Note: This problem is for the 2020 tax year.

Alfred E. Old and Beulah A. Crane, each age 42, married on September 7, 2018. Alfred and Beulah will file a joint return for 2020. Alfred's Social Security number is 111-11-1109. Beulah's Social Security number is 123-45-6780, and she has chosen to use "Old" as her married name. They live at 211 Brickstone Drive, Atlanta, GA 30304.

Alfred was divorced from Sarah Old in March 2017. Under the divorce agreement, Alfred is to pay Sarah $1,250 per month for the next 10 years or until Sarah's death, whichever occurs first. Alfred paid Sarah $15,000 in 2020. In addition, in January 2020, Alfred paid Sarah $50,000, which is designated as being for her share of the marital property. Also, Alfred is responsible for all prior years' income taxes. Sarah's Social Security number is 123-45-6788.

Alfred's salary for 2020 is $150,000. He is an executive working for Cherry, Inc. (Federal I.D. No. 98-7654321). As part of his compensation package, Cherry provides him with group term life insurance equal to twice his annual salary. His employer withheld $24,900 for Federal income taxes and $8,000 for state income taxes. The proper amounts were withheld for FICA taxes.

Beulah recently graduated from law school and is employed by Legal Aid Society, Inc. (Federal I.D. No. 11-1111111), as a public defender. She received a salary of $42,000 in 2020. Her employer withheld $7,500 for Federal income taxes and $2,400 for state income taxes. The proper amounts were withheld for FICA taxes.

Alfred and Beulah received taxable interest income of $500. Alfred and Beulah received a $1,900 refund on their 2019 state income taxes; they claimed the standard deduction on their 2019 Federal income tax return. Alfred and Beulah paid $4,500 interest and $1,450 property taxes on their personal residence in 2020. They paid sales taxes of $1,400, for which they maintain the receipts. Alfred and Beulah have never owned or used any virtual currency, and they do not want to contribute to the Presidential Election Campaign. Alfred and Beulah received the appropriate coronavirus recovery rebates (economic impact payments); related questions in ProConnect Tax should be ignored.

Required:

Compute the Olds' net tax payable (or refund due) for 2020. Use Form 1040 and Schedule 1 to complete this tax return.

• It may be necessary to complete the tax schedule and worksheet before completing Form 1040.
• Enter all amounts as positive numbers.
• If an amount box does not require an entry or the answer is zero, enter "0".
• Make realistic assumptions about any missing data.
• When computing the tax liability, do not round your immediate calculations. If required round your final answers to the nearest dollar.
• Use the 2020 Tax Rate Schedule provided. Do not use the Tax Tables.

Instructions:

Using CengageNow, you are to prepare a 2020 Form 1040 and Schedule 1. My suggestion is that you go to IRS.gov and print out a 2020 Form 1040 (both pages), and Schedule 1. Attempt to complete the return on these printed forms, and then transfer the information in CNow. I guarantee it will be much easier for you!

Next step start your return! In order to assist with your assignment, I have copied the facts, numbered each section, and then added my own notes, highlighted in yellow below, for guidance.

1. Alfred E. Old and Beulah A. Crane, each age 42, married on September 7, 2018. Alfred and Beulah will file a joint return for 2020. Alfred's Social Security number is 111-11-1109. Beulah's Social Security number is 123-45-6780, and she has chosen to use "Old" as her married name. They live at 211 Brickstone Drive, Atlanta, GA 30304.

Para 1 provides you with information needed for the top part of Form 1040.

2. Alfred was divorced from Sarah Old in March 2017. Under the divorce agreement, Alfred is to pay Sarah $1,250 per month for the next 10 years or until Sarah's death, whichever occurs first. Alfred paid Sarah $15,000 in 2020. In addition, in January 2020, Alfred paid Sarah $50,000, which is designated as being for her share of the marital property. Also, Alfred is responsible for all prior years' income taxes. Sarah's Social Security number is 123-45-6788.

Para 2 provides data concerning Alfreds previous marriage and distribution of the marital property, as well as alimony payments made. You are to determine whether these items have tax consequences.

3. Alfred's salary for 2020 is $150,000. He is an executive working for Cherry, Inc. (Federal I.D. No. 98-7654321). As part of his compensation package, Cherry provides him with group term life insurance equal to twice his annual salary. His employer withheld $24,900 for Federal income taxes and $8,000 for state income taxes. The proper amounts were withheld for FICA taxes.

Para 3 Alfreds employment information is provided. HINT: wages appear on page 1 of the 1040, federal withholding appears on page 2 of the 1040, state withholding (if greater than state sales tax paid), appears on Schedule A.

1. NOTE: The group term life insurance benefit provided results in $300 of income. (You do not have to do the calculation as this figure would be provided to the taxpayer). The $300 is reported on Schedule 1 as Other Income (typically, it would be added to Alfreds salary, but Cengage opted for this alternate reporting).

4. Beulah recently graduated from law school and is employed by Legal Aid Society, Inc. (Federal I.D. No. 11-1111111), as a public defender. She received a salary of $42,000 in 2020. Her employer withheld $7,500 for Federal income taxes and $2,400 for state income taxes. The proper amounts were withheld for FICA taxes.

Para 4 Beulahs employment information is provided. See the HINT above.

5. Alfred and Beulah received taxable interest income of $500.

Alfred and Beulah received a $1,900 refund on their 2019 state income taxes; they claimed the standard deduction on their 2019 Federal income tax return.

Alfred and Beulah paid $4,500 interest and $1,450 property taxes on their personal residence in 2020. They paid sales taxes of $1,400, for which they maintain the receipts.

Alfred and Beulah have never owned or used any virtual currency, and they do not want to contribute to the Presidential Election Campaign.

Alfred and Beulah received the appropriate coronavirus recovery rebates (economic impact payments);

Para 5 The first two sentences contain information for two INCOME items: interest appears on page 1 of the 1040. With respect to the state tax refund, application of the tax benefit rule (Chapter 5), dictates that the refund, if taxable income, is to be reported on Schedule 1.

Para 5 The third and fourth sentences contain the taxpayers personal expenses; some or all would appear on Schedule A as Itemized Deductions. However, the standard deduction is greater than itemized deductions so Schedule A is not applicable.

Para 5 - The next sentence provides you with information to complete the questions at the top of page 1 of Form 1040.

Para 5 - The last sentence provides you with information that is unique to the 2020 return. If the taxpayers did not receive their rebates, they could apply for them on the 2020 return.

After you have entered all of the information above, you should come up with a taxable income figure. Ive done it for you. URGENT: Taxable Income is $153,000. You MUST ENTER THIS FIGURE on Form 1040, page 1, line 11b EVEN IF YOUR NUMBERS DO NOT TOTAL this amount. If you dont use this figure, your tax liability, refund/payment due, etc. will all be incorrect!

MISCELLANEOUS NOTES:

• It may be necessary to complete the tax schedule and worksheet before completing Form 1040.
• Enter all amounts as positive numbers.
• If an amount box does not require an entry or the answer is zero, enter "0".
• Make realistic assumptions about any missing data.
• When computing the tax liability, do not round your immediate calculations. If required round your final answers to the nearest dollar.
• Use the 2020 Tax Rate Schedule provided. Do not use the Tax Tables.