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Note: This problem is for the 2019 tax year.
Janice Morgan, age 24, is single and has no dependents. She is a freelance writer. In January 2019, Janice opened her own office located at 2751 Waldham Road, Pleasant Hill, NM 88135. She called her business Writers Anonymous. Janice is a cash basis taxpayer. She lives at 132 Stone Avenue, Pleasant Hill, NM 88135. Her Social Security number is 123-45-6782. Janice's parents continue to provide health insurance for her under their policy. Janice did not engage in any virtual currency transactions during the year and wants to contribute to the Presidential Election Campaign Fund.
During 2019, Janice reported the following income and expense items connected with her business.
| Income from sale of articles | $85,000 |
| Rent | 16,500 |
| Utilities | 7,900 |
| Supplies | 1,800 |
| Insurance | 5,000 |
| Travel (including meals of $1,200) | 3,500 |
Janice purchased and placed in service the following fixed assets for her business. Janice wants to elect immediate expensing under 179, if possible.
- Furniture and fixtures (new) costing $21,000 on January 10
- Computer equipment (new) costing $12,400 on July 28
Janices itemized deductions include:
| State income tax | $2,950 |
| Home mortgage interest paid to First National Bank | 6,000 |
| Property taxes on home | 2,500 |
| Charitable contribution to her alma mater, State College | 1,200 |
Janice did not keep a record of the sales tax she paid. The amount allowed by the sales tax table is $437. Janice reports interest income of $4,000 on certificates of deposit at Second National Bank. She made estimated tax payments of $3,000 for 2019.
Required: Compute Janice Morgans 2019 Federal income tax payable (or refund due).
- Make realistic assumptions about any missing data.
- If an amount box does not require an entry or the answer is zero, enter "0".
- Enter all amounts as positive numbers.
- The taxpayer wants $3 to go to the to Presidential Election Campaign.
- It may be necessary to complete the other tax forms and schedules before completing Form 1040.
- Use the tax schedules (not the tax tables) included with this problem to compute the tax.
- If required, round your final answers to the nearest dollar.
PLEASE FILL OUT SCHEDULE A FOR 2019:
2 OMB No. 1545-0074 SCHEDULE A Itemized Deductions (Form 1040 or 1040-SR) Go to www.irs.gov/ScheduleA for instructions and the latest information. 2019 (Rev. January 2020) Attach to Form 1040 or 1040-SR. Department of the Treasury Attachment Caution: If you are claiming a net qualified disaster loss on Form 4684, see the Internal Revenue Service (99) Sequence No. 07 instructions for line 16 Name(s) shown on Form 1040 or 1040-SR Your social security number Janice Morgan 123-45-6782 Caution: Do not include expenses reimbursed or paid by others. Medical 1 Medical and dental expenses (see instructions) and Dental 2 Enter amount from Form 1040 or 1040- SR, line 8b.. Expenses 3 Multiply line 2 by 7.5% (0.075) Subtract line 3 from line 1. If line 3 is more than line 1, enter -O- Taxes You 5 State and local taxes. a State and local income taxes or general sales taxes. You may include either income taxes or general sales taxes on line 5a, but not both. If you elect to include general sales taxes instead of income taxes, check this box.. b State and local real estate taxes (see instructions). c State and local personal property taxes d Add lines Sa through 5c... 5d e Enter the smaller of line 5d or $10,000 ($5,000 if married filing separately) 5e 6 Other taxes. List type and amount Paid 5a 5b 5c 6 7 Add lines 5e and 6 7 Interest You Paid 8 Home mortgage interest and points. If you didn't use all of your home mortgage loan(s) to buy, build, or improve your home, see instructions and check this box.. a Home mortgage interest and points reported to you on Form 1098. See instructions if limited b Home mortgage interest not reported to you on Form 1098. See instructions if limited. If paid to the person from whom you bought the home, see instructions and show that person's name, identifying no., and address Caution: Your mortgage interest deduction may be limited (see instructions) Ba 8b c Points not reported to you on Form 1098. See instructions for special rules... d Mortage insurance premiums (see instructions) 8c 8d e Add lines 8a through 8d....... 8e 9 Investment interest. Attach Form 4952 if required. See instructions. 9 10 Add lines 8e and 9 10 11 Gifts by cash or check. If you made any gift of $250 or more, Gifts to Charity see instructions 11 12 Other than by cash or check. If you made any gift of $250 or more, see instructions. You must attach Form 8283 if over $500 13 Carryover from prior year 12 13 Caution: If you made a gift and got a benefit for it, see instructions. Casualty and Theft Losses 14 Add lines 11 through 13. 14 15 Casualty and theft loss(es) from a federally declared disaster (other than net qualified disaster losses). Attach Form 4684 and enter the amount from line 18 of that form. See instructions. 16 Other-from list in instructions. List type and amount 15 Other Itemized Deductions 16 17 Total 17 Add the amounts in the far right column for lines 4 through 16. Also, enter this amount on Itemized Form 1040 or 1040-SR, line 9. 18 If you elect to itemize deductions even though they are less than your standard deduction, Deductions check this box... BAA For Paperwork Reduction Act Notice, see the Instructions Schedule A (Form 1040 or 1040-SR) 2019 for Forms 1040 and 1040-SR. 2 OMB No. 1545-0074 SCHEDULE A Itemized Deductions (Form 1040 or 1040-SR) Go to www.irs.gov/ScheduleA for instructions and the latest information. 2019 (Rev. January 2020) Attach to Form 1040 or 1040-SR. Department of the Treasury Attachment Caution: If you are claiming a net qualified disaster loss on Form 4684, see the Internal Revenue Service (99) Sequence No. 07 instructions for line 16 Name(s) shown on Form 1040 or 1040-SR Your social security number Janice Morgan 123-45-6782 Caution: Do not include expenses reimbursed or paid by others. Medical 1 Medical and dental expenses (see instructions) and Dental 2 Enter amount from Form 1040 or 1040- SR, line 8b.. Expenses 3 Multiply line 2 by 7.5% (0.075) Subtract line 3 from line 1. If line 3 is more than line 1, enter -O- Taxes You 5 State and local taxes. a State and local income taxes or general sales taxes. You may include either income taxes or general sales taxes on line 5a, but not both. If you elect to include general sales taxes instead of income taxes, check this box.. b State and local real estate taxes (see instructions). c State and local personal property taxes d Add lines Sa through 5c... 5d e Enter the smaller of line 5d or $10,000 ($5,000 if married filing separately) 5e 6 Other taxes. List type and amount Paid 5a 5b 5c 6 7 Add lines 5e and 6 7 Interest You Paid 8 Home mortgage interest and points. If you didn't use all of your home mortgage loan(s) to buy, build, or improve your home, see instructions and check this box.. a Home mortgage interest and points reported to you on Form 1098. See instructions if limited b Home mortgage interest not reported to you on Form 1098. See instructions if limited. If paid to the person from whom you bought the home, see instructions and show that person's name, identifying no., and address Caution: Your mortgage interest deduction may be limited (see instructions) Ba 8b c Points not reported to you on Form 1098. See instructions for special rules... d Mortage insurance premiums (see instructions) 8c 8d e Add lines 8a through 8d....... 8e 9 Investment interest. Attach Form 4952 if required. See instructions. 9 10 Add lines 8e and 9 10 11 Gifts by cash or check. If you made any gift of $250 or more, Gifts to Charity see instructions 11 12 Other than by cash or check. If you made any gift of $250 or more, see instructions. You must attach Form 8283 if over $500 13 Carryover from prior year 12 13 Caution: If you made a gift and got a benefit for it, see instructions. Casualty and Theft Losses 14 Add lines 11 through 13. 14 15 Casualty and theft loss(es) from a federally declared disaster (other than net qualified disaster losses). Attach Form 4684 and enter the amount from line 18 of that form. See instructions. 16 Other-from list in instructions. List type and amount 15 Other Itemized Deductions 16 17 Total 17 Add the amounts in the far right column for lines 4 through 16. Also, enter this amount on Itemized Form 1040 or 1040-SR, line 9. 18 If you elect to itemize deductions even though they are less than your standard deduction, Deductions check this box... BAA For Paperwork Reduction Act Notice, see the Instructions Schedule A (Form 1040 or 1040-SR) 2019 for Forms 1040 and 1040-SR
