Instructions Note: This problem is for the 2018 tax year. Lance H. and Wanda B. Dean are married and live at 431 Yucca Drive, Santa Fe, NM 87501. Lance works for the convention bureau of the local Chamber of Commerce, and Wanda is employed part-time as a paralegal for a law firm. During 2018, the Deans had the following receipts: S101,000 $1,000 1,100 400 Salaries ($60,000 for Lance, $41,000 for Wanda) Interest income City of Albuquerque general purpose bonds Ford Motor company bonds Ally Bank certificate of deposit Child support payments from John Allen Annual gifts from parents Settlement from Roadrunner Touring Company Lottery winnings Federal income tax refund (for tax year 2017) 2,500 7,200 26,000 90,000 600 400 Wanda was previously married to John Allen. When they divorced several years ago, Wanda was awarded custody of their two children, Penny and Kyle. (Note: Wanda has never issued a Form 8332 waiver.) Under the divorce decree, John was obligated to pay alimony and child support-the alimony payments were to terminate if Wanda remarried. In July, while going to lunch in downtown Santa Fe, Wanda was injured by a tour bus. Because the driver was clearly at fault, the owner of the bus, Roadrunner Touring Company, paid her medical expenses (Including a one-week stay in a hospital). To avoid a lawsuit, Roadrunner also transferred $90,000 to her in settlement of the personal injuries she sustained. The Deans had the following expenditures for 2018: 57,200 $3,600 Medical expenses (not covered by insurance) Taxes- Property taxes on personal residence State of New Mexico income tax (includes amount withheld from wages during 2018) Interest on home mortgage (First National Bank) 4,200 7,800 6,000 Charitable contributions Life insurance premiums (policy on Lance's life) Contribution to traditional IRA (on Wanda's behalf) Traffic fines Contribution to the reelection campaign fund of the mayor of Santa Fe Funeral expenses for Wayne Boyle 3,600 1,200 5,000 300 500 6,300 The life insurance policy was taken out by Lance several years ago and designates Wanda as the beneficiary. As a part-time employee, Wanda is excluded from coverage under her employer's pension plan. Consequently, she provides for her own retirement with a traditional IRA obtained at a local trust company. Because the mayor is a member of the local Chamber of Commerce, Lance felt compelled to make the political contribution. The Deans' household includes the following, for whom they provide more than half of the support: Social Security Number Birth Date Lance Dean (age 42) Wanda Dean (age 40) Penny Allen (age 19) Kyle Allen (age 17) Wayne Boyle (age 75) 123-45-6786 123-45-6787 123-45-6788 123-45-6780 123-45-6785 12/16/1976 08/08/1978 10/09/1999 05/03/2002 06/15/1943 Penny graduated from high school on May 9, 2018, and is undecided about college. During 2018, she earned $8,500 (placed in a savings account) playing a harp in the lobby of a local hotel. Wayne is Wanda's widower father who died on December 20, 2017. For the past few years, Wayne qualified as a dependent of the Deans. Federal income tax withheld is $4,200 (Lance) and $2,100 (Wanda). The proper amount of Social Security and Medicare tax was withheld. Required: Determine the Federal income tax for 2018 for the Deans on a joint return by completing the appropriate forms. Use Form 1040 and Schedule 1 to complete this tax return. They do not want to contribute to the Presidential Election Campaign Fund. All members of the family had health care coverage for all of 2018. If an overpayment results, it is to be refunded to them. . 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 "O". Use the tax rate schedules Included with this problem. When computing the tax llability, do not round your Immediate calculations. If required round your final answers to the nearest dollar. Form 1040 Complete Form 1040 below for Lance and Wanda Dean. Form Department of the Treasury-Internal Revenue Service (99) 1040 u.s. Individual Income Tax Return 2018 OMB No. 1545-0074 IRS Use Only Filing status: Married filing jointly Your first name and initial Last name Your social security number Lance H. Dean 123-45-6786 Your standard deduction: None If joint return, spouse's first name and initial Last name Spouse's social security Wanda B. Dean number 123-45-6787 Spouse standard deduction: Someone can claim your spouse as a dependent Spouse was born Full-year health before January 2, 1954 - Spouse is blind 7 Spouse itemizes on a separate return or you were dual Yes care coverage or status alien exempt (see inst.) Home address (number and street). If you have a P.O. box, see instructions, Apt. no. Presidential Election 431 Yucca Drive Campaign (see inst.) None City, town or post office, state, and ZIP code. If you have a foreign address, attach Schedule 6. If more than four dependents, Santa Fe, NM 87501 see inst. and here - Dependents (see instructions):|(2) Social security number (3) Relationship to you (4) Vif qualifies for (see inst.): (1) First name Last name Child tax credit Credit for other dependents Penny Allen 123-45-6788 Child No Kyle Allen 123-45-6780 Child No No Sign Here Under penalties of perjury, I declare that I have examined this return and accompanying schedules and statements, and to the best of my knowledge and belief, they are true, correct, and complete. Declaration of preparer (other than taxpayer) is based on all information of which preparer has any knowledge. Your signature Date Your If the IRS sent you an Identity Protection PIN, occupation enter it here Manager (see inst.) Joint return? See instructions. Keep a copy for your Spouse's signature. If a joint return, Date Spouse's If the IRS sent you an Identity Protection PIN, records. both must sign. occupation enter it here Paralegal (see inst.) Paid Preparer Use Only Preparer's name Preparer's signature PTIN Firm's EIN Check if: Self-Prepared - 3rd Party Designee Firm's name Phone no. - Self-employed Firm's address BAA For Disclosure, Privacy Act, and Paperwork Reduction Act Notice, see separate instructions. Form 1040 (2018) Form 1040 (2018) Lance H. and Wanda B. Dean 123-45-6786 Page 2 4 Wages, salaries, tips, etc. Attach Form(s) W-2......... 101,000 2,500 3b 2a Tax-exempt b Taxable interest interest Qualified b Ordinary dividends dividends Attach Form(s) W-2. Also 4a IRAs, pensions, b Taxable attach Form(s) W-2G and and annuities amount 1099-R If tax was 5a Social security b Taxable withheld. benefits amount 6 Total income. Add lines 1 through 5. Add any amount from Schedule 1, line 22 103,500 7 Adjusted gross income. If you have no adjustments to income, enter the amount from line 6; otherwise, subtract Schedule 1, line 36, from line 6... Standard deduction or itemized deductions (from Schedule A).. Standard Deduction for- Single or married filing lo separately, $12,000 Qualified business income deduction (see instructions) .. - Married filing jointly or Qualifying widow(er), $24,000 Head of household, $18,000 If you checked any box under Standard deduction, see instructions. 10 Taxable income. Subtract lines 8 and 9 from line 7. If zero or less, enter-O-.... 11 a Tax (see inst) o (check if any from: 1 Form(s) 8814 2 - Form 4972 31 b Add any amount from Schedule 2 and check here.... 12 a Child tax credit/credit for other dependents b Add any amount from Schedule 3 and check here ....... Subtract line 12 from line 11. If zero or less, enter -- ....... 14 Other taxes. Attach Schedule 4. ....... Total tax. Add lines 13 and 14 ....... Federal income tax withheld from Forms W-2 and 1099.. 17 Refundable credits: a EIC (see inst.) b Sch 8812 c Form 8863 Add any amount from Schedule 5 Add lines 16 and 17. These are your total payments .... 18 -6,000 Refund 19 Ir line 18 is more than line 15, subtract line 15 from line 18. This is the amount you overpaid ..... 20a Amount of line 19 you want refunded to you. If Form 8888 is attached, check here ..... c Type: Checking - Savings Direct deposit? See instructions. b Routing number III d Account number 1110||||||| 21 Amount of line 19 you want applied to your 2019 estimated tax Amount 22 Amount you owe. Subtract line 18 from line 15. For details on how to Dav. see instructions ... You Owe ...... 23 23 Estimated tax penalty (see instructions)..... Go to www.irs.gov/Form1040 for instructions and the latest information. Form 1040 (2018) Schedule 1 Complete Schedule A for Lance and Wanda Dean for 2018. Additional Income and Adjustments to OMB No. 1545- 0074 SCHEDULE 1 Income (Form 1040) 2018 Department of the Treasury Internal Revenue Attach to Form 1040. Attachment Service Go to www.lrs.gov/Form1040 for instructions and the latest Sequence No. information. Name(s) shown on Form 1040 Your social security number Lance H. and Wanda B. Dean 123-45-6786 Additional 1- Reserved Income 10 Taxable refunds, credits, or offsets of state and local income taxes.... Alimony received ....... 01 12 Business income or (loss). Attach Schedule C or C-EZ.............. Capital gain or loss). Attach Schedule D if required. If not required, check here Other gains or (losses). Attach Form 4797 .... 15a Reserved 16a Reserved ..... ......... 17 Rental real estate, royalties, partnerships, S corporations, trusts, etc. Attach Schedule E 99,100 18 Farm income or (loss). Attach Schedule F ..... 19 Unemployment compensation .... 20a Reserved Other income. List type and amount 21 Settlement from Roadrunner 22 Combine the amounts in the far right column. If you don't have any adjustments to income, enter here and include on Form 1040, line 6. Otherwise, go to line 23 Adjustments 23 to Income 24 Certain business expenses of reservists, performing artists, and fee-basis government officials. Attach Form 2106 ............ 197,000 25 Health savings account deduction. Attach Form 8889 ....... 26 Moving expenses for members of the Armed Forces. Attach Form 3903... 27 Deductible part of self-employment tax. Attach Schedule SE Self-employed SEP, SIMPLE, and qualified plans Self-employed health insurance deduction .... 30 Penalty on early withdrawal of savings .... 31a Alimony paid b Recipient's SSN IRA deduction.. Student loan interest deduction ... Reserved ......... 35 Reserved 197,000 36 Add lines 23 through 35 ......... BAA For Paperwork Reduction Act Notice, see your tax return instructions. Schedule 1 (Form 1040) 2018 2018 Tax Rate Schedules Use the 2018 Tax Rate Schedules to compute the tax. (Note: Because the tax rate schedules are used instead of the tax tables, the amount of tax computed may vary slightly from the amount listed in the tables.) 2018 Tax Rate Schedules Single-Schedule X Head of household-Schedule z If taxable income of the If taxable income of the But not amount is: But not amount Over- over- The tax is: over Over- Over- The tax is: over- so 59,525 ...... 10% $0 $0 $13,500 9,525 38,700 $952.50 + 12% 9,525 13,500 51,800 $1,360.00 + 12% 13,600 38,700 82,500 4,453.50 + 22% 38,700 51,800 82,500 5,944.00 + 22% 51,800 82,500 157,500 14,089.50 + 24% 82,500 82,500 157,500 12,698.00 + 24% 82,500 157,500 200,000 32,089.50 + 32% 157,500 157,500 200,000 30,698.00 + 32% 157,500 200,000 500,000 45,689.50 + 35% 200,000 200,000 500,000 44,298.00 + 35% 200,000 500,000 ...... 150,689.50 + 37% 500,000 500,000 .. .. .. 149,298.00 + 37% 500,000 ...... 10% $0 is: of the amount Over Married filing jointly or Qualifying widow(er)-Schedule Y-1 If taxable income of the But not amount Over over The tax is: over SO $19,050 ......10% $0 19,050 77,400 $1,905.00 + 12% 19,050 77,400 165,000 8,907.00 + 22% 77,400 155,000 315,000 28,179.00 + 24% 165,000 315,000 400,000 64,179.00 + 32% 315,000 400,000 600,000 91,379.00 + 35% 400,000 600,000 ...... 161,379.00 + 37% 600,000 Married filing separately-Schedule Y-2 If taxable income is: But not Over over The tax Is: $0 $9,525 ...... 10% 9,525 38,700 $952.50 + 12% 38,700 82,500 4,453.50 + 22% 82,500 157,500 14,089.50 + 24% 157,500 200,000 32,089.50 + 32% 200,000 300,000 45,689.50 + 35% 300,000 ...... 80,689.50 + 37% SO 9,525 38,700 82,500 157,500 200,000 300,000