Comprehensive Tax Return Problem

Required:

Use the following information to complete Keith and Jennifer Hamiltons 2021 federal income tax return. If any information is missing, use reasonable assumptions to fill in the gaps.

The forms, schedules, and instructions can be found at the IRS website (www.irs.gov). The instructions can be helpful in completing the forms.

Facts:

1. Keith Hamilton is employed as a human resources manager for Toys Unlimited, Inc., and Jennifer is a financial planner for her mothers company, Long-term Investments, Inc., a full-service wealth-planning firm. They provide the following information:

They both want to contribute to the presidential election campaign.

They live at 9876 Old Waverly, Charleston, South Carolina 29401.

Keiths birthday is 7/17/1967 and his Social Security number is 555-12-6789.

Jennifers birthday is 9/11/1969 and her Social Security number is 987-65-4321.

Keith and Jennifer do not have any foreign bank accounts or trusts.

2. Keith received a Form W-2 from Toys Unlimited, Inc. that contained the following information:

Line 1 Wages, tips, other compensation $45,000

Line 2 Federal income tax withheld 7,500

Line 3 Social Security wages 45,000

Line 4 Social Security tax withheld 2,790

Line 5 Medicare wages and tips 45,000

Line 6 Medicare tax withheld 653

Line 17 State income tax 2,200

3. Jennifer received a Form W-2 from Long-term Investments, Inc., that contained the following information:

Line 1 Wages, tips, other compensation $85,000

Line 2 Federal income tax withheld 12,500

Line 3 Social Security wages 85,000

Line 4 Social Security tax withheld 5,270

Line 5 Medicare wages and tips 85,000

Line 6 Medicare tax withheld 1,233

Line 17 State income tax 4,200

4. Keith and Jennifer incurred the following medical expenses for the year:

Transportation to Chicago for Keiths cancer treatment 2,000 miles

Unreimbursed hospital charges for Keith $6,500

Unreimbursed prescription drug charges for Keith and Jennifer 1,750

Unreimbursed physician charges for Keith and Jennifer 2,200

Unreimbursed prescription glasses for Jennifer 150

Laser hair removal treatment for Jennifer (so that she will no longer need to shave her legs) 2,000

5. Keith and Jennifer paid $12,000 of interest payments on their primary residence (acquisition debt of $225,000). They also paid $1,750 of interest expense on Jennifers car loan and $500 of interest on their Visa card.

6. Keith and Jennifer paid $4,000 of real estate taxes on their home and $1,000 of real estate tax on a vacant lot they purchased with the hope of building their dream home in the future. They also paid $3,000 in sales tax on Jennifers car and other purchases and $1,000 of ad valorem personal property tax on their cars.

7. Keith and Jennifer made the following contributions this year:

American Red Cross $ 200

United Way 150

St. Josephs Catholic Church 8,000

Food for the family of Hannah Barbara (a neighbor who suffered a tragic car accident this past year) 225

Stock transfer to the University of South Carolina (originally purchased for $1,000 in January 2006) on July 1, 2021 750

8. Keith won $5,000 in the state lottery. He has been playing the lottery for years, spending $10 in lottery tickets every week ($520 in total) and is careful that he saves the old tickets to keep track of the numbers he plays.

9. Keith and Jennifer did not buy, sell, exchange, or otherwise acquire any financial interest in a virtual currency.

10. Keith and Jennifer received their Economic Impact Payment (stimulus check) in the full amount during 2021.

\begin{tabular}{|l|l|l|l|l|l} U.S. Individual Income Tax Return & OMB No. 1545-0074 & IRS Use Only-Do not write or staple in this space. \end{tabular} Filing Status Single Married filing jointly Married filing separately (MFS) Head of household (HOH) Qualifying widow(er) (QW) Check only If you checked the MFS box, enter the name of your spouse. If you checked the HOH or QW box, enter the child's name if the qualifying one box. person is a child but not your dependent At any time during 2021, did you receive, sell, exchange, or otherwise dispose of any financial interest in any virtual currency? | Yes No Standard Someone can claim: You as a dependent Your spouse as a dependent Deduction Spouse itemizes on a separate return or you were a dual-status alien Age/Blindness You: Were bom before January 2, 1957 Are blind Spouse: Was bom before January 2, 1957 Is blind For Diselosure, Privacy Act, and Paperwork Reduction Act Notice, see separate instructions. Cat. No. 11320B Form 1040(2021) Form 1040 (2021) Page 2