John and Sandy Ferguson got married eight years ago and have a seven-year-old daughter, Samantha. In 2020, John worked as a computer technician at a local university earning a salary of $152,000, and Sandy worked part time as a receptionist for a law firm earning a salary of $29,000. John also does some Web design work on the side and reported revenues of $4,000 and associated expenses of $750. The Fergusons received $800 in qualified dividends and a $200 refund of their state income taxes. The Fergusons always itemize their deductions, and their itemized deductions were well over the standard deduction amount last year. The Fergusons had qualifying insurance for purposes of the Affordable Care Act (ACA). Use Exhibit 8-9, Tax Rate Schedule, Dividends and Capital Gains Tax Rates, 2020 AMT exemption for reference.

The Fergusons reported making the following payments during the year:

State income taxes of $4,400. Federal tax withholding of $21,000.

Alimony payments to Johns former wife of $10,000 (divorced on 12/31/2014).

Child support payments for Johns child with his former wife of $4,100.

$12,200 of real property taxes.

Sandy was reimbursed $600 for employee business expenses she incurred. She was required to provide documentation for her expenses to her employer.

$3,600 to Kid Care day care center for Samanthas care while John and Sandy worked.

$14,000 interest on their home mortgage ($400,000 acquisition debt).

$3,000 interest on a $40,000 home-equity loan. They used the loan to pay for a family vacation and new car.

$15,000 cash charitable contributions to qualified charities.

Donation of used furniture to Goodwill. The furniture had a fair market value of $400 and cost $2,000.

1 Wages, salaries, tips, etc. Attach Form(s) W-2 1 181,000 2a Tax-exempt interest 2a 2b 3b 800 b Taxable interest. Attach Sch. B if required 800 b Ordinary dividends. Attach Sch. Bif required b b Taxable amount d d Taxable amount 4b 4d b Taxable amount 5b 6 3a Qualified dividends 3a Standard 4a IRA distributions 4a Deduction for C Single or 4c c Pensions and annuities Married filing separately, 5a Social security benefits 5a $12.200 Married filing 6 Capital gain or loss). Attach Schedule D if required. If not required, check here jointly or Qualifying 7a Other income from Schedule 1, line 9 widow(er), $24,400 b Add lines 1, 2b, 3b, 4b, 40, 5b, 6, and 7a. This is your total income Head of household, 8a Adjustments to income from Schedule 1, line 22 $18,350 . If you checked b Subtract line 8a from line 7b. This is your adjusted gross income any box under Standard 9 Standard deduction or itemized deductions (from Schedule A) Deduction see instructions. 10 Qualified business income deduction. Attach Form 8995 or Form 8995-A 7a 7b 181,800 8 8b 181,800 9 10 11a Add lines 9 and 10 11a 0 b Taxable income. Subtract line 11a from line 8b 11b 181,800 For Disclosure, Privacy Act, and Paperwork Reduction Act Notice, see separate instructions. Cat. No. 11320B Form 1040 (2019) THIS FORM IS A SIMULATION OF AN OFFICIAL U.S. TAX FORM. IT IS NOT THE OFFICIAL FORM ITSELF. DO NOT USE THIS FORM FOR TAX FILINGS OR FOR ANY PURPOSE OTHER THAN EDUCATIONAL 2020 McGraw-Hill Education Teo 12a 12b 13a 0 13b 0 14 15 16 0 17 18a 18b 12a Tax (see inst.) Check if any from Form(s): (1) 8814 (2) 4972 (3) b Add Schedule 2, line 3, and line 12a and enter the total 13a Child tax credit or credit for other dependents b Add Schedule 3, line 7, and line 13a and enter the total 14 Subtract line 13b from line 12b. If zero or less, enter-O- 15 Other taxes, including self-employment tax, from Schedule 2, line 10 16 Add lines 14 and 15. This is your total tax 17 Federal income tax withheld from Forms W-2 and 1099 18 Other payments and refundable credits: a Earned income credit (EIC) b Additional child tax credit. Attach Schedule 8812 C American opportunity credit from Form 8863, line 8 d Schedule 3, line 14 e Add lines 18a through 18d. These are your total other payments and refundable credits 19 Add lines 17 and 18e. These are your total payments 20 If line 19 is more than line 16, subtract line 16 from line 19. This is the amount you overpaid 21a Amount of line 20 you want refunded to you. If Form 8888 is attached, check here Routing number c Type: Checking Account number 22 Amount of line 20 you want applied to your 2020 estimated tax 23 Amount you owe. Subtract line 19 from line 16. For details on how to pay, see instructions 24 Estimated tax penalty (see instructions) 18c 18d 18e 0 19 0 20 21a Savings 22 23 24 Parti 1 1 2a 2a b 3 3 Additional Income Taxable refunds, credits, or offsets of state and local income taxes Alimony received Date of original divorce or separation agreement (see instructions) Business income or (loss). Attach Schedule C Other gains or losses). Attach Form 4797 Rental real estate, royalties, partnerships, S corporations, trusts, etc. Attach Schedule E Farm income or loss). Attach Schedule F Unemployment compensation Other income. List type and amount 4 4 5 5 6 6 7 7 8 8 9 9 Part II 10 10 11 11 12 12 13 13 14 14 15 15 Combine lines 1 through 8. Enter here and on Form 1040 or 1040-SR, line 7a Adjustments to Income Educator expenses Certain business expenses of reservists, performing artists, and fee-basis government officials. Attach Form 2106 Health savings account deduction. Attach Form 8889 Moving expenses for members of the Armed Forces. Attach Form 3903 Deductible part of self-employment tax. Attach Schedule SE Self-employed SEP, SIMPLE, and qualified plans Self-employed health insurance deduction Penalty on early withdrawal of savings Alimony paid Recipient's SSN Date of original divorce or separation agreement (see instructions) IRA deduction Student loan interest deduction Reserved for future use 16 16 17 17 18a 18a b 19 19 20 20 21 21 22 Add lines 10 through 21. These are your adjustments to income. Enter here and on Form 1040 or 1040-SR, line 8a 22 0 1 2 3 SCHEDULE 2 Additional Taxes OMB No. 1545-0074 (Form 1040 or 1040-SR) 2019 Department of the Treasury Attach to Form 1040 or 1040-SR. Internal Revenue Service Go to www.irs.gov/Form1040 for instructions and the latest information. Attachment Sequence No. 02 Name(s) shown on Form 1040 or 1040-SR Your social security number John Ferguson Sandy Ferguson 111-11-1111 Partl Tax 1 Alternative minimum tax. Attach Form 6251 2 Excess advance premium tax credit repayment. Attach Form 8962 3 Add lines 1 and 2. Enter here and include on Form 1040 or 1040-SR, line 12b Part II Other Taxes 4 Self-employment tax. Attach Schedule SE 5 Unreported social security and Medicare tax from Form: a 4137 6 Additional tax on IRAs, other qualified retirement plans, and other tax-favored accounts. Attach Form 5329 if required 7a Household employment taxes. Attach Schedule H 7a b Repayment of first-time homebuyer credit from Form 5405. Attach Form 5405 if required 7b 8 Taxes from: a Form 8959 b Form 8960 8 c Instructions, enter code(s) 9 Section 965 net tax liability installment from Form 965-A 10 Add lines 4 through 8. These are your total other taxes. Enter here and on Form 1040 or 1040-SR, line 15 For Paperwork Reduction Act Notice, see your tax return instructions. Cat. No. 71478U Schedule 2 (Form 1040 or 1040-SR) 2019 THIS FORM IS A SIMULATION OF AN OFFICIAL U.S. TAX FORM. IT IS NOT THE OFFICIAL FORM ITSELF. DO NOT USE THIS FORM FOR TAX FILINGS OR FOR ANY PURPOSE OTHER THAN EDUCATIONAL. 2020 McGraw-Hill Education. b 8919 5 6 10 0 N 6 7 Part. Nonrefundable Credits 1 Foreign tax credit. Attach Form 1116 if required 1 2 Credit for child and dependent care expenses. Attach Form 2441 3 Education credits from Form 8863, line 19 3 4 Retirement savings contributions credit. Attach Form 8880 4 5 Residential energy credit. Attach Form 5695 5 6 Other credits from Form: a 3800 b 8801 7 Add lines 1 through 6. Enter here and include on Form 1040 or 1040-SR, line 13 0 Part II Other Payments and Refundable Credits 8 2019 estimated tax payments and amount applied from 2018 return 8 9 Net premium tax credit. Attach Form 8962 9 10 Amount paid with request for extension to file (see instructions) 10 11 Excess social security and tier 1 RRTA tax withheld 11 12 Credit for federal tax on fuels. Attach Form 4136 12 13 Credits from Form: a 2439 b Reserved C 8885 13 14 Add lines 8 through 13. Enter here and on Form 1040 or 1040-SR, line 18d 14 0 For Paperwork Reduction Act Notice, see your tax return instructions. Cat. No. 71480G Schedule 3 (Form 1040 or 1040-SR) 2019 THIS FORM IS A SIMULATION OF AN OFFICIAL U.S. TAX FORM. IT IS NOT THE OFFICIAL FORM ITSELF. DO NOT USE THIS FORM FOR TAX FILINGS OR FOR ANY PURPOSE OTHER THAN EDUCATIONAL. 2020 McGraw-Hill Education. . Part II Alternative Minimum Tax (AMT) Exemption. (If you were under age 24 at the end of 2019, see instructions.) IF your filing status is... AND line 4 is not over... THEN enter on line 5... Single or head household $ 510,300 $ 71,700 Married filing jointly or qualifying widow(er) 1,020,600 111,700 Married filing separately 510,300 55,850 5 If line 4 is over the amount shown above for your filing status, see instructions 6 Subtract line 5 from line 4. If more than zero, go to line 7. If zero or less, enter -- here and on lines 7, 9, and 11, and go to line 10 6 7 If you are filing Form 2555, see instructions for the amount to enter. If you reported capital gain distributions directly on Form 1040 or 1040-SR, line 6; you reported qualified dividends on Form 1040 or 1040-SR, line 3a; or you had a gain on both lines 15 and 16 of Schedule D (Form 1040 or 1040-SR) (as refigured for the AMT, if necessary), complete Part III on the back and enter the amount from line 40 here. All others: If line 6 is $194,800 or less ($97,400 or less if married filing separately), multiply line 6 by 26% (0.26). Otherwise, multiply line 6 by 28% (0.28) and subtract $3,896 ($1,948 if married filing separately) from the result. 8 Alternative minimum tax foreign tax credit (see instructions) 9 Tentative minimum tax. Subtract line 8 from line 7 10 Add Form 1040 or 1040-SR, line 12a (minus any tax from Form 4972), and Schedule 2 (Form 1040 or 1040-SR), line 2. Subtract Subtract from the result any foreign tax credit from Schedule 3 (Form 1040 or 1040-SR), line 1. If you used Schedule J to figure your tax on Form 1040 or 1040-SR, line 12a, refigure that tax without using Schedule J before completing this line (see instructions) 10 11 AMT. Subtract line 10 from line 9. If zero or less, enter-O-. Enter here and on Schedule 2 (Form 1040 or 1040-SR), line 1 11 For Paperwork Reduction Act Notice, see your tax return instructions. Cat. No. 13600G THIS FORM IS A SIMULATION OF AN OFFICIAL U.S. TAX FORM. IT IS NOT THE OFFICIAL FORM ITSELF. DO NOT USE } } Form 6251 (2019)

Question

John and Sandy Ferguson got married eight years ago and have a seven-year-old daughter, Samantha. In 2020, John worked as a computer technician at a local university earning a salary of $152,000, and Sandy worked part time as a receptionist for a law firm earning a salary of $29,000. John also does some Web design work on the side and reported revenues of $4,000 and associated expenses of $750. The Fergusons received $800 in qualified dividends and a $200 refund of their state income taxes. The Fergusons always itemize their deductions, and their itemized deductions were well over the standard deduction amount last year. The Fergusons had qualifying insurance for purposes of the Affordable Care Act (ACA). Use Exhibit 8-9, Tax Rate Schedule, Dividends and Capital Gains Tax Rates, 2020 AMT exemption for reference.

The Fergusons reported making the following payments during the year:

State income taxes of $4,400. Federal tax withholding of $21,000.
Alimony payments to Johns former wife of $10,000 (divorced on 12/31/2014).
Child support payments for Johns child with his former wife of $4,100.
$12,200 of real property taxes.
Sandy was reimbursed $600 for employee business expenses she incurred. She was required to provide documentation for her expenses to her employer.
$3,600 to Kid Care day care center for Samanthas care while John and Sandy worked.
$14,000 interest on their home mortgage ($400,000 acquisition debt).
$3,000 interest on a $40,000 home-equity loan. They used the loan to pay for a family vacation and new car.
$15,000 cash charitable contributions to qualified charities.
Donation of used furniture to Goodwill. The furniture had a fair market value of $400 and cost $2,000.

image text in transcribed

1 Wages, salaries, tips, etc. Attach Form(s) W-2 1 181,000 2a Tax-exempt interest 2a 2b 3b 800 b Taxable interest. Attach Sch. B if required 800 b Ordinary dividends. Attach Sch. Bif required b b Taxable amount d d Taxable amount 4b 4d b Taxable amount 5b 6 3a Qualified dividends 3a Standard 4a IRA distributions 4a Deduction for C Single or 4c c Pensions and annuities Married filing separately, 5a Social security benefits 5a $12.200 Married filing 6 Capital gain or loss). Attach Schedule D if required. If not required, check here jointly or Qualifying 7a Other income from Schedule 1, line 9 widow(er), $24,400 b Add lines 1, 2b, 3b, 4b, 40, 5b, 6, and 7a. This is your total income Head of household, 8a Adjustments to income from Schedule 1, line 22 $18,350 . If you checked b Subtract line 8a from line 7b. This is your adjusted gross income any box under Standard 9 Standard deduction or itemized deductions (from Schedule A) Deduction see instructions. 10 Qualified business income deduction. Attach Form 8995 or Form 8995-A 7a 7b 181,800 8 8b 181,800 9 10 11a Add lines 9 and 10 11a 0 b Taxable income. Subtract line 11a from line 8b 11b 181,800 For Disclosure, Privacy Act, and Paperwork Reduction Act Notice, see separate instructions. Cat. No. 11320B Form 1040 (2019) THIS FORM IS A SIMULATION OF AN OFFICIAL U.S. TAX FORM. IT IS NOT THE OFFICIAL FORM ITSELF. DO NOT USE THIS FORM FOR TAX FILINGS OR FOR ANY PURPOSE OTHER THAN EDUCATIONAL 2020 McGraw-Hill Education Teo 12a 12b 13a 0 13b 0 14 15 16 0 17 18a 18b 12a Tax (see inst.) Check if any from Form(s): (1) 8814 (2) 4972 (3) b Add Schedule 2, line 3, and line 12a and enter the total 13a Child tax credit or credit for other dependents b Add Schedule 3, line 7, and line 13a and enter the total 14 Subtract line 13b from line 12b. If zero or less, enter-O- 15 Other taxes, including self-employment tax, from Schedule 2, line 10 16 Add lines 14 and 15. This is your total tax 17 Federal income tax withheld from Forms W-2 and 1099 18 Other payments and refundable credits: a Earned income credit (EIC) b Additional child tax credit. Attach Schedule 8812 C American opportunity credit from Form 8863, line 8 d Schedule 3, line 14 e Add lines 18a through 18d. These are your total other payments and refundable credits 19 Add lines 17 and 18e. These are your total payments 20 If line 19 is more than line 16, subtract line 16 from line 19. This is the amount you overpaid 21a Amount of line 20 you want refunded to you. If Form 8888 is attached, check here Routing number c Type: Checking Account number 22 Amount of line 20 you want applied to your 2020 estimated tax 23 Amount you owe. Subtract line 19 from line 16. For details on how to pay, see instructions 24 Estimated tax penalty (see instructions) 18c 18d 18e 0 19 0 20 21a Savings 22 23 24 Parti 1 1 2a 2a b 3 3 Additional Income Taxable refunds, credits, or offsets of state and local income taxes Alimony received Date of original divorce or separation agreement (see instructions) Business income or (loss). Attach Schedule C Other gains or losses). Attach Form 4797 Rental real estate, royalties, partnerships, S corporations, trusts, etc. Attach Schedule E Farm income or loss). Attach Schedule F Unemployment compensation Other income. List type and amount 4 4 5 5 6 6 7 7 8 8 9 9 Part II 10 10 11 11 12 12 13 13 14 14 15 15 Combine lines 1 through 8. Enter here and on Form 1040 or 1040-SR, line 7a Adjustments to Income Educator expenses Certain business expenses of reservists, performing artists, and fee-basis government officials. Attach Form 2106 Health savings account deduction. Attach Form 8889 Moving expenses for members of the Armed Forces. Attach Form 3903 Deductible part of self-employment tax. Attach Schedule SE Self-employed SEP, SIMPLE, and qualified plans Self-employed health insurance deduction Penalty on early withdrawal of savings Alimony paid Recipient's SSN Date of original divorce or separation agreement (see instructions) IRA deduction Student loan interest deduction Reserved for future use 16 16 17 17 18a 18a b 19 19 20 20 21 21 22 Add lines 10 through 21. These are your adjustments to income. Enter here and on Form 1040 or 1040-SR, line 8a 22 0 1 2 3 SCHEDULE 2 Additional Taxes OMB No. 1545-0074 (Form 1040 or 1040-SR) 2019 Department of the Treasury Attach to Form 1040 or 1040-SR. Internal Revenue Service Go to www.irs.gov/Form1040 for instructions and the latest information. Attachment Sequence No. 02 Name(s) shown on Form 1040 or 1040-SR Your social security number John Ferguson Sandy Ferguson 111-11-1111 Partl Tax 1 Alternative minimum tax. Attach Form 6251 2 Excess advance premium tax credit repayment. Attach Form 8962 3 Add lines 1 and 2. Enter here and include on Form 1040 or 1040-SR, line 12b Part II Other Taxes 4 Self-employment tax. Attach Schedule SE 5 Unreported social security and Medicare tax from Form: a 4137 6 Additional tax on IRAs, other qualified retirement plans, and other tax-favored accounts. Attach Form 5329 if required 7a Household employment taxes. Attach Schedule H 7a b Repayment of first-time homebuyer credit from Form 5405. Attach Form 5405 if required 7b 8 Taxes from: a Form 8959 b Form 8960 8 c Instructions, enter code(s) 9 Section 965 net tax liability installment from Form 965-A 10 Add lines 4 through 8. These are your total other taxes. Enter here and on Form 1040 or 1040-SR, line 15 For Paperwork Reduction Act Notice, see your tax return instructions. Cat. No. 71478U Schedule 2 (Form 1040 or 1040-SR) 2019 THIS FORM IS A SIMULATION OF AN OFFICIAL U.S. TAX FORM. IT IS NOT THE OFFICIAL FORM ITSELF. DO NOT USE THIS FORM FOR TAX FILINGS OR FOR ANY PURPOSE OTHER THAN EDUCATIONAL. 2020 McGraw-Hill Education. b 8919 5 6 10 0 N 6 7 Part. Nonrefundable Credits 1 Foreign tax credit. Attach Form 1116 if required 1 2 Credit for child and dependent care expenses. Attach Form 2441 3 Education credits from Form 8863, line 19 3 4 Retirement savings contributions credit. Attach Form 8880 4 5 Residential energy credit. Attach Form 5695 5 6 Other credits from Form: a 3800 b 8801 7 Add lines 1 through 6. Enter here and include on Form 1040 or 1040-SR, line 13 0 Part II Other Payments and Refundable Credits 8 2019 estimated tax payments and amount applied from 2018 return 8 9 Net premium tax credit. Attach Form 8962 9 10 Amount paid with request for extension to file (see instructions) 10 11 Excess social security and tier 1 RRTA tax withheld 11 12 Credit for federal tax on fuels. Attach Form 4136 12 13 Credits from Form: a 2439 b Reserved C 8885 13 14 Add lines 8 through 13. Enter here and on Form 1040 or 1040-SR, line 18d 14 0 For Paperwork Reduction Act Notice, see your tax return instructions. Cat. No. 71480G Schedule 3 (Form 1040 or 1040-SR) 2019 THIS FORM IS A SIMULATION OF AN OFFICIAL U.S. TAX FORM. IT IS NOT THE OFFICIAL FORM ITSELF. DO NOT USE THIS FORM FOR TAX FILINGS OR FOR ANY PURPOSE OTHER THAN EDUCATIONAL. 2020 McGraw-Hill Education. . Part II Alternative Minimum Tax (AMT) Exemption. (If you were under age 24 at the end of 2019, see instructions.) IF your filing status is... AND line 4 is not over... THEN enter on line 5... Single or head household $ 510,300 $ 71,700 Married filing jointly or qualifying widow(er) 1,020,600 111,700 Married filing separately 510,300 55,850 5 If line 4 is over the amount shown above for your filing status, see instructions 6 Subtract line 5 from line 4. If more than zero, go to line 7. If zero or less, enter -- here and on lines 7, 9, and 11, and go to line 10 6 7 If you are filing Form 2555, see instructions for the amount to enter. If you reported capital gain distributions directly on Form 1040 or 1040-SR, line 6; you reported qualified dividends on Form 1040 or 1040-SR, line 3a; or you had a gain on both lines 15 and 16 of Schedule D (Form 1040 or 1040-SR) (as refigured for the AMT, if necessary), complete Part III on the back and enter the amount from line 40 here. All others: If line 6 is $194,800 or less ($97,400 or less if married filing separately), multiply line 6 by 26% (0.26). Otherwise, multiply line 6 by 28% (0.28) and subtract $3,896 ($1,948 if married filing separately) from the result. 8 Alternative minimum tax foreign tax credit (see instructions) 9 Tentative minimum tax. Subtract line 8 from line 7 10 Add Form 1040 or 1040-SR, line 12a (minus any tax from Form 4972), and Schedule 2 (Form 1040 or 1040-SR), line 2. Subtract Subtract from the result any foreign tax credit from Schedule 3 (Form 1040 or 1040-SR), line 1. If you used Schedule J to figure your tax on Form 1040 or 1040-SR, line 12a, refigure that tax without using Schedule J before completing this line (see instructions) 10 11 AMT. Subtract line 10 from line 9. If zero or less, enter-O-. Enter here and on Schedule 2 (Form 1040 or 1040-SR), line 1 11 For Paperwork Reduction Act Notice, see your tax return instructions. Cat. No. 13600G THIS FORM IS A SIMULATION OF AN OFFICIAL U.S. TAX FORM. IT IS NOT THE OFFICIAL FORM ITSELF. DO NOT USE } } Form 6251 (2019)