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Gross Income Exclusions and Deductions for AGI CUMULATIVE PROBLEM 1 (CHAPTERS 1-4) Use the following information to prepare Erica Hansen's tax return. Use Form 10 Schedule 3, Schedule EIC, Schedule 8812, and Form 8880. This problem is suita preparation or computer software application. Form 1040, Schedule 1 om is suitable for manual Erica L. Hansen (SSN 376-38-4930), age 42, is a single parent with three children SL 19 Sunset Road, Normal, Illinois 61761. She chooses to support the Presidential can see children. She resides at he Presidential campaign fund. 69-62-3418), Tiffany A. Hansen, her 14-year-old Her household includes Randall L. Hansen, her 19-year-old son (SSN 369-62-3418). Hansen, her 12-year-old daughter (SSN 396-30-6439), and Donna M. Hansen, her 14 daughter (SSN 653-29-8177). Erica provides over half of the support of cach child, che vear delivering papers Donna has no income of her own, but Randall earns $4,200 during the year deliverin and mowing lawns. All children lived in the household for 12 months, Randall is a full student at Heartland College in Normal, Illinois. Erica works as an office manager for Universal Development Corporation. Information from her W-2, as well as other relevant information follows. Gross wages $39,500 Social security tax withheld 2,449 Medicare tax withheld 573 Federal income tax withheld 0 State income tax withheld 819 Interest received: First Federal Savings Bank Olympic Savings-certificate of deposit cashed in State of Maryland bonds $775 175 300 Erica gets her family health care coverage through her work. Erica is a participant in an employer-sponsored retirement plan. However, she wants to make the largest possible deductible contribution to her traditional IRA. If Erica has overpaid her taxes, she prefers to roccive a refund. She signs and dates her return on April 5, 2019. Retirement Savings Contributions Credit: Compute the amount of the credit using the information presented in 9204.06. EIC Calculation: Look up the amount in the EIC Tables for both earned income and AGI. Additional Child Tax Credit: Enter on Schedule 8812 (line 1) $1,400 for each qualifying child. 2-17 ax Determination Payments, and Reporting ments, and Reporting Procedures RETIREMENTS KEMENT SAVINGS CONTRIBUTIONS CREDITI butions (including amounts with- is in addition to any deduction edit applies to contributions plans such as 401(k) plans, 9204.06 axpayers may take a nonrefundable tax credit for contributions ng plans. The credit is in additio from their paychecks) to retirement savings P ontributions. The credit applies usion relating to the retirement plan contri to traditional and Roth IRAs and other qualified retirement plans su annuities, 457 plans. SIMPLE and SEP plans. The credit for 2018 is determined by multiplying payer) by a percentage taken from Figure 2. 3.4. On a joint tax return, the credit 000 maximum contribution, provided both spouses make at least a $2.00 to a retirement plan during the year. The percentage percentages used to compute the credit der Certain taxpayers held from their pay to the retiree and other plans. or exclusion relating made to traditional an 403(b) annuities, contributions (not to exceed $2,000 p the credit can be based oth spouses make at least a $2,000 contri pute the credit depend on the on a $4,000 maximum contribution taxpayer's filing status and AGI. Applicable Married Filing Jointly AGI Over % Figure 2-4: Retirement Savings Contributions ce Head of Household Not Over AGI Over Not Over SO $38,000 $0 $28,500 41,000 28,500 30,750 63,000 30,750 47,250 47,250 All Others AGI Over Not Over $0 $19,000 19,000 20,500 20,500 31,500 31,500 50% 20 38,000 41,000 63,000 10 0 Taxpayers must be at least 18 years old to qualify for the credit. Also, no credit is available for persons claimed as dependents or those who are full-time students. As Figure 2-4 shows, no credit is available in 2018 for joint filers with AGI in excess of $63,000; head of households filers with AGI over $47,250, or for all other filers with AGI in excess of $31,500 (which includes taxpavers lose filing status is single, married filing separately, or qualifying widow(er)). Claiming the Credit The retirement savings contributions credit is computed on Form 8880, Credit for Qualified Retirement Savings Contributions. The credit is then reported on Form 1040 along with the expayer's other nonrefundable tax credits. The amount of the credit is limited to the taxpayer's tal tax liability after subtracting out the following nonrefundable tax credits: foreign tax credit, Eld and dependent care credit, elderly or disabled credit, and education credit. It the four the amelen repon Form ave and Sue Orr report $40,000 of AGI on their 2018 joint return. During the year Dave contributed ,000 to his Roth IRA. Sue did not make any contributions during the year. The Orrs' retirement savings tributions credit equals $400 ($2,000 per taxpayer maximum x 20% from the table in Figure 2-4). iming the Orrs do not have any other nonrefundable tax credits for the year, they report this amount tributions credit equals $400 ot make any contributions in return. During the year Day orm 1040. Sarts as in Example 14, except that in addition to the retirement aim a $1,000 education credit. The Orrs' total tavit liability by the $1,000 educati ti Gross Income Exclusions and Deductions for AGI CUMULATIVE PROBLEM 1 (CHAPTERS 1-4) Use the following information to prepare Erica Hansen's tax return. Use Form 10 Schedule 3, Schedule EIC, Schedule 8812, and Form 8880. This problem is suita preparation or computer software application. Form 1040, Schedule 1 om is suitable for manual Erica L. Hansen (SSN 376-38-4930), age 42, is a single parent with three children SL 19 Sunset Road, Normal, Illinois 61761. She chooses to support the Presidential can see children. She resides at he Presidential campaign fund. 69-62-3418), Tiffany A. Hansen, her 14-year-old Her household includes Randall L. Hansen, her 19-year-old son (SSN 369-62-3418). Hansen, her 12-year-old daughter (SSN 396-30-6439), and Donna M. Hansen, her 14 daughter (SSN 653-29-8177). Erica provides over half of the support of cach child, che vear delivering papers Donna has no income of her own, but Randall earns $4,200 during the year deliverin and mowing lawns. All children lived in the household for 12 months, Randall is a full student at Heartland College in Normal, Illinois. Erica works as an office manager for Universal Development Corporation. Information from her W-2, as well as other relevant information follows. Gross wages $39,500 Social security tax withheld 2,449 Medicare tax withheld 573 Federal income tax withheld 0 State income tax withheld 819 Interest received: First Federal Savings Bank Olympic Savings-certificate of deposit cashed in State of Maryland bonds $775 175 300 Erica gets her family health care coverage through her work. Erica is a participant in an employer-sponsored retirement plan. However, she wants to make the largest possible deductible contribution to her traditional IRA. If Erica has overpaid her taxes, she prefers to roccive a refund. She signs and dates her return on April 5, 2019. Retirement Savings Contributions Credit: Compute the amount of the credit using the information presented in 9204.06. EIC Calculation: Look up the amount in the EIC Tables for both earned income and AGI. Additional Child Tax Credit: Enter on Schedule 8812 (line 1) $1,400 for each qualifying child. 2-17 ax Determination Payments, and Reporting ments, and Reporting Procedures RETIREMENTS KEMENT SAVINGS CONTRIBUTIONS CREDITI butions (including amounts with- is in addition to any deduction edit applies to contributions plans such as 401(k) plans, 9204.06 axpayers may take a nonrefundable tax credit for contributions ng plans. The credit is in additio from their paychecks) to retirement savings P ontributions. The credit applies usion relating to the retirement plan contri to traditional and Roth IRAs and other qualified retirement plans su annuities, 457 plans. SIMPLE and SEP plans. The credit for 2018 is determined by multiplying payer) by a percentage taken from Figure 2. 3.4. On a joint tax return, the credit 000 maximum contribution, provided both spouses make at least a $2.00 to a retirement plan during the year. The percentage percentages used to compute the credit der Certain taxpayers held from their pay to the retiree and other plans. or exclusion relating made to traditional an 403(b) annuities, contributions (not to exceed $2,000 p the credit can be based oth spouses make at least a $2,000 contri pute the credit depend on the on a $4,000 maximum contribution taxpayer's filing status and AGI. Applicable Married Filing Jointly AGI Over % Figure 2-4: Retirement Savings Contributions ce Head of Household Not Over AGI Over Not Over SO $38,000 $0 $28,500 41,000 28,500 30,750 63,000 30,750 47,250 47,250 All Others AGI Over Not Over $0 $19,000 19,000 20,500 20,500 31,500 31,500 50% 20 38,000 41,000 63,000 10 0 Taxpayers must be at least 18 years old to qualify for the credit. Also, no credit is available for persons claimed as dependents or those who are full-time students. As Figure 2-4 shows, no credit is available in 2018 for joint filers with AGI in excess of $63,000; head of households filers with AGI over $47,250, or for all other filers with AGI in excess of $31,500 (which includes taxpavers lose filing status is single, married filing separately, or qualifying widow(er)). Claiming the Credit The retirement savings contributions credit is computed on Form 8880, Credit for Qualified Retirement Savings Contributions. The credit is then reported on Form 1040 along with the expayer's other nonrefundable tax credits. The amount of the credit is limited to the taxpayer's tal tax liability after subtracting out the following nonrefundable tax credits: foreign tax credit, Eld and dependent care credit, elderly or disabled credit, and education credit. It the four the amelen repon Form ave and Sue Orr report $40,000 of AGI on their 2018 joint return. During the year Dave contributed ,000 to his Roth IRA. Sue did not make any contributions during the year. The Orrs' retirement savings tributions credit equals $400 ($2,000 per taxpayer maximum x 20% from the table in Figure 2-4). iming the Orrs do not have any other nonrefundable tax credits for the year, they report this amount tributions credit equals $400 ot make any contributions in return. During the year Day orm 1040. Sarts as in Example 14, except that in addition to the retirement aim a $1,000 education credit. The Orrs' total tavit liability by the $1,000 educati ti