity loan. They used the loan to pay for a family vacation and new car.
• $15,000 cash charitable contributions to qualified charities.
• Donation of used furniture to Goodwill. The furniture had a fair market value of $400 and cost $2,000.

EXHIBIT 8-9 Child and Dependent Care Credit Percentage

If AGI is over But not over Then the percentage is $0 15,000 35% 15,000 17,000 34 17,000 19,000 33 19,000 21,000 32 21,000 23,000 31 23,000 25,000 30 25,000 27,000 29 27,000 29,000 28 29,000 31,000 27 31,000 33,000 26 33,000 35,000 25 35,000 37,000 24 37,000 39,000 23 39,000 41,000 22 41,000 43,000 21 43,000 No limit 20

Schedule Y-1-Married Filing Jointly or Qualifying Widow(er) If taxable income is over: But not over: The tax is: $0 $19,400 10% of taxable income $19,400 $78,950 $1,940 plus 12% of the excess over $19,400 $78,950 $168,400 $9,086 plus 22% of the excess over $78,950 $168,400 $321,450 $28,765 plus 24% of the excess over $168,400 $321,450 $408,200 $65,497 plus 32% of the excess over $321,450 $408,200 $612,350 $93,257 plus 35% of the excess over $408,200 $612,350 $164,709.50 plus 37% of the excess over $612,350

Tax Rates for Net Capital Gains and Qualified Dividends

Rate* Taxable Income Married Filing Jointly Married Filing Separately Single Head of Household Trusts and Estates 0% $0 - $78,750 $0 - $39,375 $0 - $39,375 $0 - $52,750 $0 - $2,650 15% $78,751 - $488,850 $39,376 - $244,425 $39,376 - $434,550 $52,751 - $461,700 $2,651 - $12,950 20% $488,851+ $244,426+ $434,551+ $461,701+ $12,951+

ACCT 430 Income Tax Tax Return Project Spring 2020 Use the space below to calculate the Ferguson's taxes payable or refund due for the year: Description Amount Computation (1) Gross income (2) For AGI deductions (3) Adjusted gross income - (1) - (2) (4) Standard deduction (5) Itemized deductions (6) Greater of standard or itemized deductions Greater of Line (4) or Line (5) (7) Deduction for qualified business income (8) Taxable income - (3) - (6) - (7) (9) Income tax liability [Hint: Qualified dividends are taxed at preferential rate] (10) Other Taxes [Hint: AMT = 0] (11) Total Tax - (9) + (10) (12) Credits (13) Prepayments Taxes due or (refund) - (11) - (12) - (13)