Income tax

All students are encouraged to review the special grading policies that apply this term because of the shift from traditional classroom to remote learning.

Please submit to lawprof18@aol.com no later than noon Sunday, May 24. Please respond in either Word or Excel.

Problem 1

Compute the 2019 Federal income tax for Doug. All transactions are in 2019 unless stated otherwise.

Doug is 49, single and has sole custody of his 14 and 22-year-old children. His son, Frank is 14 and a student in high school. His daughter, Gloria is 22 and attends college in Iowa.

Doug salary was $182,000 in 2019. He participated in a qualified defined contribution plan, he contributed 24,000 and his employer added $12,000. Total contribution to the plan was 36,000.

He participated in a medical FSA (flexible spending account), contributing $5,000 to the plan. He used to funds in the plan to pay for dental care for Frank.

His earnings statement showed the following:

Federal tax withheld 17,350

New York State tax 7,200

New Yok City tax 4,400

Social security 7,115

Defined contribution plan 24,000

Medical FSA 5,000

He purchased a co-op apartment in January 2019 and moved into it. He financed the purchase with a $950,000 30-year bank mortgage at 3% interest. He paid the bank 1,200 in mortgage loan fees at closing and 28,450 in mortgage interest during the year. In addition, the bank charged 3 points, $28,500 which the bank withheld from loan proceeds.

Based on the statement from the co-op board, his share of real estate tax was 3,012.

The cost of dental (orthodontia) for Frank was 17,200. He paid 12,200 and the balance was paid from his FSA.

Cost of eyeglasses and contact lenses for Doug, Frank and Gloria was 1,450 during 2019.

His charitable contributions were:

Donations to his church 800

Food donated to local soup kitchen 85

He worked in the local soup kitchen for 3 days preparing meals for the hungry. The soup kitchen valued his service at 450.

He paid 28,000 in tuition for Gloria at Iowa State University.

Compute his tax and determine how much he will either pay the IRS or get a refund from the IRS.