Paul Richardson and Nicole Richardson, who live at 55 Colchester Avenue, Burlington, Vermont, 05405, are married and plan to file a joint federal income tax return for 2022. Paul was born on August 8, 1971, and his social security number is 164-62-1184. Nicole was born on July 8, 1974, and her social security number is 764-31-0817. Neither Paul nor Nicole wants to contribute to a presidential election campaign. Paul and Nicole have two children. Their son Michael Richardson was born on January 9, 2004. Michael had finished high school in 2022 and lived with Paul and Nicole for five months in 2022 before moving into an apartment with friends. Michael provided 35% of his own support during the year from a part- time job (his parents paid the rest). Michael earned $5,510 in that job during 2022. The social security number for Michael is 172-17-4742. Karen Richardson, their daughter, was born on July 3, 2005. Throughout 2022, Karen was attending high school and lived with Paul and Nicole, who paid all her living costs. The social security number for Karen is 271-74-7714. Paul has a $24,700 annual salary, plus health insurance and retirement benefits, at his job at Case Company (Case). He works in the sales department of Case. Paul had to pay $889 of the yearly $1,482 cost of health insurance for him and his family. Case paid the remainder of the cost for the health insurance. In addition, Paul made a $1,729 contribution to his section 401(k) retirement account for 2022. Case was willing to match that contribution, up to 20% of his salary. Therefore, Case made a $1,729 matching contribution. Paul signed salary reduction agreements to pay his health insurance cost and make his retirement contribution from the amount salary described above. His Form W-2 showed that Paul had $1,822 in FICA taxes, $1,980 in federal income taxes, and $740 in state income taxes withheld from his paychecks by Case during 2022. Case also paid the federal government $1,822 for its share of FICA taxes and $420 for its FUTA taxes due to Pauls employment. Nicole uses employer identification number 74-8671644 for her financial planning business, which she operates as a sole proprietorship. She accounts for the business using the cash method. In connection with her business, Nicole collected $17,267 in fees during 2022 even though they were earned during 2021, received $118,400 in fees that were both earned and collected during 2022, and billed $5,920 for services provided during 2022 and for which she will likely receive payment during 2023. Nicole rented office space for the business and paid $13,100 for rent, $936 for lighting and heating utilities, and $728 for liability insurance related to that space. Her office space is located at 85 South Prospect Street, Burlington, Vermont, 05405. Nicole hired an employee, who was paid $9,867 during 2022. In addition to paying the wages, Nicole had to pay $755 as the employer's portion of FICA taxes and $420 for her responsibility for FUTA taxes. During 2022, in connection with her business, Nicole also paid $179 in interest on a loan used to meet the short-term cash needs of the business, $804 for legal services in connection with reviewing contracts with Nicoles clients, $1,040 in accounting fees for preparing financial statements for 2021, $891 for office supplies consumed during the year, $471 for various materials and supplies consumed during the year, and $130 in penalties for a speeding ticket. In anticipation of her eventual retirement, Nicole also contributed $14,700 into a qualified retirement plan related to her business. BSAD 169 Individual Taxation Page 3 Spring 2023 Nicole placed a few assets, which have been used solely in her business, into service during 2022. On July 11, she placed into service a tablet computer, which cost $1,600, and, on December 7, she placed into service a desk, which cost $3,840. The only other business-use asset she owns is a credenza, which cost $2,275 when it was placed into service on April 2, 2020. Nicole uses MACRS for depreciation purposes but does not take bonus depreciation or elect to expense any costs under section 179 or the de minimis safe harbor rules. Throughout 2022, Paul and Nicole owned bonds issued by Import Incorporated. During the year, these bonds made interest payments to Paul and Nicole that equaled $2,802. Paul owned stock in Gamma Incorporated (Gamma) and Walnut Incorporated (Walnut) during 2022. From his Gamma stock, he collected $1,845 in total cash dividends during 2022. Despite having received the dividend payments, on August 7, 2022, Paul sold 950 of the Gamma shares for $3,895. His grandmother bought 340 shares of the Gamma stock on January 15, 1987, for $578. Those shares were worth $1,428 when his grandmother died on April 8, 2015, and $1,326 when they were distributed to Paul, as an inheritance, on May 3, 2015. On May 11, 2017, Nicole bought 330 shares of Gamma stock. On February 5, 2018, she gave those shares to Paul as an anniversary gift. The shares cost $495 when they were purchased, and they were worth $528 when she made the gift. Paul had bought 280 Gamma shares, for which he paid $1,148, on May 13, 2021. Paul had to pay a $140 online-transaction fee when he purchased the 280 shares of Gamma stock and a $190 fee when he sold all 950 shares of Gamma stock. Paul could not identify which particular shares of Gamma stock he sold in 2022. Paul also received $1,311 in cash dividends from Walnut in 2022. All the dividends paid by Gamma and Walnut during the year were qualified dividends. In addition, to support their general investment activities, Paul and Nicole paid $526 for an industry newsletter about Walnuts industry and $1,656 for diversification advice from a broker during 2022. Nicole has served meals at a homeless shelter for many years. She believes that, based on how she bills her time in her financial planning business, she gave $2,365 worth of her time to the shelter during 2022. She also has a receipt showing that she gave shoes worth $41 to the shelter during the year. Nicole also gave $5,315 to UVM, where she had gone to school many years ago. During a pledge drive in 2022, Paul contributed $792 to Vermont Public Radio. Paul and Nicole paid $100 to rent a safe deposit box at State Bank (Bank) during 2022. They used the box to hold bearer bonds, issued by Import Incorporated, which they purchased as an investment in 2018. They also maintain joint bank accounts at Bank. During 2022, Bank paid them $859 in interest on a money market account that they maintain at the bank. But they earn no interest on their checking account. Case deposits Pauls paychecks directly into their savings account. Nicole set up an automatic payment of $17 each month from their checking account as a contribution to their community church. Paul and Nicole purchased their house in 2014 and took out a mortgage from Bank to pay for it. They made $3,568 of principal repayments to Bank during 2022, which left them with a $324,381 outstanding loan balance, and they paid $13,624 in interest to Bank during the year. Paul wrote a $5,660 check to the county government during 2022 to pay the real estate taxes on the house. BSAD 169 Individual Taxation Page 4 Spring 2023 Aside from their home mortgage, Paul and Nicole used their house as security to borrow $23,838 from Bank as a home equity loan in 2021. They used the money to pay for car repairs. By making monthly payments, they repaid $954 of the home equity loan in addition to paying $1,907 in interest on that loan during 2022. However, they also took out an unsecured short-term loan to pay the entire cost for the installation of a solar-electric panel on their house during 2022. They repaid Bank $893 of the $3,308 short-term loan--plus they paid Bank $165 in interest on that loan--during the remainder of 2022. During 2022, Nicole had to see a doctor for a hearing test, which cost $637. The doctor also had Nicole pay $206 for a hearing aid. These costs were covered by the health insurance that Paul has through Case. Paul and Nicole filed their joint returns for the 2021 year on February 11, 2022. Case had withheld $6,583 for federal income tax payments from Pauls paychecks during 2021. So, in addition to filing their return, they also sent the federal government a check for $421 on February 11, 2022, for the additional taxes that they owed for 2021. Their Vermont state return showed that they owed $1,622 in total taxes for 2021. Paul had $1,930 in state income taxes withheld from his paychecks during 2021; therefore, the State of Vermont sent them a $308 refund check from their 2021 year on March 30, 2022. Paul and Nicole had included the full $1,930 of withheld taxes in their $29,500 of total itemized expenses, which they had deducted on their 2021 federal income tax return. After their returns were filed, Paul and Nicole paid their accountant $210 on February 24, 2022, for preparing their 2021 returns. In 2023, they expect to pay your firm $240 for preparing their 2022 returns. Required: Earn the accounting fee. Complete Paul and Nicole Richardsons 2022 federal income tax return (Form 1040), which might require the use of Schedule 1, Schedule 2, Schedule 3, Schedule A, Schedule B, Schedule C, Schedule D, Schedule SE, Form 4562, Form 5695, Schedule 8812, Form 8949, and/or Form 8995.