Dwight K. Schrute is a married 54 year old (SSN 546-57-1111) residing at 15 Beets Way, Scranton, PA 18504. Dwight’s wife is Angela E. Schrute (52 years old, SSN 331-24-6363). Dwight and Angela have two children. Beetrice H. Schrute is 17 years old (SSN 663-32-4565). She has a part-time job where she earned $7,750 for 2020. Dwight and Angela provided all of Beetrice’s support. Their other child is Phillip Schrute and is 20 years old (SSN 455-22-9896). Phillip did not live with his parents but instead lived in an apartment with a friend while he figures out what he wants to do with her life. Phillip works part-time as an actor where he earned $3,800. This income did not allow Phillip to pay for all of his expenses so his parents helped with many of his expenses and ended up providing over half of his support. Dwight and Angela also provide most of the support Angela’s father, Sean Martin, (95 years, SSN 356-22-4589), who lives in assisted living. His gross income was $4,220. Dwight also provides more of the support for his cousin, Mose Schrute (SSN 256-66-4354). Mose lives with Dwight and Angela and for 2020 had gross income of $3,500.

In 2020, Dwight broke his leg when the exercise ball he was sitting on busted. His medical bills totaled $27,000. Insurance reimbursed him for $15,000 of these costs. Other unreimbursed medical and dental expenses for the year totaled $11,480.

Angela owns a successful pet sitting business that she runs as a cash basis sole proprietorship. She provided you with the following information for 2020:

Cash collected from clients for services provided in 2019 $10,250

Cash collected from clients for 2020 services $258,000

Cash collected from clients as prepayment for 2021 services $15,000

Cash paid for meals (for people) $1,900

Cash paid for tickets to the Cat Fanciers’ International Cat show to build $4,500

client relations

Cash paid for health insurance for Angela $7,000

Cash paid for health insurance for employees $29,000

Cash paid for wages for employees $99,500

Cash paid for liability insurance (contract was a 2-year contract starting 5/1/20) $30,000

Cash paid for used office furniture (purchased 8/5/20) $15,020

Cash paid for utilities $7,650

Cash paid for building rent (for period 2/1/20 – 1/31/21) $13,200

Cash paid for interest expense (for period 12/1/20 - 2/28/21) $3,750

In addition, Angela’s records from last year show that he has two assets that are not fully depreciated.

6/6/18 – Office Furniture $1,000 Purchase Price

10/1/19 – Office Computers $5.500 Purchase Price

These were the only asset purchases in those years and Angela did not elect 179 or bonus in either year.

Angela made estimated federal income tax payments of $15,000 and state income tax payments of $3,800 total.

Dwight is the Regional Manager for Dunder Mifflin. His 2020 W-2 is attached. He had the following unreimbursed employee expenses during 2020: business meals ($3,000), entertainment ($6,400), and business use of his car - 3,000 miles (he has no idea of the actual costs related to these miles). His car was placed in service 1/1/2015 and his personal miles for the year were 2,000.

In 2020, Dwight and Angela had interest of $2,500 from PNC Bank and $2,960 from State of Pennsylvania bonds. They had qualified dividends of $3,245. Angela paid $10,000 in alimony to her ex-husband, Robert (SSN 455-66-6655). They were divorced in 1990. In 2020, the Schrute’s received a 2019 state income tax refund of $7,823.

With some extra cash, Dwight bought 100 shares of SPLS stock on 5/5/2020 for $154 a share. Dwight sold all the shares on 11/1/2020 for $131 a share.

Angela bought Dwight a Pontiac Firebird Trans Am in January 2020 for $84,850. In February, the Pontiac was stolen from the farm. The estimated FMV of the car when stolen was $75,000. Insurance only reimbursed them $20,000 for the loss.

The Schrute’s paid $4,765 in real estate taxes on their home and $810 in personal property taxes during 2020. They paid $11,905 in mortgage interest (acquisition indebtedness is less than $750,000). They paid $4,000 to have the yard at their home professionally landscaped. They contributed $10,000 to Scott’s Tots, a 501(c)(3) charity that provides scholarships to high school students, and $6,500 to other qualified charities, all in the form of checks. Dwight and Angela borrowed $42,000 this year to purchase a new truck for personal use. The sales tax on the vehicle was $1,100, the interest expense on the loan was $1,685, and maintenance costs were $550.

Angela inherited $40,000 cash when her grandma died this year. Her dad also gave her $18,000. On his annual guys trip to Las Vegas with Michael and Jim, Dwight won $6,000 on the first day playing craps and lost $8,000 on day two.

The Schrute’s paid you $1,875 to prepare their 2019 tax return in 2020. On that tax return, the Schrute’s had itemized deductions of $27,101.

Complete Dwight and Angela’s 2020 Federal Income Tax Return. When faced with any choices, the Schrute’s want you to make decisions that minimize their taxes. If you have completed the return correctly, you should turn in Form 1040, Schedules 1 and 2, Schedules A, C, SE (ignore part II), and Form 8959. Put any capital gain or loss on line 7 of the Form 1040 and ignore Schedule D. Ignore any issues with Alternative Minimum Tax (do not complete any schedules or lines related to AMT) and ignore additional medicare tax on unearned income. Ignore the qualified business income deduction. You should not turn in any other IRS Schedules/Forms other than those listed above. You also need to turn in an Excel file with any calculation not found directly on the return. You may work with one or two other people on this project (i.e groups of 3) but groups should not work together. Each group will turn in 1 tax return and 1 Excel file.