Note: This problem is for the 2020 tax year. David R. and Ella M. Cole (ages 39 and 38, respectively) are husband and wife who live at 1820 Elk Avenue, Denver, CO 80202. David is a self-employed consultant specializing in retail management, and Ella is a dental hygienist for a chain of dental clinics. David earned consulting fees of $145,000 in 2020. He maintains his own office and pays for all business expenses. The Coles are adequately covered by the medical plan provided by Ella's employer but have chosen not to participate in its 401(k) retirement plan. David's employment-related expenses for 2020 are summarized below. Airfare Lodging Meals (during travel status) Entertainment Ground transportation (e.g., limos, rental cars, and taxis) Business gifts Office supplies (includes postage, overnight delivery, and copying) $8,800 4,615 4,800 3,600 800 900 1,500 The entertainment involved taking clients to sporting and musical events. The business gifts consisted of $50 gift certificates to a national restaurant. These were sent by David during the Christmas holidays to 18 of his major clients. In addition, David drove his 2018 Ford Expedition 11,000 miles for business and 3,000 for personal use during 2020. He purchased the Expedition on August 15, 2017; David always has used the automatic (standard) mileage method for tax purposes. Parking and tolls relating to business use total $340 in 2020. When the Coles purchased their present residence in April 2017, they devoted 450 of the 3,000 square feet of living space to an office for David. The property cost $440,000 ($40,000 of which is attributable to the land) and has since appreciated in value. Expenses relating to the residence in 2020 (except for mortgage interest and property taxes; see below) are reported as follows: Insurance $2,600 Repairs and maintenance 900 Utilities 4,700 Painting office area; area rugs and plants (in the office)* 1,800 *Treat as a direct office in home expense. In terms of depreciation, the Coles use the MACRS percentage tables applicable to 39-year nonresidential real property. As to depreciable property (e.g., office furniture), David tries to avoid capitalization and uses whatever method provides the fastest write- off for tax purposes. Ella works at a variety of offices as a substitute when a hygienist is ill or on vacation or when one of the clinics is particularly busy (e.g., prior to the beginning of the school year). Assume that Ella is an employee (not an independent contractor). Besides her transportation, she must provide and maintain her own uniforms. Her expenses for the year are summarized. Uniforms $690 State and city occupational licenses 380 Professional journals and membership dues in the American Dental Hygiene Association 340 Correspondence study course (taken online) dealing with teeth whitening procedures 420 Ella's salary for the year is $42,000, and her Form W-2 for the year shows income tax withholdings of $4,000 (Federal) and $1,000 (state) and the proper amount of Social Security and Medicare taxes. In addition to those Items already mentioned, the Coles had the following receipts during 2020. Interest income- State of Colorado general purpose bonds IBM bonds Wells Fargo Bank Federal income tax refund for year 2019 Life insurance proceeds paid by Eagle Assurance Corporation Inheritance of savings account from Sarah Cole Sales proceeds from two ATVS $2,500 800 1,200 $4,500 510 200,000 50,000 9,000 For several years, the Coles household has included David's divorced mother, Sarah, who has been claimed as their dependent. Late last year, Sarah unexpectedly died. Unknown to Ella and David, Sarah had a life insurance policy and a savings account (with David as the designated beneficiary of each). In 2019, the Coles purchased two ATVs for $14,000. After several near mishaps, they decided that the sport was too dangerous. In 2020, they sold the ATVS to their neighbor. Additional expenditures for the year include the following. Funeral expenses for Sarah Taxes- Real property taxes on personal residence $6,400 $4,500 Colorado state income tax due (paid in April 2020 for tax year 2019) 310 Mortgage interest on personal residence (Rocky Mountain Bank) 6,710 6,600 Contributions to traditional IRAs for Ella and David ($6,000+ $6,000) 12,000 In 2020, the Coles made quarterly estimated tax payments of $6,000 (Federal) and $500 (state) for a total of $24,000 (Federal) and $2,000 (state). In 2020, the Coles made quarterly estimated tax payments of $6,000 (Federal) and $500 (state) for a total of $24,000 (Federal) and $2,000 (state). Relevant Social Security numbers are: David Cole Ella Cole 123-45-6788 123-45-6787 The Coles have never owned or used any virtual currency. The Coles received the appropriate coronavirus recovery rebates (economic impact payments; related questions in ProConnect Tax should be ignored). They do not want to contribute to the Presidential Election Campaign Fund. David is not eligible for any qualified sick or family leave credit for 2020 and does not want to defer payment of any of his self-employment taxes for 2020. Also, the Coles want any overpayment of tax refunded to them and not applied toward next year's tax liability. Required: Using the appropriate forms and schedules, compute David and Ella's joint Federal income tax for 2020. Disregard the alternative minimum tax (AMT) and the various education credits 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". If required, round all dollar amounts to the nearest dollar. It may be necessary to complete the tax schedules before completing Form 1040. Use the included tax rates schedules to compute the tax. When computing the tax liability, do not round your immediate calculations. If required, round your final answers to the nearest dollar. Form Department of the Treasury-Internal Revenue Service (99) 1040 u.s. Individual Income Tax Return Filing Status Married filing jointly Your first name and middle initial David R. Cole If joint return, spouse's first name and middle initial Ella M. Cole Last name Last name Home address (number and street). If you have a P.O. box, see instructions. 1820 Elk Avenue 2020 OMB No. 1545-0074 IRS Use Only Apt. no. City, town, or post office. If you have a foreign address, also complete spaces below. State ZIP code Denver, CO 80202 Foreign country name Foreign province/state/county Foreign postal code Your social security number 123-45-6788 Spouse's social security number 123-45-6787 Presidential Election Campaign Check here if you, or your spouse if filing jointly, want $3 to go to this fund. Checking a box below will not change your tax or refund. None At any time during 2020, did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency? No Standard Someone can claim: None Deduction Age/Blindness You: None Spouse: None Dependents (see instructions): If more than four dependents, see (1) First name Last name (2) Social security (3) Relationship number to you (4) if qualifies for (see instructions): Child tax credit Credit for other dependents instructions and check here 1 Wages, salaries, tips, etc. Attach Form(s) W-2. 42,000 Attach Sch. B if 2a Tax-exempt interest.. 2a 2,500 b Taxable interest. 2b 2,000 required. 3a Qualified dividends... b Ordinary dividends. 3b 4a IRA distributions . . . . . 4a b Taxable amount. 4b 5a Pensions and annuities 5a b Taxable amount 5b Standard 6a Social security benefits b Taxable amount. 6b Deduction for- 7 Capital gain or (loss). Attach Schedule D if required. If not required, check here... 7 Single or Married filing 8 Other income from Schedule 1, line 9..... 8 separately, $12,400 9 Add lines 1, 2b, 3b, 4b, 5b, 6b, 7, and 8. This is your total income 9 Married filing jointly or 10 Adjustments to income: Head of . Qualifying widow(er), $24,800 a From Schedule 1, line 22. 10a b Charitable contributions if you take the standard deduction. See instructions.... 10b c Add lines 10a and 10b. These are your total adjustments to income... 10c 11 Subtract line 10c from line 9. This is your adjusted gross income. 11 household, $18,650 If you checked any box under Standard Deduction, see instructions. 12 Standard deduction or itemized deductions (from Schedule A) .. 13 Qualified business income deduction. Attach Form 8995 or Form 8995-A. 14 Add lines 12 and 13. 15 Taxable income. Subtract line 14 from line 11. If zero or less, enter -0- BAA For Disclosure, Privacy Act, and Paperwork Reduction Act Notice, see separate instructions. 12 13 14 15 Form 1040 (2020) David R. and Ella M. Cole 123-45-6788 16 Tax (see instructions). Check if any from Form(s): 18814 24972 3 17 Amount from Schedule 2, line 3. 16 17 18 Add lines 16 and 17. 19 Child tax credit or credit for other dependents. 20 Amount from Schedule 3, line 7.... 18 19 20 21 Add lines 19 and 20.... 21 22 Subtract line 21 from line 18. If zero or less, enter -0- 22 23 Other taxes, including self-employment tax, from Schedule 2, line 10 23 24 Add lines 22 and 23. This is your total tax. 24 24 25 Federal Income tax withheld from: . Form(s) W-2... a Form 1040 (2020) Page 2 25a b Form(s) 1099.. 25b c Other forms (see instructions). 25c d Add lines 25a through 25c.... 25d If you have a 26 2020 estimated tax payments and amount applied from 2019 return 26 x qualifying child, attach Sch. EIC. Earned income credit (EIC)..... 27 . If you have 22 27 nontaxable Additional child tax credit. Attach Schedule 8812 combat pay, see 28 combat pay, see 28 28 instructions. American opportunity credit from Form 8863, line 8...... 29 29 Recovery rebate credit. See instructions. 30 Amount from Schedule 3, line 13. 31 30 31 32 Add lines 27 through 31. These are your total other payments and refundable credits 32 33 33 Add lines 25d, 26, and 32. These are your total payments... Refund 34 If line 33 is more than line 24, subtract line 24 from line 33. This is the amount you overpaid. 34 35a Amount of line 34 you want refunded to you. If Form 8888 is attached, check here 35a Direct deposit? b Routing number c Type: Checking Savings See Instructions. d Account number 36 Amount of line 34 you want applied to your 2021 estimated tax.. 36 Amount 37 Subtract line 33 from line 24. This is the amount you owe now.. 37 You Owe For details on how to pay, see instructions. Third Party Designee Note: Schedule H and Schedule SE filers, line 37 may not represent all of the taxes you owe for 2020. See Schedule 3, line 12e, and its instructions for details. 38 Estimated tax penalty (see instructions).. 38 Do you want to allow another person to discuss this return with the IRS? See instructions.. Yes. Complete below. > No Designee's name Phone no. Personal identification number (PIN) Sign Here Joint return? See instructions. Under penalties of perjury, I declare that I have examined this return and accompanying schedules and statements, and to the best of my knowledge and belief, they are true, correct, and complete. Declaration of preparer (other than taxpayer) is based on all information of which preparer has any knowledge. Your signature Date Your occupation Consultant Keep a copy for Spouse's signature. If a joint Date Spouse's occupation your records. return, both must sign. Dental Hygienist If the IRS sent you an Identity Protection PIN, enter it here (see inst.) If the IRS sent your spouse an Identity Protection PIN, enter it here (see inst.) SCHEDULE 1 (Form 1040) Department of the Treasury Internal Revenue Service Additional Income and Adjustments to Income OMB No. 1545-0074 Attach to Form 1040, 1040-SR, or 1040-NR. Go to www.irs.gov/Form 1040 for instructions and the latest information. Name(s) shown on Form 1040, 1040-SR, or 1040-NR David R. and Ella M. Cole 2020 Attachment Sequence No. 01 Your social security number 123-45-6788 Part I Additional Income 1 Taxable refunds, credits, or offsets of state and local income taxes 2a Alimony received... b Date of original divorce or separation agreement (see instructions) 1 2a 3 Business income or (loss). Attach Schedule C... 4 Other gains or (losses). Attach Form 4797. . . 4 5 Rental real estate, royalties, partnerships, S corporations, trusts, etc. Attach Schedule E. 5 6 Farm income or (loss). Attach Schedule F. 6 7 Unemployment compensation.... 7 8 Other income. List type and amount 8 9 Combine lines 1 through 8. Enter here and on Form 1040, 1040-SR, or 1040-NR, line 8... 9 Part II Adjustments to Income 10 Educator expenses. 10 11 Certain business expenses of reservists, performing artists, and fee-basis government officials. Attach Form 2106.... 12 Health savings account deduction. Attach Form 8889.. 13 Moving expenses for members of the Armed Forces. Attach Form 3903.. 14 Deductible part of self-employment tax. Attach Schedule SE.... 15 Self-employed SEP, SIMPLE, and qualified plans... 16 Self-employed health insurance deduction... 11 12 13 13 14 15 16 17 Penalty on early withdrawal of savings. 18a Alimony paid b Recipient's SSN c Date of original divorce or separation agreement (see instructions) 19 IRA deduction... 20 Student loan interest deduction. 21 Tuition and fees deduction. Attach Form 8917. 22 Add lines 10 through 21. These are your adjustments to income. Enter here and on Form 1040, 1040-SR, or 1040-NR, line 10a . . . BAA For Paperwork Reduction Act Notice, see your tax return instructions. 17 18a 19 12,000 V 20 21 22 Schedule 1 (Form 1040) 2020 Schedule 2 Complete the Cole's Schedule 2. SCHEDULE 2 (Form 1040) Department of the Treasury Internal Revenue Service Additional Taxes Attach to Form 1040, 1040-SR, or 1040-NR. Go to www.irs.gov/Form 1040 for instructions and the latest information. Name(s) shown on Form 1040, 1040-SR, or 1040-NR David R. and Ella M. Cole Part I OMB No. 1545-0074 2020 Attachment Sequence No. 02 Your social security number 123-45-6788 Tax 1 Alternative minimum tax. Attach Form 6251.. 2 Excess advance premium tax credit repayment. Attach Form 8962.. 1 0 2 3 Add lines 1 and 2. Enter here and include on Form 1040, 1040-SR, or 1040-NR, line 17 3 0 Part II Other Taxes 4 Self-employment tax. Attach Schedule SE... 4 5 Unreported social security and Medicare tax from Form: a 4137 b 8919.. 5 6 Additional tax on IRAS, other qualified retirement plans, and other tax-favored accounts. Attach Form 5329 if required.... 6 7a Household employment taxes. Attach Schedule H..... 7a b Repayment of first-time homebuyer credit from Form 5405. Attach Form 5405 if required. 7b 8 8 Taxes from: a Form 8959 b Form 8960 c Instructions; enter code(s) 9 Section 965 net tax liability installment from Form 965-A.... 9 10 Add lines 4 through 8. These are your total other taxes. Enter here and on Form 1040 or 1040-SR, line 23, or Form 1040-NR, line 23b.... 10 BAA For Paperwork Reduction Act Notice, see your tax return instructions. Schedule 2 (Form 1040) 2020 SCHEDULE B (Form 1040) Department of the Treasury Internal Revenue Service (99) Name(s) shown on return David R. and Ella M. Cole Part I Interest Interest and Ordinary Dividends Go to www.irs.gov/ScheduleB for instructions and the latest information. Attach to Form 1040 or 1040-SR. OMB No. 1545-0074 2020 Attachment Sequence No. 08 Your social security number 123-45-6788 1 List name of payer. If any interest is from a seller-financed mortgage and the buyer used the property as a personal residence, see the instructions and list this interest first. Also, show that buyer's social security number and address Amount (See instructions and the instructions for Forms 1040 and 1040-SR, line 2b.) Note: If you received a Form 1099-INT, Form 1099-OID, or IBM Wells Fargo Bank 1 800 1,200 substitute statement from a brokerage firm, list the firm's 2 Add the amounts on line 1 2 2,000 name as the payer and enter the total interest shown on that form. 3 Excludable interest on series EE and I U.S. savings bonds issued after 1989. Attach Form 8815..... 3 4 Subtract line 3 from line 2. Enter the result here and on Form 1040 or 1040-SR, line 2b 4 2,000 Note: If line 4 is over $1,500, you must complete Part III. Amount Part II 5 List name of payer Ordinary Dividends (See instructions and the instructions for Form 1040 or 1040- SR, line 3b.) Note: If you received a Form 1099-DIV or substitute statement from a brokerage firm, list the firm's name as the payer 5 and enter the ordinary dividends shown on that form. 6 Add the amounts on line 5. Enter the total here and on Form 1040 or 1040-SR, line 3b 6 0 Note: If line 6 is over $1,500, you must complete Part III. Part III You must complete this part if you (a) had over $1,500 of taxable interest or ordinary dividends; (b) had a foreign account; or (c) received a distribution from, or were a grantor of, or a transferor to, a foreign trust. Yes OO No 7a Foreign Accounts and Trusts Caution: If required, failure to file FinCEN Form 114 may result in substantial penalties. See instructions. At any time during 2020, did you have a financial interest in or signature authority over a financial account (such as a bank account, securities account, or brokerage account) located in a foreign country? See instructions .... If 'Yes,' are you required to file FinCEN Form 114, Report of Foreign Bank and Financial Accounts (FBAR), to report that financial interest or signature authority? See FinCEN Form 114 and its instructions for filing requirements and exceptions to those requirements... b If you are required to file FinCEN Form 114, enter the name of the foreign country where the financial account is located 8 During 2020, did you receive a distribution from, or were you the grantor of, or transferor to, a foreign trust? If 'Yes,' you may have to file Form 3520. See instructions .. BAA For Paperwork Reduction Act Notice, see your tax return instructions. X X Schedule B (Form 1040) 2020 SCHEDULE C (Form 1040) Department of the Treasury Internal Revenue Service (99) Name of proprietor David R. Cole Profit or Loss From Business (Sole Proprietorship) Go to www.irs.gov/ScheduleC for instructions and the latest information. Attach to Form 1040, 1040-SR, 1040-NR, or 1041; partnerships generally must file Form 1065. A Principal business or profession, including product or service (see instructions) Consulting Services C Business name. If no separate business name, leave blank. OMB No. 1545-0074 2020 Attachment Sequence No. 09 Social security number (SSN) 123-45-6788 B Enter code from instructions 541600 D Employer ID number (EIN) (see instr.) E Business address (including suite or room no.) 1820 Elk Avenue City, town or post office, state, and ZIP code Denver CO 80202 F Accounting method: (1) Cash (2) Accrual (3) Other (specify) G Did you "materially participate" in the operation of this business during 2020? If "No," see instructions for limit on losses. Yes No H If you started or acquired this business during 2020, check here... I Did you make any payments in 2020 that would require you to file Form(s) 1099? See instructions... J If "Yes," did you or will you file required Forms 1099?.. Part I Income 1 Gross receipts or sales. See Instructions for line 1 and check the box if this income was reported to you on Form W-2 and the "Statutory employee" box on that form was checked... 2 Returns and allowances.. Yes No Yes No 1 145,000 2 3 145,000 3 Subtract line 2 from line 1. 4 Cost of goods sold (from line 42). 4 5 Gross profit. Subtract line 4 from line 3..... 5 145,000 6 Other income, including federal and state gasoline or fuel tax credit or refund (see instructions). 7 Gross income. Add lines 5 and 6..... 6 7 145,000 Part II Expenses. Enter expenses for business use of your home only on line 30. 8 Advertising..... 8 18 Office expense (see instructions). 18 9 Car and truck expenses (see 19 Pension and profit-sharing plans..... 19 instructions) 325 J Dent or leace (con instructional. 9 Car and truck expenses (see instructions).. 19 Pension and profit-sharing plans.... 19 6,325 20 Rent or lease (see instructions): 10 Commissions and fees. ... 10 11 Contract labor (see instructions).. 11 12 Depletion.... a Vehicles, machinery, and equipment.... 20a b Other business property. 20b 12 21 Repairs and maintenance.. 21 13 Depreciation and section 179 expense deduction (not included 22 Supplies (not included in Part III).. 22 1,500 23 Taxes and licenses. 23 in Part III) (see instructions) .... 13 24 Travel and meals: . . 14 Employee benefit programs a Travel... 24a (other than on line 19)...... 14 b Deductible meals (see 15 Insurance (other than health).... 15 instructions). 24b 2,400 16 Interest (see instr.): 25 Utilities... 25 a Mortgage (paid to banks, etc.)... 16a b Other.. 16b 26 Wages (less employment credits). 27a Other expenses (from line 48). b Reserved for future use 26 27a 790 27b 28 17 Legal and professional services... 17 28 Total expenses before expenses for business use of home. Add lines 8 through 27a ... 29 Tentative profit or (loss). Subtract line 28 from line 7... 30 Expenses for business use of your home. Do not report these expenses elsewhere. Attach Form 8829 unless using the simplified method. See instructions. Simplified method filers only: enter the total square footage of: (a) your home: of your home used for business: 29 and (b) the part . Use the Simplified Method Worksheet in the instructions to figure 30 the amount to enter on line 30.. 31 Net profit or (loss). Subtract line 30 from line 29. If a profit, enter on both Schedule 1 (Form 1040), line 3, and on Schedule SE, line 2. (If you checked the box on line 1, see instructions). Estates and trusts, enter on Form 1041, line 3. If a loss, you must go to line 32. 32 If you have a loss, check the box that describes your investment in this activity See instructions. If you checked 32a, enter the loss on both Schedule 1 (Form 1040), line 3, and on Schedule SE, line 2. (If you checked the box on line 1, see the line 31 instructions). Estates and trusts, enter on Form 1041, line 3. If you checked 32b, you must attach Form 6198. Your loss may be limited. BAA For Paperwork Reduction Act Notice, see the separate instructions. } 31 32a All investment is at risk. 32b Some investment is not at risk. Schedule C (Form 1040) 2020 Schedule C (Form 1040) 2020 David R. Cole Part III Cost of Goods Sold (see instructions) 123-45-6788 Page 2 David R. Cole Schedule C (Form 1040) 2020 Part III Cost of Goods Sold (see instructions) 123-45-6788 Page 2 33 Method(s) used to value closing inventory: a Cost b Lower of cost or market C Other (attach explanation) 34 Was there any change in determining quantities, costs, or valuations between opening and closing inventory? If "Yes," attach explanation.... 35 Inventory at beginning of year. If different from last year's closing inventory, attach explanation ..... 36 Purchases less cost of items withdrawn for personal use.. 37 Cost of labor. Do not include any amounts paid to yourself. 38 Materials and supplies..... 39 Other costs... 40 Add lines 35 through 39. 41 Inventory at end of year... 42 Cost of goods sold. Subtract line 41 from line 40. Enter the result here and on line 4..... Part IV Yes Nopp 35 36 37 38 39 40 41 42 Information on Your Vehicle. Complete this part only if you are claiming car or truck expenses on line 9 and are not required to file Form 4562 for this business. See the instructions for line 13 to find out if you must file Form 4562. Yes No Yes Yes No Yes. No 2 2 2 2 43 When did you place your vehicle in service for business purposes? (month/day/year) 44 of the total number of miles you drove your vehicle during 2020, enter the number of miles you used your vehicle for: a Business b Commuting (see instructions) 45 Was your vehicle available for personal use during off-duty hours? . . . 46 Do you (or your spouse) have another vehicle available for personal use? 47a Do you have evidence to support your deduction? ... b If "Yes," is the evidence written? ... Part V Other Expenses. List below business expenses not included on lines 8-26 or line 30. Business gifts Parking and tolls c Other 450 V 340 48 Total other expenses. Enter here and on line 27a. 48 790 Schedule C (Form 1040) 2020 SCHEDULE SE (Form 1040) Department of the Treasury Internal Revenue Service (99) Self-Employment Tax Go to www.irs.gov/ScheduleSE for instructions and the latest information. Attach to Form 1040, 1040-SR, or 1040-NR. OMB No. 1545-0074 2020 Attachment Sequence No. 17 Name of person with self-employment income (as shown on Form 1040, 1040-SR, or 1040-NR) David R. Cole Social security number of person with self-employment income 123-45-6788 Part I Self-Employment Tax Note: If your only income subject to self-employment tax is church employee income, see instructions for how to report your income and the definition of church employee income. A If you are a minister, member of a religious order, or Christian Science practitioner and you filed Form 4361, but you had $400 or more of other net earnings from self-employment, check here and continue with Part I...... Skip lines 1a and 1b if you use the farm optional method in Part II. See instructions. 1a Net farm profit or (loss) from Schedule F, line 34, and farm partnerships, Schedule K-1 (Form 1065), box 14, code A.... 1a b If you received social security retirement or disability benefits, enter the amount of Conservation Reserve Program payments included on Schedule F, line 4b, or listed on Schedule K-1 (Form 1065), box 20, code AH 1b Skip line 2 if you use the nonfarm optional method in Part II. See instructions. 2 Net profit or (loss) from Schedule C, line 31; and Schedule K-1 (Form 1065), box 14, code A (other than farming). See instructions for other income to report or if you are a minister or member of a religious order 3 Combine lines 1a, 1b, and 2... 2 3 4a If line 3 is more than zero, multiply line 3 by 92.35% (0.9235). Otherwise, enter amount from line 3...... Note: If line 4a is less than $400 due to Conservation Reserve Program payments on line 1b, see instructions. b If you elect one or both of the optional methods, enter the total of lines 15 and 17 here... c Combine lines 4a and 4b. If less than $400, stop; you don't owe self-employment tax. Exception: If less than $400 and you had church employee income, enter -0- and continue.. 5a Enter your church employee income from Form W-2. See instructions for definition of church employee income.. 4a 4b 4c 5a b Multiply line 5a by 92.35% (0.9235). If less than $100, enter -0- 5b 6 Add lines 4c and 5b... 6 7 Maximum amount of combined wages and self-employment earnings subject to social security tax or the 6.2% portion of the 7.65% railroad retirement (tier 1) tax for 2020.. 7 8a Total social security wages and tips (total of boxes 3 and 7 on Form(s) W-2) and railroad retirement (tler 1) compensation. If $137,700 or more, skip lines 8b through 10, and go to line 11..... b Unreported tips subject to social security tax from Form 4137, line 10. c Wages subject to social security tax from Form 8919, line 10. 8a 8b 8c b Unreported tips subject to social security tax from Form 4137, line 10 8b c Wages subject to social security tax from Form 8919, line 10... d Add lines 8a, 8b, and 8c. ... 8c 8d 9 Subtract line 8d from line 7. If zero or less, enter -0- here and on line 10 and go to line 11 10 Multiply the smaller of line 6 or line 9 by 12.4% (0.124). 11 Multiply line 6 by 2.9% (0.029)... 10 11 12 Self-employment tax. Add lines 10 and 11. Enter here and on Schedule 2 (Form 1040), line 4 13 Deduction for one-half of self-employment tax. 12 Multiply line 12 by 50% (0.50). Enter here and on Schedule 1 (Form 1040), line 14... 13 Part II Optional Methods To Figure Net Earnings (see instructions) Farm Optional Method. You may use this method only if (a) your gross farm income (1) wasn't more than $8,460, or (b) your net farm profits (2) were less than $6,107. 14 Maximum Income for optional methods... 14 15 Enter the smaller of: two-thirds (2/3) of gross farm income(1) (not less than zero) or $5,640. Also, include this amount on line 4b above.... 15 Nonfarm Optional Method. You may use this method only if (a) your net nonfarm profits (3) were less than $6,107 and also less than 72.189% of your gross nonfarm income, (4) and (b) you had net earnings from self- employment of at least $400 in 2 of the prior 3 years. Caution: You may use this method no more than five times. 16 Subtract line 15 from line 14. 17 Enter the smaller of: two-thirds (2/3) of gross nonfarm income (4) (not less than zero) or the amount on line 16. Also, include this amount on line 4b above..... (1) From Sch. F, line 9; and Sch. K-1 (Form 1065), box 14, code B. (2) From Sch. F, line 34; and Sch. K-1 (Form 1065), box 14, code A -minus the amount you would have entered on line 1b had you not used the optional method .. 16 17 (3) From Sch. C, line 31; and Sch. K-1 (Form 1065), box 14, code A. (4) From Sch. C, line 7; and Sch. K-1 (Form 1065), box 14, code C. BAA For Paperwork Reduction Act Notice, see your tax return instructions. Schedule SE (Form 1040) 2020 Schedule SE (Form 1040) 2020 David R. Cole 123-45-6788 Attachment Sequence No. 17 Page 2 Part III Maximum Deferral of Self-Employment Tax Payments If line 4c is zero, skip lines 18 through 20, and enter -0- on line 21. 18 Enter the portion of line 3 that can be attributed to March 27, 2020, through December 31, 2020.. 18 19 If line 18 is more than zero, multiply line 18 by 92.35% (0.9235); otherwise, enter the amount from line 18 .. 19 123-45-6788 Attachment Sequence No. 17 Page 2 Schedule SE (Form 1040) 2020 Part III David R. Cole Maximum Deferral of Self-Employment Tax Payments If line 4c is zero, skip lines 18 through 20, and enter -0- on line 21. 18 Enter the portion of line 3 that can be attributed to March 27, 2020, through December 31, 2020. . . 19 If line 18 is more than zero, multiply line 18 by 92.35% (0.9235); otherwise, enter the amount from line 18 . . 20 Enter the portion of lines 15 and 17 that can be attributed to March 27, 2020, through December 31, 2020 . . . 21 Combine lines 19 and 20 .. If line 5b is zero, skip line 22 and enter -0- on line 23. 22 Enter the portion of line 5a that can be attributed to March 27, 2020, through December 31, 2020. 23 Multiply line 22 by 92.35% (0.9235) 24 Add lines 21 and 23. ... 25 Enter the smaller of line 9 or line 24. . 26 Multiply line 25 by 6.2% (0.062). Enter here and see the instructions for line 12e of Schedule 3 (Form 1040). BAA 18 19 20 21 24 222 23 24 24 25 26 Schedule SE (Form 1040) 2020 Foodback Complete Roberta's Form 8995. Form 8995 Department of the Treasury Internal Revenue Service Name(s) shown on return David R. and Ella M. Cole Qualified Business Income Deduction Simplified Computation Attach to your tax return. Go to www.irs.gov/Form8995 for instructions and the latest information. OMB No. 1545-0123 2020 Attachment Sequence No. 55 Your taxpayer identification number 123-45-6788 Note. You can claim the qualified business income deduction only if you have qualified business income from a qualified trade or business, real estate investment trust dividends, publicly traded partnership income, or a domestic production activities deduction passed through from an agricultural or horticultural cooperative. See instructions. Use this form if your taxable income, before your qualified business income deduction, is at or below $163,300 ($326,600 if married filing jointly), and you aren't a patron of an agricultural or horticultural cooperative. 1 i David R. Cole ii (a) Trade, business, or aggregation name (b) Taxpayer identification number (c) Qualified business income or (loss) 123-45-6788 Iv V 2 Total qualified business income or (loss). Combine lines 11 through 1v, column (c)... 2 3 Qualified business net (loss) carryforward from the prior year... 3 4 Total qualified business income. Combine lines 2 and 3. If zero or less, enter -0- 4 5 Qualified business income component. Multiply line 4 by 20% (0.20)... 6 Qualified REIT dividends and publicly traded partnership (PTP) income or (loss) (see Instructions)..... 6 7 Qualified REIT dividends and qualified PTP (loss) carryforward from the prior year.. 7 8 Total qualified REIT dividends and PTP income. Combine lines 6 and 7. If zero or less, 8 enter -0- ... 9 REIT and PTP component. Multiply line 8 by 20% (0.20) ... 10 Qualified business income deduction before the income limitation. Add lines 5 and 9 11 Taxable income before qualified business income deduction.. 11 12 Net capital gain (see instructions)... 12 13 Subtract line 12 from line 11. If zero or less, enter -0- 14 Income limitation. Multiply line 13 by 20% (0.20). 13 5 10 14 13 Subtract line 12 from line 11. If zero or less, enter -0- . . 13 14 Income limitation. Multiply line 13 by 20% (0.20) 14 15 Qualified business income deduction. Enter the lesser of line 10 or line 14. Also enter this amount on the applicable line of your return.. 15 16 Total qualified business (loss) carryforward. Combine lines 2 and 3. If greater than zero, enter -0- 16 17 Total qualified REIT dividends and PTP (loss) carryforward. Combine lines 6 and 7. If greater than zero, enter -0- ..... 17 BAA For Privacy Act and Paperwork Reduction Act Notice, see instructions. Form 8995 (2020) Complete the Coles' Form 8829 for 2020. The applicable depreciation percentage is 2.564%. Form 8829 Department of the Treasury Internal Revenue Service (99) Name(s) of proprietor(s) David R. Cole Expenses for Business Use of Your Home File only with Schedule C (Form 1040). Use a separate Form 8829 for each home you used for business during the year. Go to www.irs.gov/Form8829 for instructions and the latest information. Part I Part of Your Home Used for Business OMB No. 1545-0074 2020 Attachment Sequence No. 176 Your social security number 123-45-6788 1 Area used regularly and exclusively for business, regularly for daycare, or for storage of inventory or product samples (see instructions).. 2 Total area of home... 3 Divide line 1 by line 2. Enter the result as a percentage. 1 450 2 3,000 3 15 % For daycare facilities not used exclusively for business, go to line 4. All others, go to line 7. 4 Multiply days used for daycare during year by hours used per day..... hr 5 If you started or stopped using your home for daycare during the year, see instructions; otherwise, enter 8,784.... 5 hr 6 Divide line 4 by line 5. Enter the result as a decimal amount.. 6 7 Business percentage. For daycare facilities not used exclusively for business, multiply line 6 by line 3 (enter the result as a percentage). All others, enter the amount from line 3 . . . Part II Figure Your Allowable Deduction 8 Enter the amount from Schedule C, line 29, plus any gain derived from the business use of your home, minus any loss from the trade or business not derived from the business use of your home. See instructions. See instructions for columns (a) and (b) before completing lines 9-22. 9 Casualty losses (see instructions) ... 10 Deductible mortgage interest (see instructions) ... 10 11 Real estate taxes (see instructions).. 11 12 Add lines 9, 10, and 11. 12 13 Multiply line 12, column (b), by line 7. 14 Add line 12, column (a), and line 13... 15 Subtract line 14 from line 8. If zero or less, enter -0- 16 Excess mortgage interest (see instructions) ... 16 (a) Direct expenses (b) Indirect expenses 6,600 6,400 V 13,000 13 1,950 V 7 15 V % 8 14 1,950 15 13 Multiply line 12, column (b), by line 7. 14 Add line 12, column (a), and line 13.. 15 Subtract line 14 from line 8. If zero or less, enter -0- 16 Excess mortgage interest (see instructions) ...... 17 Excess real estate taxes (see instructions). 16 17 18 Insurance.. 19 Rent... 20 Repairs and maintenance 21 Utilities... 18 19 13 1,950 2,600 20 900 21 4,700 22 Other expenses (see instructions), Statement 1 22 23 Add lines 16 through 22. 24 Multiply line 23, column (b), by line 7... 23 25 Carryover of prior year operating expenses (see instructions). 26 Add line 23, column (a), line 24, and line 25... 14 1,950 15 24 25 26 27 Allowable operating expenses. Enter the smaller of line 15 or line 26... 27 28 Limit on excess casualty losses and depreciation. Subtract line 27 from line 15. 28 29 Excess casualty losses (see instructions).. 29 30 Depreciation of your home from line 42 below.... 30 31 Carryover of prior year excess casualty losses and depreciation (see instructions) 31 32 32 Add lines 29 through 31 33 Allowable excess casualty losses and depreciation. Enter the smaller of line 28 or line 32.... 33 34 34 Add lines 14, 27, and 33. 35 Casualty loss portion, if any, from lines 14 and 33. Carry amount to Form 4684 See instructions... 35 36 Depreciation of Your Home Allowable expenses for business use of your home. Subtract line 35 from line 34. Enter here and on Schedule C, line 30. If your home was used for more than one business, see instructions .... Part III 36 37 Enter the smaller of your home's adjusted basis or its fair market value. See instructions. 38 Value of land included on line 37.. 39 Basis of building. Subtract line 38 from line 37. 40 Business basis of building. Multiply line 39 by line 7. 37 38 39 40 Part III Depreciation of Your Home 37 Enter the smaller of your home's adjusted basis or its fair market value. See instructions. . 38 Value of land included on line 37 . . . 39 Basis of building. Subtract line 38 from line 37 . . . . 40 Business basis of building. Multiply line 39 by line 7 41 Depreciation percentage (see instructions). 42 Depreciation allowable (see instructions). Multiply line 40 by line 41. Enter here and on line 30 above . . Carryover of Unallowed Expenses to 2021 Part IV 43 Operating expenses. Subtract line 27 from line 26. If less than zero, enter -0- .. g 37 38 39 40 41 % 42 43 44 Excess casualty losses and depreciation. Subtract line 33 from line 32. If less than zero, enter -0- . BAA For Paperwork Reduction Act Notice, see your tax return instructions. 44 Form 8829 (2020) Federal Statements Complete David R. and Ella M. Cole's Federal Statements. 2020 Statement 1 Form 8829, Line 22 Other Expenses Painting office area etc... Federal Statements David R. and Ella M. Cole Total Page 1 123-45-6788 Direct Indirect