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Joe and Jessie are married and have one dependent child, Lizzie. Lizzie is currently in college at State University. Joe works as a design engineer

Joe and Jessie are married and have one dependent child, Lizzie. Lizzie is currently in college at State University. Joe works as a design engineer for a manufacturing firm while Jessie runs a craft business from their home. Jessies craft business consists of making craft items for sale at craft shows that are held periodically at various locations. Jessie spends considerable time and effort on her craft business, and it has been consistently profitable over the years. Joe and Jessie own a home and pay interest on their home loan (balance of $220,000) and a personal loan to pay for Lizzies college expenses (balance of $35,000). Neither Joe nor Jessie is blind or over age 65, and they plan to file as married-joint. Assume that the employer portion of the self-employment tax on Jessies income is $831. Joe and Jessie have summarized the income and expenses they expect to report this year as follows:

Income:

Joes salary

$ 129,100

Jessies craft sales

18,400

Interest from certificate of deposit

1,650

Interest from Treasury bond funds

716

Interest from municipal bond funds

920

Expenditures:

Federal income tax withheld from Joes wages

$ 13,700

State income tax withheld from Joes wages

6,400

Social Security tax withheld from Joes wages

7,482

Real estate taxes on residence

6,200

Automobile licenses (based on weight)

310

State sales tax paid

1,150

Home mortgage interest

16,000

Interest on Masterdebt credit card

2,300

Medical expenses (unreimbursed)

1,690

Joes employee expenses (unreimbursed)

2,400

Cost of Jessies craft supplies

4,260

Postage for mailing crafts

145

Travel and lodging for craft shows

2,230

Self-employment tax on Jessies craft income

1,662

College tuition paid for Lizzie

5,780

Interest on loans to pay Lizzies tuition

3,200

Lizzies room and board at college

12,620

Cash contributions to the Red Cross

525

PLEASE ANSWER WITH FOLLOWING FORMS:

1040 page 1

schedule 1

schedule C

Schedule A

PLEASE USE ACTUAL FORMS IN ANSWER!

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