Instructions Form 1040 Schedule 1 Schedule 2 Schedule B Schedule C Form 1040 Complete the Coles' Form 1040. Form Department of the Treasury-Internal Revenue Service (99) 1040 U.S. Individual Income Tax Return 2021 OMB No. 1545-0074 IF Filing Status Your first name and middle initial Last name Your social securit David R. Cole 123-45-678 If joint return, spouse's first name and middle initial Last name Spouse's social secu Ella M. Cole 123-45-678 Home address (number and street). If you have a P.O. box, see instructions. Apt. no. Presidential Election 1820 Elk Avenue Do you, or your spouse want $3 to go to this fu City, town, or post office. If you have a foreign address, also complete spaces below. State ZIP code an option below will not Denver, CO 80202 tax or refund Foreign country name Foreign province/state/county Foreign postal code At any time during 2021, did you receive, sell, exchange, or otherwise dispose of any financial interest in any virtual currency? Yes Standard Deduction Someone can claim: You: Age/Blindness No Spouse: Dependen (see instructions): (2) Social security (3) Relationship (4) / if qualifies for (see instruct If more than four (1) First name Last name number to you Child tax credit Credit for other d dependents, see 0 instructions and check here - 0 1 Wages, salaries, tips, etc. Attach Form(s) W-2 . . ..... . ...... 1 Attach 2a Tax-exempt interest . . 2a b Taxable interest . . . . . . . . . . 2b Sch. B if required. a Qualified dividends . .. 3a b Ordinary dividends . . . . . . . . 3b 4a IRA distributions . . 4a b Taxable amount . 4b 5a Pensions and annuities 5a b Taxable amount . . . . . . . . . . 5b Standard Deduction 6a Social security benefits 6a Taxable amount . . . . . . . . . . 6b for- 7 Capital gain or (loss). Attach Schedule D if required. If not required, check here . . . 7 . Single or Married filing separately, 3 Other income from Schedule 1, line 10 . . . . . . . . . . . . . . . . . ... 8 $12,550 . Married filing Add lines 1, 2b, 3b, 4b, 5b, 6b, 7, and 8. This is your total income . . . . . . . . . . . .. . jointly or Qualifying 10 Adjustments to income from Schedule 1, line 26 . . . . . . . . . . . . . 10 widow(er), $25,100 11 Subtract line 10 from line 9. This is your adjusted gross income . 11 Head of household, 12a Standard deduction or itemized deductions (from Schedule A) $18,800 12a . If you checked any b Charitable contributions if you take the standard deduction (see box under instructions) . . .. ... 12b Standard Deduction, see c Add lines 12a and 12b . . ... . . . . . 12c instructions. 13 Qualified business income deduction from Form 8995 or Form 8995-A . . . . . . . . . . ... 13 14 Add lines 12c and 13 .. . . . . . . . . . . . 14 15 Taxable income. Subtract line 14 from line 11. If zero or less, enter -0- . . . . .. . .. . . . 15Schedule SE Complete Cole's Schedule SE for 2021. SCHEDULE SE Self-Employment Tax OMB No. 1545-0074 Form 1040) 2021 Department of the Treasury Internal Go to www.irs.gov/ScheduleSE for instructions and the latest information. Attachment Revenue Service (99) Attach to Form 1040, 1040-SR, or 1040-NR Sequence No. 17 Name of person with self-employment income (as shown on Form 1 wn on Form 1040, 1040-SR, or Social security number of person with 1040-NR) self-employment income 23-45-6788 David R. Cole Part I Self-Employment Tax Note: If your only income subject to self-employment tax is church employee income, see instructions for how to report your income and the definition of church employee income A If you are a minister, member of a religious order, or Christian Science practitioner and you filed Form 4361, but you had $400 or more of other net earnings from self-employment, check here and continue with Part I . .. . Skip lines 1a and 1b if you use the farm optional method in Part II. See instructions. la Net farm profit or (loss) from Schedule F, line 34, and farm partnerships, Schedule K-1 (Form 1065), box 14, code A 1a b If you received social security retirement or disability benefits, enter the amount of Conservation Reserve Program payments included on Schedule F, line 4b, or listed on Schedule K-1 (Form 1065), box 20, code AH Skip line 2 if you use the nonfarm optional method in Part II. See instructions. Net profit or (loss) from Schedule C, line 31; and Schedule K-1 (Form 1065), box 14, code A (other than farming). See instructions for other income to report or if you are a minister or member of a religious order 3 Combine lines 1a, 1b, and 2 . .. 3 4a If line 3 is more than zero, multiply line 3 by 92.35% (0.9235). Otherwise, enter amount from line 3 . . . la Note: If line 4a is less than $400 due to Conservation Reserve Program payments on line 1b, see instructions If you elect one or both of the optional methods, enter the total of lines 15 and 17 here . c Combine lines 4a and 4b. If less than $400, stop; you don't owe self-employment tax. Exception: If less than $400 and you had church employee income, enter -0- and continue . ........ 4c a Enter your church employee income from Form W-2. See instructions for definition of church employee income . Sa b Multiply line 5a by 92.35% (0.9235). If less than $100, enter - 0- . . . . . . . . 5b 6 Add lines 4c and 5b 6 7 Maximum amount of combined wages and self-employment earnings subject to social security tax or the 6.2% portion of the 7.65% railroad retirement (tier 1) tax for 2021 .. 7 Ba Total social security wages and tips (total of boxes 3 and 7 on Form(s) W-2) and railroad retirement (tier 1) compensation. If $142,800 or more, skip lines b through 10, and go to line 11 . . Ba Unreported tips subject to social security tax from Form 4137, line 10 . . .. b Wages subject to social security tax from Form 8919, line 10 . . .. .... 8c d Add lines 8a, 8b, and 8c . 9 Subtract line 8d from line 7. If zero or less, enter -0- here and on line 10 and go to line 11 . .. . ..... 9 10 Multiply the smaller of line 6 or line 9 by 12.4% (0.124) . 10 11 Multiply line 6 by 2.9% (0.029) . 11 2 Self-employment tax. Add lines 10 and 11. Enter here and on Schedule 2 (Form 1040), line 4 . . . . . . 12 13 Deduction for one-half of self-employment tax. Multiply line 12 by 50% (0.50). Enter here and on Schedule 1 (Form 1040), line 15 . . 13 Part II Optional Methods To Figure Net Earnings (see instructions) arm Optional Method. You may use this method only if (a) your gross farm income wasn't more than $8,820, or (b) your net farm profits(2) were less than $6,367. 14 Maximum income for optional methods . . . 14 15 Enter the smaller of: two-thirds (2/3) of gross farm income()(not less than zero) or $5,880. Also, include this amount on line 4b above . 15 Nonfarm Optional Method. You may use this method only if (a) your net nonfarm profits() were less than $6,367 and also less than 72.189% of your gross nonfarm income, " and (b) you had net earnings from self-employment of at least $400 in 2 of the prior 3 years. Caution: You may use this method no more than five times. 16 Subtract line 15 from line 14 . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . .. . . . . . . . . ............. ... 16Form 8995 Complete Roberta's Form 8995. Qualified Business Income Deduction OMB No. 1545-0123 Form 8995 Simplified Computation 2021 Department of the Treasury -Attach to your tax return. Attachment Internal Revenue Service - Go to www.irs.gov/Form8995 for instructions and the latest information Sequence No. 55 Name(s) shown on return Your taxpayer identification number David R. and Ella M. Col 123-45-6788 Note. You can claim the qualified business income deduction only if you have qualified business income from a qualified trade or business, real estate investment trust dividends, publicly traded partnership income, or a domestic production activities deduction passed through from an agricultural or horticultural cooperative. Se instructions. Use this form if your taxable income, before your qualified business income deduction, is at or below $164,900 ($164,925 if married filing separately; $329,800 if married filing jointly), and you aren't a patron of an agricultural or horticultural cooperative (a) Trade, business, or aggregation name (b) Taxpayer identification (c) Qualified business number income or (loss David R. Cole 123-45-6788 Total qualified business income or (loss). Combine lines li through 1v, column (c) . .. 2 3 Qualified business net (loss) carryforward from the prior year . ..... 3 4 Total qualified business income. Combine lines 2 and 3. If zero or less, enter -0-. .. . 5 Qualified business income component. Multiply line 4 by 20% (0.20) . .. . . . . . . . . .... 5 6 Qualified REIT dividends and publicly traded partnership (PTP) income or (loss) (see instructions) 7 Qualified REIT dividends and qualified PTP (loss) carryforward from the prior year . . 8 Total qualified REIT dividends and PTP income. Combine lines 6 and 7. If zero or less, enter -0-. . 8 REIT and PTP component. Multiply line 8 by 20% (0.20) . .... ... . . . . . . . . . . . . . . . . . . . ... 9 10 Qualified business income deduction before the income limitation. Add lines 5 and 9 . . . . . . . . . . . . . . . . . . 10 11 Taxable income before qualified business income deduction (see instructions) . ... 11 2 Net capital gain (see instruction 12 13 Subtract line 12 from line 11. If zero or less, enter -0- . . . . . ... . . . . . . . . . . . 13 4 Income limitation. Multiply line 13 by 20% (0.20) . 14 15 Qualified business income deduction. Enter the smaller of line 10 or line 14. Also enter this amount on the applicable line of your return (see instructions) . 15 16 Total qualified business (loss) carryforward. Combine lines 2 and 3. If greater than zero, enter -0-. . . . . . . 16 17 Total qualified REIT dividends and PTP (loss) carryforward. Combine lines 6 and 7. If greater than zero, enter - 0- . . . . . . . .. .. ..... 17 BAA For Privacy Act and Paperwork Reduction Act Notice, see instructions. Form 8995 (2021)Form 8829 Complete the Coles' Form 8829 for 2021. The applicable depreciation percentage is 2.564%. OMB No . 1545-0074 Form 8829 Expenses for Business Use of Your Home - File only with Schedule C (Form 1040). Use a separate Form 8829 for each home you used for 2021 Department of the Treasury Internal business during the year. Attachment Revenue Service (99) Go to www.irs.gov/Form8829 for instructions and the latest information. Sequence No. 176 Name(s) of proprietor(s) Your social security number David R. Cole 123-45-6788 Part 1 Part of Your Home Used for Business 1 Area used regularly and exclusively for business, regularly for daycare, or for storage of inventory or product samples (see nstructions) . ... 2 Total area of home . . . . .. 3 Divide line 1 by line 2. Enter the result as a percentage . . . . . . . . . . .... 3 For daycare facilities not used exclusively for business, go to line 4. All others, go to line 7. 4 Multiply days used for daycare hr 5 If you started or stopped using your home for daycare during the year, see instructions; otherwise, enter 8,760 . .. hr 6 Divide line 4 by line 5. Ent nal amount . . Business percentage. For daycare facilities not used exclusively for business, multiply line 6 by line 3 (enter the result as a percentage). All others, enter the amount from line 3 . .... - 7 Part II Figure Your Allowable Deduction Enter the amount from Schedule C, line 29, plus any gain derived from the business use of your home, minus any loss from the trade or business not derived from the business use of your home. See instructions. 8 See instructions for columns (a) and (b) before completing lines 9-22. a) Direct expenses (b) Indirect expenses Casualty losses (see instructions) . ..... . . . . . . . 9 0 Deductible mortgage interest (see instructions) . 11 Real estate taxes (see instructions) . ........... 2 Add lines 9, 10, and 11 . . . . . . . 12 3 Multiply line 12, column (b), by line 7 . . . . . . . . . .. . .. . . . . .. 13 14 Add line 12, column (a), and line 13 .. 15 Subtract line 14 from line 8. If zero or less, enter -0-. . ................................. 16 Excess mortgage interest (see instructions) ....... 16 17 Excess real estate taxes (see instructions) . . . . . 17 18 Insurance . . ...................... 18 19 Rent . ........... ... . ... . ... . .. . . . .. . ... 10 Repairs and maintenance . ................... 1 Utilities . .. 2 Other expenses (see instructions) .... Statement.?.... 23 Add lines 16 through 22 . . . . . . . . . 24 Multiply line 23, column (b), by line 7 . . . . . . . . .. 24 25 Carryover of prior year operating expenses (see instructions) ............ 25 26 Add line 23, column (a), line 24, and line 25 . . . . . . . . . . . . .. ... 26 7 Allowable operating expenses. Enter the smaller of line 15 or line 26 ......... . . . .. . .. . .. .. ..... 28 Limit on excess casualty losses and depreciation. Subtract line 27 from line 15 . 28 29 Excess casualty losses (see instructions) . . 29 30 Depreciation of your home from line 42 below . 31 Carryover of prior year excess casualty loss d depreciation (see instructions) 31 32 Add lines 29 through 31 . . . . . . . ... 33 Allowable excess casualty losses and depreciation. Enter the smaller of line 28 or line 32 ............. 4 Add lines 14, 27, and 33 . ..... 5 Casualty loss portion, if any, from lines 14 and 33. Carry amount to Form 4684 See instructions . . . 6 Allowable expenses for business use of your home. Subtract line 35 from line 34. Enter here and on Schedule C, line 30 f your home was used for more than one business, see instructions . 36 Part Ill Depreciation of Your Home 37 Enter the smaller of your home's adjusted basis or its fair market value. See instructions . . . . . . . . . . .. 8 Value of land included on line 37 . 9 Basis of building. Subtract line 38 from line 37 . .. 10 Business basis of building. Multiply line 39 by line 7 .. ..... . . . . . . . . ... .... 41 Depreciation percentage (see instructions) ........ 42 Depreciation allowable (see instructions). Multiply line 40 by line 41. Enter here and on line 30 above . ..... Part IV Carryover of Unallowed Expenses to 2022 43 Operating expenses. Subtract line 27 from line 26. If less than zero, enter - 0- . 44 Excess casualty losses and depreciation. Subtract line 33 from line 32. If less than zero, enter -0-. BAA For Paperwork Reduction Act Notice, see your tax return instructions Form 8829 (2021)Instructions Note: This problem is for the 2021 tax year. David R. and Ella M. Cole (ages 39 and 38, respectively) are husband and wife who live at 1820 Elk Avenue, Denver, CO 80202. David is a self-employed consultant specializing in retail management, and Ella is a dental hygienist for a chain of dental clinics. David earned consulting fees of $145,000 in 2021. He maintains his own office and pays for all business expenses. The Coles are adequately covered by the medical plan provided by Ella's employer but have chosen not to participate in its 401(k) retirement plan. David's employment-related expenses for 2021 are summarized below. Airfare $8,800 Lodging 4,835 Meals from restaurants (during travel status) 2,400 Entertainment 3,600 Ground transportation (e.g., limos, rental cars, and taxis) 800 Business gifts 900 Office supplies (includes postage, overnight delivery, and copying) 1,500 The entertainment involved taking clients to sporting and musical events. The business gifts consisted of $50 gift certificates to a national restaurant. These were sent by David during the Christmas holidays to 18 of his major clients. In addition, David drove his 2019 Ford Expedition 11,000 miles for business and 3,000 for personal use during 2021. He purchased the Expedition on August 15,2018, and has always used the automatic (standard) mileage method for tax purposes. Parking and tolls relating to business use total $340 in 2021. When the Coles purchased their present residence in April 2018, they devoted 450 of the 3,000 square feet of living space to an office for David. The property cost $440,000 ($40,000 of which is attributable to the land) and has since appreciated in value. Expenses relating to the residence in 2021 (except for mortgage interest and property taxes; see below) are as follows: Insurance $2,600 Repairs and maintenance 900 Utilities 4,700 Painting office area; area rugs and plants (in the office)* 1,800 *Treat as a direct office in home expense. In terms of depreciation, the Coles use the MACRS percentage tables applicable to 39-year nonresidential real property. As to depreciable property (e.g., office furniture), David tries to avoid capitalization and uses whatever method provides the fastest write-off for tax purposes. Ella works at a variety of offices as a substitute when a hygienist is ill or on vacation or when one of the clinics is particularly busy (e.g., prior to the beginning of the school year). Assume that Ella is an employee (not an independent contractor). Besides her transportation, she must provide and maintain her own uniforms. Her expenses for 2021 appear below. Uniforms $690 State and city occupational licenses 380 Professional journals and membership dues in the American Dental Hygiene Association 340 Correspondence study course (taken online) dealing with teeth whitening procedures 420 amount of Social Security and Medicare taxes. Interest income Ella's salary for the year is $42,000, and her Form W-2 for the year shows income tax withholdings of $4,000 (Federal) and $1,000 (state) and the proper Besides the items already mentioned, the Coles had the following receipts during 2021. State of Colorado general purpose bonds $2,500 IBM bonds 800 Wells Fargo Bank 1,200 $4,500 Federal income tax refund for year 2020 510 Life insurance proceeds paid by Eagle Assurance Corporation 200,000 Inheritance of savings account from Sarah Cole 50,000 Sales proceeds from two ATVs 9,000 For several years, the Coles' household has included David's divorced mother, Sarah, who has been claimed as their dependent. In late December 2020, Sarah unexpectedly died of heart attack in her sleep. Unknown to Ella and David, Sarah had a life insurance policy and a savings account (with David as the designated beneficiary of each). In 2020, the Coles purchased two ATVs for $14,000. After several near mishaps, they decided that the sport was too dangerous. In 2021, they sold the ATVs to their neighbor. Additional expenditures for 2021 include: Funeral expenses for Sarah Taxes Real property taxes on personal residence Colorado state income tax due (paid in April 2021 for tax year 2020) Mortgage interest on personal residence (Rocky Mountain Bank) Contributions to traditional IRAs for Ella and David ($6,000 + $6,000) Relevant Social Security numbers are: David Cole 123-45-6788 Ella Cole 123-45-6787 $4,500 $6,400 310 6710 6,600 12,000 In 2021, the Coles made quarterly estimated tax payments of $6,000 (Federal) and $500 (state) for a total of $24,000 (Federal) and $2,000 (state). The Coles have never owned or used any virtual currency. The Coles received the appropriate coronavirus recovery rebates (economic impact payments); related questions in ProConnect Tax should be ignored. They do not want to contribute to the Presidential Election Campaign Fund. Also, the Coles want any overpayment of tax refunded to them and not applied toward next year's tax liability. David will have a self-employment tax liability. Required: Using the appropriate forms and schedules, compute the Coles' Federal income tax for 2021. education credits. Make realistic assumptions about any missing data. Enter all amounts as positive numbers. If an amount box does not require an entry or the answer is zero, enter If required, round all dollar amounts to the nearest dollar. It may be necessary to complete the tax schedules before completing Form 1040. Disregard the alternative minimum tax (AMT) and the various Use the included tax rates schedules to compute the tax. When computing the tax liability, do not round your immediate calculations. If required, round your final answers to the nearest dollar