George and Barbara live in New Orleans, Louisiana. George works as the CFO of a small company. Barbara has two jobs. She owns and operates a successful bakery, Barbaras Bakery. The bakery is taxed as an S Corporation. She also works as a teacher at a local culinary school, Chefs to Be. Barbara also receives consulting fees from local restaurants.

George and Barbara have three children:

Joseph was born November 19, 2010

Emma was born November 6, 2012

Michael was born May 22, 2018.

While George and Barbara work, Michael attends daycare. Joseph and Emma are in school during the day but George and Barbara do pay extra for care after school.

In March 2019, George and Barbara meet with you for assistance in preparing their tax return. They present you with the following information:

Georges wages from his position as a CFO are as follows:

Gross Wages - $100,000

401k contributions - $5,000

Health Insurance -$8,000

Federal W/H - $7,500

Louisiana W/H - $1,500

FICA W/H -$5,704

Medicare W/H - $1,334

Barbaras wages from Barbaras Bakery:

Gross Wages - $115,000

Federal W/H - $9,000

Louisiana W/H - $3,500

FICA w/h - $7,130

Medicare w/h - $1,667.50

Barbaras wages from Chefs to Be:

Gross Wages - $50,000

Federal W/H -$5,000

Louisiana W/H - $500

FICA w/h -$3,100

Medicare w/h - $725

Barbara also receives consulting fees of $15,000 from a local restaurant for consulting with their chefs. She incurs expenses of $2,500 for material and supplies.

Barbaras Bakery is taxed as an S Corporation and Barbara is the sole shareholder. Barbara started the business in 2015. She initially put $10,000 into the business to get it started. In 2015 she had net taxable income of $15,000. In 2016, she had net taxable income of $50,000. In 2017 she had net taxable income of $60,000 and in 2018 she has net taxable income of $85,000.

In 2018, George decided to invest in a partnership, ABC Real Estate. George is a 10% owner of the partnership. Since he is very busy as a CFO, he reviews the financial statements once a month which takes about 3 hours. George invested $25,000 in the partnership during 2018. In early 2019, George receives is 2018 K-1 and it shows a loss of $30,000.

George and Barbara have a savings account with Whitney Bank. They received a 2018 Form 1099-INT from the bank. The form shows they received $475 of interest income for 2018.

In 2017, George and Barbara did not itemize. However, they purchased a house in 2018 and you suspect they will itemize this year. They purchased a house for $525,000 and put down 20%. They paid $18,000 of interest on the mortgage for 2018.

The kids attend school at St. Clement of Rome School. The school has a daycare as well as grades Pk2 7. They paid tuition for Joseph and Emma of $9,500 in 2018. In addition, they also paid $5,500 for Michaels daycare. Also, they paid an additional $600 for after-care expenses. They also contributed $1,500 to St. Clement of Rome Church for the year.

Please prepare George and Barbaras 2018 Form 1040 and supporting schedules. Schedules should include the following:

Schedules 1 5

Schedule A

Schedule B

Schedule C

Schedule E

Form 2441