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 2021, the Deans had the following receipts:

Line Item DescriptionAmountAmountSalaries ($60,000 for Lance, $42,000 for Wanda) $102,000Interest income City of Albuquerque general purpose bonds$1,000 Ford Motor company bonds1,100 Ally Bank certificate of deposit400 Total 2,500Child support payments from John Allen 7,200Annual gifts from parents 26,000Settlement from Roadrunner Touring Company 90,000Lottery winnings 600Federal income tax refund (for tax year 2020) 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 supportthe 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 2021:

Line Item DescriptionAmountAmountMedical expenses (not covered by insurance) $7,200Taxes Property taxes on personal residence$3,600 State of New Mexico income tax (includes amount withheld from wages during 2021)4,200 Total 7,800Interest on home mortgage (First National Bank) 6,000Charitable contributions (cash) 3,600Life insurance premiums (policy on Lance's life) 1,200Contribution to traditional IRA (on Wanda's behalf) 6,000Traffic fines 300Contribution to the reelection campaign fund of the mayor of Santa Fe 500Funeral expenses for Wayne Boyle 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:

Line Item DescriptionSocial Security NumberBirth DateLance Dean (age 42)123-45-678612/16/1979Wanda Dean (age 40)123-45-678708/08/1981Penny Allen (age 19)123-45-678810/09/2002Kyle Allen (age 16)123-45-678005/03/2005Wayne Boyle (age 75)123-45-678506/15/1946

Penny graduated from high school on May 9, 2021, and is undecided about college. During 2021, 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, 2021. For the past few years, Wayne qualified as a dependent of the Deans.

Federal income tax withheld is $3,900 (Lance) and $1,800 (Wanda). The proper amount of Social Security and Medicare tax was withheld. The Deans received the appropriate coronavirus recovery rebates (economic impact payments); related questions in ProConnect Tax should be ignored.

Required:

Determine the Federal income tax for 2021 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 own and did not use any virtual currency during the year, and they do not want to contribute to the Presidential Election Campaign Fund. 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 "0".
• Use the tax rate schedules included with this problem. When computing the tax liability, do not round your immediate calculations. If required round your final answers to the nearest dollar.

I just need to know what 12b is. I am stuck on it!

BAA For Disclosure, Privacy Act, and Paperwork Reduction Act Notice, see separate instructions. Form 1040 (2021)