Diana $($age $38)$ and Ryan Workman $($age $40)$ were married on January $1,2023.$ Diana has an eight$-$year$-$old son, Jorge Anderson, from her previous marriage. Diana will claim Jorge as a dependent during the current year. Ryan works as a computer programmer at Datafile Inc. $($DI$)$ and is completing an MBA program. Diana is self$-$employed and runs a day care center that has been in business for the past $10$ years. The Workman$$s personal information needed to complete the Form $1040$ is below:

Social Security Numbers:

Ryan $110-44-5555$

Diana $111-22-3333$

Jorge $112-23-3456$

Address:

$1234$ Numbers Lane

Atlantic City, NJ $11225$

The Workmans do not want to direct any money to the Presidential Election Campaign nor did they engage in any cryptocurrency transactions during the year. Neither Diana nor Ryan were born before $1957$ and neither of them is legally blind.

Day Care Center Information:

Name: Tiny Tots

Address: $2020$ Kiddie Way, Atlantic City, NJ $11227$

Employer ID number: $61-9988776$

Business code: $624410$

Accounting method: Cash

Diana is not required to file any Form $1099$s due to the childcare business. She did materially participate in the business.

In addition to the tax information on their W$-2($see $$j$$ for more information on Ryan$$s W$-2)$ and $1099$s provided in class, the Workmans disclose the following information in their interview with you:

a$.$ Diana received $$2,000$ in alimony and $$4,500$ in child support payments from her former husband. They divorced on $5/30/2017.$

b$.$ Diana won a $$900$ cash prize at her church$-$sponsored Bingo game.

c$.$ The couple bought $50$ shares of ABC Inc. stock for $$40$ per share on July $2.$ The stock was worth $$47$ a share on December $31.$

d$.$ Diana$$s father passed away on April $14.$ She inherited cash of $$50,000$ from her father and his baseball card collection, valued at $$2,000.$ As beneficiary of her father$$s life insurance policy, Diana also received $$150,000.$

e$.$ The couple spent a weekend in Atlantic City in November and came home with gross gambling winnings of $$1,200.$

f$.$ Ryan was hit and injured by a drunk driver while crossing a street at a crosswalk. He was unable to work for a month. He received $$6,000$ from his disability insurance. Ryan had paid for the insurance policy.

g$.$ The drunk driver who hit Ryan in part $($f$)$ was required to pay his $$2,000$ medical costs, $$1,500$ for the emotional trauma he suffered from the accident, and $$5,000$ for punitive damages.

h$.$ Diana is a $10$ percent owner of MNO Inc., a Subchapter S corporation. The company reported ordinary business income for the year of $$92,000.$ Diana acquired the MNO stock two years ago. $($Diana has not received her Schedule K$-1$ yet, but she knows this information to be accurate.$)$

This information goes on the Schedule E Part II $($pg $2).$ Columns c$,$ e$,$ and f should NOT be checked. The EIN number is $45-3344567.$ This income is passive, thus should be reported in column h$.$

i$.$ Diana$$s daycare business collected $$35,000$ in revenues. In addition, customers owed her $$3,000$ at year$-$end. During the year, Diana spent $$5,500$ for supplies, $$1,500$ for utilities, $$15,000$ for rent, and $$500$ for miscellaneous expenses. One customer gave her use of his vacation home for a week $($worth $$2,500)$ in exchange for Diana allowing his child to attend the day care center free of charge. Diana accounts for her business activities using the cash method of accounting.

j$.$ Ryan received a W$-2$ from his employer. However, the W$-2$ he received listed ONLY his salary $($and those disability premiums$)$ in Box $1.$ He has already heard that DI will be issuing $$corrected$$ W$-2$s shortly. Apparently, DI$$s accountant did not understand what types of fringe benefits or other perks may have been taxable.

ADD any of the following items that are TAXABLE to the amount in Box $1$ of Ryan$$s W$-2$ to get the dollar amount that goes on line $1$ of the Form $1040.$ If the amount$($s$)$ are NOT taxable or are not taxable in the current year, do not add them to Box $1.$

Ryan$$s employer pays the couple$$s annual health insurance premiums of $$5,500$ for a qualified plan.

DI paid $$8,000$ toward Ryan$$s tuition and fees for his MBA.

Ryan received $$400$ cash for reaching $10$ years of continuous service at DI$.$

For meeting his performance goals this year, Ryan was informed on December $27$ that he would receive a $$5,000$ year$-$end bonus. DI $($located in Houston, Texas$)$ mailed Ryan$$s bonus check from its payroll processing center $($Tampa$,$ Florida$)$ on December $28.$ Ryan didn$$t receive the check at his home until January $2.$ DI did not include this amount in the $2023$ salary on his W$-2.$

Information needed:

$1099$s $(3)$

Form W$-2$

Instruction sheet

Tax forms $($Form $1040,$ Schedule $1,$ Schedule C$,$ and Schedule E$)$

Required:

Prepare a Schedule C$,$ Schedule E$,$ Schedule $1,$ and Form $1040($through Line $9-$Total Income$).$