Note: This problem is for the 2020 tax year. Daniel B. Butler and his spouse Freida C. Butler file a joint return. The Butlers live at 625 Oak Street in Corbin, KY 40701 . Dan's Sodal Security number is 111-11-1112, and Freda's is 123-45-6780. Dan was bom on January 15, 1969, and freida was bom an August 20 , 1970. During 2020, Dan and Freida furnished over half of the total support of each of the following individuals, all of whom still live at home: a. Gina, their daughter, age 22, a full-time student, who married on Decernber 21, has no income of her own and did not file a joint return with her husband, Casey, who earned $10,600 during 2020. Gina's Social Security number is 123-45-6788. b. Willie, their sont, age 19, graduated high school in May 2020. He is taking a leap year and will not begin college until 2021. He had gross income of $6,300 in 2020. Willie's Social Security number is 123456787. c. Ben, their oldest son, age 26, is a full-time graduate student with gross income of $5,200. Ben's Social Security number is 123456786. Dan was employed as a manager by wJJ, Inc. (employer identification number 11-1111111, 604 Framklin Street, Cortin, KY 40702 ), and Freida was emplayed as a salespersan for Corbin Realty, Inc. (employer identification number 98-7654321, 899 Central Street, Corkin, KY 40701]. Selected information from the W-2 forms provided by the employers is presented below. Dan and freida use the cash method. Freida sold a house on Decernber 30, 2020, and will be paid a coenmission of $3,100 (not induded in the $86,000 reported an the W-2) on the January 10, 2021, dosing date. Other incorne (as reported on 1099 Forms) for 2020 consisted of the following: The $382 from First Bank was an original issue discount. Dan and Freida colleded $16,000 on the First Bank CD that matured on September 30, 2020. The CD was purchased on October 1, 2018, for $14,995, and the yield to maturity was 3.3%. Dan participated on a game show and won a cash prize of $7,000. In addition ta the above information, Dat and freida's itemized deductions included the following: Sales tax from the sales tax table is $1,860. Dan and Freida made Federal estimated tax payments of $8,000. They have never owned or used any virtual currency, and they do not wish to contribute to the Presidential Election Campaign. For 2020, they received the correct. amount of economic impact payments ( 2020 recovery credits). The Kentusky income tax rate is 4% Required: Compute Dan and Freida's 2020. Federal income tax payable (or refund due). Lse Form 1040 and Sotedules 1, B and the Qualified Dividends and Capital Gain Tax Worksheet to complete this tax return. If there is a tax overpayment, the Butlers would like a refund. If additional tax is due, assume no underpayment penalty applies: It may be necessary to corriplete the tax schedules 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 ". - When computing the tax liability, do not round your immediate calculations. - If required, round your answers to the nearest dollar. - Make realistic assumptions about any missing data. - Use the Tax Rate Schedule provided. Do not use the Tax Tables. Form 1040 Complate the Butler's Form 1040. \begin{tabular}{ll|l|l|l} 1040 & U.S. Individual Income Tax Return & 2020 & OMB Na. 1545-0074 & IRS Use Only \\ \hline \end{tabular} Part II Adjustments to Income BAA For Paperwork Reduction Act Notice, see your tax return instructions. Schedule 1 (Form 1040) 2020 Before you begin: See the earlier instructions for tine 16 to see if you can use this worksheet to figure yout tax. Before completing this worksteet, camplete form 1040 through line 15. he box on Jsa the 2020 Tax Rate Schedules to compute the tax. (Note: Because the tax rate schedules are used instead of the tax tables, the amount of tax computed may vary slightly from the amourt listed in the tables.) Dan plans to reduoe his work schedule and work only half-Lime for WJJ in 2021 . He has beeni writing songs for several years and wants to devote mare tirne to developing a career as a songwriter. Because of the uricertainty in the music business, horvever, he would like you to make all computations assuming that he will have no incorne from sangwtiting in 2021 . To frake up for the loss of incorne, Freida plans to increase the amount of time she sperits selling real estate. She estimates that she will be able to earm $90,000 in 2021. - Assume that all other inconte and expense iterms will be approximately the same as they were in 2020 (including the prize wirnings). - Assume that Wilie will be enrolled in college as a full-time student for the stmmer and fall semesters. No changes regarding Gina and Ben. - The $3,100 commission recerved on Jarvary 10,2021 , is included in the 590,000 income to be earmed by Freida in 2021. - The 22$2020 marginal tax rate remains the sarne in 2021 . - Assume a payrul tax rate for FICA and Medicare of 7.65\% and the Keritucky state income rate of 4%. - Assume Interest income, dividend income, prize ircome and the standard deduction will be the same for 2021. Complete the following letter regarding whether the Butlers will have more or less disposable inconte (after Federal incorra tax) in 2021. You asked me to estimate your after-tax income under the assumption that Dan will work only halftime next year. The reduction in Dan's pay will be partially olfset by a $ Freida will earn. This net $ reduction in salary and wages will also result in a decrease in your kentusky incone tax, Social Security tax, and Medicare tax. The net reduction in your after-tax cash flow will be approximately . The calculations are presented below: Note: This problem is for the 2020 tax year. Daniel B. Butler and his spouse Freida C. Butler file a joint return. The Butlers live at 625 Oak Street in Corbin, KY 40701 . Dan's Sodal Security number is 111-11-1112, and Freda's is 123-45-6780. Dan was bom on January 15, 1969, and freida was bom an August 20 , 1970. During 2020, Dan and Freida furnished over half of the total support of each of the following individuals, all of whom still live at home: a. Gina, their daughter, age 22, a full-time student, who married on Decernber 21, has no income of her own and did not file a joint return with her husband, Casey, who earned $10,600 during 2020. Gina's Social Security number is 123-45-6788. b. Willie, their sont, age 19, graduated high school in May 2020. He is taking a leap year and will not begin college until 2021. He had gross income of $6,300 in 2020. Willie's Social Security number is 123456787. c. Ben, their oldest son, age 26, is a full-time graduate student with gross income of $5,200. Ben's Social Security number is 123456786. Dan was employed as a manager by wJJ, Inc. (employer identification number 11-1111111, 604 Framklin Street, Cortin, KY 40702 ), and Freida was emplayed as a salespersan for Corbin Realty, Inc. (employer identification number 98-7654321, 899 Central Street, Corkin, KY 40701]. Selected information from the W-2 forms provided by the employers is presented below. Dan and freida use the cash method. Freida sold a house on Decernber 30, 2020, and will be paid a coenmission of $3,100 (not induded in the $86,000 reported an the W-2) on the January 10, 2021, dosing date. Other incorne (as reported on 1099 Forms) for 2020 consisted of the following: The $382 from First Bank was an original issue discount. Dan and Freida colleded $16,000 on the First Bank CD that matured on September 30, 2020. The CD was purchased on October 1, 2018, for $14,995, and the yield to maturity was 3.3%. Dan participated on a game show and won a cash prize of $7,000. In addition ta the above information, Dat and freida's itemized deductions included the following: Sales tax from the sales tax table is $1,860. Dan and Freida made Federal estimated tax payments of $8,000. They have never owned or used any virtual currency, and they do not wish to contribute to the Presidential Election Campaign. For 2020, they received the correct. amount of economic impact payments ( 2020 recovery credits). The Kentusky income tax rate is 4% Required: Compute Dan and Freida's 2020. Federal income tax payable (or refund due). Lse Form 1040 and Sotedules 1, B and the Qualified Dividends and Capital Gain Tax Worksheet to complete this tax return. If there is a tax overpayment, the Butlers would like a refund. If additional tax is due, assume no underpayment penalty applies: It may be necessary to corriplete the tax schedules 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 ". - When computing the tax liability, do not round your immediate calculations. - If required, round your answers to the nearest dollar. - Make realistic assumptions about any missing data. - Use the Tax Rate Schedule provided. Do not use the Tax Tables. Form 1040 Complate the Butler's Form 1040. \begin{tabular}{ll|l|l|l} 1040 & U.S. Individual Income Tax Return & 2020 & OMB Na. 1545-0074 & IRS Use Only \\ \hline \end{tabular} Part II Adjustments to Income BAA For Paperwork Reduction Act Notice, see your tax return instructions. Schedule 1 (Form 1040) 2020 Before you begin: See the earlier instructions for tine 16 to see if you can use this worksheet to figure yout tax. Before completing this worksteet, camplete form 1040 through line 15. he box on Jsa the 2020 Tax Rate Schedules to compute the tax. (Note: Because the tax rate schedules are used instead of the tax tables, the amount of tax computed may vary slightly from the amourt listed in the tables.) Dan plans to reduoe his work schedule and work only half-Lime for WJJ in 2021 . He has beeni writing songs for several years and wants to devote mare tirne to developing a career as a songwriter. Because of the uricertainty in the music business, horvever, he would like you to make all computations assuming that he will have no incorne from sangwtiting in 2021 . To frake up for the loss of incorne, Freida plans to increase the amount of time she sperits selling real estate. She estimates that she will be able to earm $90,000 in 2021. - Assume that all other inconte and expense iterms will be approximately the same as they were in 2020 (including the prize wirnings). - Assume that Wilie will be enrolled in college as a full-time student for the stmmer and fall semesters. No changes regarding Gina and Ben. - The $3,100 commission recerved on Jarvary 10,2021 , is included in the 590,000 income to be earmed by Freida in 2021. - The 22$2020 marginal tax rate remains the sarne in 2021 . - Assume a payrul tax rate for FICA and Medicare of 7.65\% and the Keritucky state income rate of 4%. - Assume Interest income, dividend income, prize ircome and the standard deduction will be the same for 2021. Complete the following letter regarding whether the Butlers will have more or less disposable inconte (after Federal incorra tax) in 2021. You asked me to estimate your after-tax income under the assumption that Dan will work only halftime next year. The reduction in Dan's pay will be partially olfset by a $ Freida will earn. This net $ reduction in salary and wages will also result in a decrease in your kentusky incone tax, Social Security tax, and Medicare tax. The net reduction in your after-tax cash flow will be approximately . The calculations are presented below