Note: This problem is for the 2019 tax year. 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, while Wanda is employed part-time as a paralegal for a law firm. During 2019, the Deans had the following receipts: Salaries ($60,000 for Lance, $41,000 for Wanda) $101,000 Interest income- $1,000 City of Albuquerque general purpose bonds Ford Motor Company bonds 1,100 Ally Bank certificate of deposit 400 2,500 Child support payments from John Allen 7,200 Annual gifts from parents 26,000 Settlement from Roadrunner Touring Company 90,000 Lottery winnings 600 Federal income tax refund (for tax year 2018) 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 support-the 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. As 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 2019: Medical expenses (not covered by insurance) $7,200 Taxes Property taxes on personal residence $3,600 State of New Mexico income tax (includes amount withheld 4,200 7,800 from wages during 2019) Interest on home mortgage (First National Bank) 6,000 Charitable contributions 3,600 Life insurance premiums (policy on Lance's life) 1,200 Contribution to traditional IRA (on Wanda's behalf) 5,000 Traffic fines 300 500 Contribution to the reelection campaign fund of the mayor of Santa Fe Funeral 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: Social Security Number* Birth Date Lance Dean (age 42) 123-45-6786 12/16/1977 Wanda Dean (age 40) 123-45-6787 08/08/1979 123-45-6788 10/09/2000 Penny Allen (age 19) Kyle Allen (age 17) 123-45-6789 05/03/2003 Wayne Boyle (age 75) 123-45-6785 06/15/1944 *In the interest of privacy and to protect against taxpayer identification misuse, Social Security numbers used throughout the textbook have been replaced with fictitious numbers. Penny graduated from high school on May 9, 2019, and is undecided about college. During 2019, 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 January 20, 2019. 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. Required: Determine the Federal income tax for 2019 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. Form 1040 (2019) Lance H. and Wanda B. Dean 123-45-6786 Page 2 12a Tax (see inst.) Check if any from Form(s): 108814 2 0 4972 30 12a 1,940 X b Add Schedule 2, line 3, and line 12a and enter the total 12b 0 13a Child tax credit or credit for other dependents. 13a 0 x b Add Schedule 3, line 7, and line 13a and enter the total. 13b 0 X 14 Subtract line 13b from line 12b. If zero or less, enter-O- 14 0 15 Other taxes, including self-employment tax, from Schedule 2, line 10 15 16 Add lines 14 and 15. This is your total tax 16 0 17 Federal income tax withheld from Forms W-2 and 1099 17 5,700 18 Other payments and refundable credits: a Earned income credit (EIC)..... 18a If you have a qualifying child, attach Sch. EIC. If you have nontaxable combat pay, see instructions. b Additional child tax credit. Attach Schedule 8812 18b c American opportunity credit from Form 8863, line 8 18c d Schedule 3, line 14 .. 18d e Add lines 18a through 18d. These are your total other payments and refundable credits 18e 19 Add lines 17 and 18e. These are your total payments. 19 5,700 Refund 20 0 X 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 21a 0 Direct deposit? b Routing number c Type: Checking Savings See instructions. d Account number 22 Amount of line 20 you want applied to your 2020 estimated tax. 22 23 Amount Amount you owe. Subtract line 19 from line 16. For details on how to pay, see instructions. 23 You Owe 24 Estimated tax penalty (see instructions). 24 Third Party Do you want to allow another person (other than your paid preparer) to discuss this return with Yes. Complete below. the IRS? See instructions. No Designee 2019 Tax Rate Schedules Single-Schedule X Head of household-Schedule z If taxable income is: of the amount If taxable income is: of the amount But not But not Over- over- The tax is: Over- Over- over- The tax is: over- $0 $ 9,700 10% $ 0 $ 13,850 10% $ 0 39,475 9,700 39,475 $0 9,700 39,475 13,850 52,850 52,850 84,200 $ 1,385.00 + 12% 6,065.00 + 22% 84,200 13,850 52,850 84,200 84,200 160,725 84,200 160,700 12,962.00 + 24% $ 970.00 + 12% 4,543.00 + 22% 14,382.50 + 24% 32,748.50 + 32% 46,628.50 + 35% 153,798.50 + 37% 204,100 160,725 204,100 510,300 204,100 510,300 84,200 160,725 204,100 510,300 160,700 204,100 31,322.00 + 32% 45,210.00 + 35% 160,700 204,100 510,300 510,300 152,380.00 + 37% 510,300 Married filing jointly or Qualifying widow(er)-Schedule Y-1 Married filing separately-Schedule Y-2 of the If taxable income is: Over- But not of the amount over- If taxable income is: Over- But not amount over- The tax is: over- The tax is: Over- $0 $ 19,400 10% $0 $ 0 $ 9,700 10% $ 0 ..... 19,400 78,950 $ 1,940.00 + 12% 19,400 9,700 39,475 $ 970.00 + 12% 168,400 78,950 39,475 84,200 78,950 168,400 9,086.00 + 22% 28,765.00 + 24% 4,543.00 + 22% 14,382.50 + 24% 321,450 84,200 160,725 168,400 321,450 9,700 39,475 84,200 160,725 204,100 306,175 321,450 408,200 160,725 204,100 32,748.50 + 32% 65,497.00 + 32% 93,257.00 + 35% 408,200 612,350 408,200 204,100 306, 175 46,628.50 + 35% 612,350 164,709.50 + 37% 612,350 306,175 82,354.75 + 37% Note: This problem is for the 2019 tax year. 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, while Wanda is employed part-time as a paralegal for a law firm. During 2019, the Deans had the following receipts: Salaries ($60,000 for Lance, $41,000 for Wanda) $101,000 Interest income- $1,000 City of Albuquerque general purpose bonds Ford Motor Company bonds 1,100 Ally Bank certificate of deposit 400 2,500 Child support payments from John Allen 7,200 Annual gifts from parents 26,000 Settlement from Roadrunner Touring Company 90,000 Lottery winnings 600 Federal income tax refund (for tax year 2018) 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 support-the 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. As 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 2019: Medical expenses (not covered by insurance) $7,200 Taxes Property taxes on personal residence $3,600 State of New Mexico income tax (includes amount withheld 4,200 7,800 from wages during 2019) Interest on home mortgage (First National Bank) 6,000 Charitable contributions 3,600 Life insurance premiums (policy on Lance's life) 1,200 Contribution to traditional IRA (on Wanda's behalf) 5,000 Traffic fines 300 500 Contribution to the reelection campaign fund of the mayor of Santa Fe Funeral 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: Social Security Number* Birth Date Lance Dean (age 42) 123-45-6786 12/16/1977 Wanda Dean (age 40) 123-45-6787 08/08/1979 123-45-6788 10/09/2000 Penny Allen (age 19) Kyle Allen (age 17) 123-45-6789 05/03/2003 Wayne Boyle (age 75) 123-45-6785 06/15/1944 *In the interest of privacy and to protect against taxpayer identification misuse, Social Security numbers used throughout the textbook have been replaced with fictitious numbers. Penny graduated from high school on May 9, 2019, and is undecided about college. During 2019, 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 January 20, 2019. 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. Required: Determine the Federal income tax for 2019 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. Form 1040 (2019) Lance H. and Wanda B. Dean 123-45-6786 Page 2 12a Tax (see inst.) Check if any from Form(s): 108814 2 0 4972 30 12a 1,940 X b Add Schedule 2, line 3, and line 12a and enter the total 12b 0 13a Child tax credit or credit for other dependents. 13a 0 x b Add Schedule 3, line 7, and line 13a and enter the total. 13b 0 X 14 Subtract line 13b from line 12b. If zero or less, enter-O- 14 0 15 Other taxes, including self-employment tax, from Schedule 2, line 10 15 16 Add lines 14 and 15. This is your total tax 16 0 17 Federal income tax withheld from Forms W-2 and 1099 17 5,700 18 Other payments and refundable credits: a Earned income credit (EIC)..... 18a If you have a qualifying child, attach Sch. EIC. If you have nontaxable combat pay, see instructions. b Additional child tax credit. Attach Schedule 8812 18b c American opportunity credit from Form 8863, line 8 18c d Schedule 3, line 14 .. 18d e Add lines 18a through 18d. These are your total other payments and refundable credits 18e 19 Add lines 17 and 18e. These are your total payments. 19 5,700 Refund 20 0 X 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 21a 0 Direct deposit? b Routing number c Type: Checking Savings See instructions. d Account number 22 Amount of line 20 you want applied to your 2020 estimated tax. 22 23 Amount Amount you owe. Subtract line 19 from line 16. For details on how to pay, see instructions. 23 You Owe 24 Estimated tax penalty (see instructions). 24 Third Party Do you want to allow another person (other than your paid preparer) to discuss this return with Yes. Complete below. the IRS? See instructions. No Designee 2019 Tax Rate Schedules Single-Schedule X Head of household-Schedule z If taxable income is: of the amount If taxable income is: of the amount But not But not Over- over- The tax is: Over- Over- over- The tax is: over- $0 $ 9,700 10% $ 0 $ 13,850 10% $ 0 39,475 9,700 39,475 $0 9,700 39,475 13,850 52,850 52,850 84,200 $ 1,385.00 + 12% 6,065.00 + 22% 84,200 13,850 52,850 84,200 84,200 160,725 84,200 160,700 12,962.00 + 24% $ 970.00 + 12% 4,543.00 + 22% 14,382.50 + 24% 32,748.50 + 32% 46,628.50 + 35% 153,798.50 + 37% 204,100 160,725 204,100 510,300 204,100 510,300 84,200 160,725 204,100 510,300 160,700 204,100 31,322.00 + 32% 45,210.00 + 35% 160,700 204,100 510,300 510,300 152,380.00 + 37% 510,300 Married filing jointly or Qualifying widow(er)-Schedule Y-1 Married filing separately-Schedule Y-2 of the If taxable income is: Over- But not of the amount over- If taxable income is: Over- But not amount over- The tax is: over- The tax is: Over- $0 $ 19,400 10% $0 $ 0 $ 9,700 10% $ 0 ..... 19,400 78,950 $ 1,940.00 + 12% 19,400 9,700 39,475 $ 970.00 + 12% 168,400 78,950 39,475 84,200 78,950 168,400 9,086.00 + 22% 28,765.00 + 24% 4,543.00 + 22% 14,382.50 + 24% 321,450 84,200 160,725 168,400 321,450 9,700 39,475 84,200 160,725 204,100 306,175 321,450 408,200 160,725 204,100 32,748.50 + 32% 65,497.00 + 32% 93,257.00 + 35% 408,200 612,350 408,200 204,100 306, 175 46,628.50 + 35% 612,350 164,709.50 + 37% 612,350 306,175 82,354.75 + 37%