Patti is a 27-year old sales representative for company J in Martinsburg, West Virginia. She needs your help to figure out her tax liability for 2020. The following has the related information.

1. She renewed her $69,960 contract with the company effective Feb. 2020, which was a 10% increase from the last contract ($63,600) that covered period of Feb. 1 2019 to Jan. 31 2020. The new contract is for period Feb. 1 2019 to Jan. 31 2020. Both the old and the new contracts are on end-of-month payment schedule. For 2020, she paid $1,200 of health insurance premium and contributed $4,000 to her 401(K) retirement plan.

2. During the year, she received a car insurance reimbursement of $2,000 for accident repair.

3. She took a business trip last year from DC to LA. The employer arranged flights and hotel for her at the cost of $2,500. After the trip, the company also reimbursed her out-of-pocket expenses of $200 for taxi and meals, and paid $800 for her overtime. The client she presented to gave her a gift worth $50. Assume that all of the items are not reflected in her W-2.

4. She was divorced with John Doe a few years ago and receives a $300 monthly alimony from him.

5. Patti has a savings account with BB&T. According to her 1099-INT box-1, the bank paid $950 of interest to her account.

6. She received $500 state income tax refund, according to 1099-G box-2.

7. Patti has a traditional IRA account and she contributed $5,000 to the account. The adjusted amount of IRA contribution is subject to phase-out depending on the level of income.

8. She has been investing in stocks. She bought 3,000 shares of stock K last year at $4.00/share and sold 2,000 shares on Dec. 30, 2020 at $3.50/share. According to 1099-DIV, K paid $1,000 of dividend to her for the year. In addition to the new capital loss, she also had a carry-over loss of $12,000 from previous years.

9. She inherited a house from her grandpa with a market value of $300,000 on Dec. 31.

10. Besides health insurance premiums, she paid $2,500 medical and $3,000 dental expenses.

11. Patti took a student loan of $20,000 in 2015, and she is currently repaying $200 a month. According to her 1098-E, the total interest received by the lender last year was $1,680. Student loan interest is a deduction subject to phase-out if income is between $55,000 and $75,000.

12. She rents an apartment and subleases a room to house mate Jenna. Patti pays $900 rent and Jenna pays her $450 per month. According to IRS, rental income is defined as the income from rental properties.

13. She purchased her car in 2018 with a loan, currently repaying $400 a month. The total interest for 2014 is $2,000 and the market value of the vehicle is $10,000 for 2020.

14. She gifted $3,000 to charity during the year. 2

15. Patti is not a casino goer, but she went to Charles Town casino for a social function on Dec. 1, 2020 and gambled a little for fun. For the night, her total lost bets were $300 and total winning bets were $250. According to IRS, gambling winnings are taxable as other income and gambling losses can be deducted as other miscellaneous deduction in schedule A if itemized deduction is chosen and up to the amount of gambling winnings.

16. She is a WV resident. The real property tax rate is 1% and the personal property tax rate is 2%.

17. Standard deduction is $12,400.

18. Pattis tax status is single without dependents. She uses whichever deduction is larger.

Question:

Box No. 1. 2. 3. 4. 5. 6. 14. 17. Patti's W-2 Item Wages, tips, other compensation Federal income tax withheld Social security wages Social security tax withheld Medicare wages and tips Medicare tax withheld Retirement Contribution State Income Tax Amount 64.230 15,000 68,230 2.866 68,230 989 4,000 3,000 Box No. Value Description wages, salaries, tips, etc. 1 2b taxable interest 3b ordinary dividends 7 capital gain (loss) 8 Schedule 1, line 9 10c adjustments to income 11 adjusted gross income 12 itemized or standard deduction taxable income 15 16 49,000 6,576 tax 25a W-2 tax withheld 34 tax overpaid Box No. 1. 2. 3. 4. 5. 6. 14. 17. Patti's W-2 Item Wages, tips, other compensation Federal income tax withheld Social security wages Social security tax withheld Medicare wages and tips Medicare tax withheld Retirement Contribution State Income Tax Amount 64.230 15,000 68,230 2.866 68,230 989 4,000 3,000 Box No. Value Description wages, salaries, tips, etc. 1 2b taxable interest 3b ordinary dividends 7 capital gain (loss) 8 Schedule 1, line 9 10c adjustments to income 11 adjusted gross income 12 itemized or standard deduction taxable income 15 16 49,000 6,576 tax 25a W-2 tax withheld 34 tax overpaid