Please help me correct chap 4 red X marks . Note: This problem is for the 2019 tax year. Daniel B. Butler and Freida C.
Please help me correct chap 4 red X marks .
Note: This problem is for the 2019 tax year.
Daniel B. Butler and Freida C. Butler, husband and wife, file a joint return. The Butlers live at 625 Oak Street in Corbin, KY 40701. Dan's Social Security number is 111-11-1112, and Freida's is 123-45-6780. Dan was born on January 15, 1968, and Freida was born on August 20, 1969.
During 2019, Dan and Freida furnished over half of the total support of each of the following individuals, all of whom still live at home:
- Gina, their daughter, age 22, a full-time student, who married on December 21, has no income of her own and did not file a joint return with her husband, Casey, who earned $10,600 during 2019. Gina's Social Security number is 123-45-6788.
- Willie, their son, age 19, graduated high school in May 2019. He is taking a leap year and will not begin college until 2020. He had gross income of $6,300 in 2019. Willie's Social Security number is 123-45-6787.
- Ben, their oldest son, age 26, is a full-time graduate student with gross income of $5,200. Ben's Social Security number is 123-45-6786.
Dan was employed as a manager by WJJJ, Inc. (employer identification number 11-1111111, 604 Franklin Street, Corbin, KY 40702), and Freida was employed as a salesperson for Corbin Realty, Inc. (employer identification number 98-7654321, 899 Central Street, Corbin, Ky 40701). Selected information from the W2 forms provided by the employers is presented below. Dan and Freida use the cash method.
| Line | Description | Dan | Freida |
| 1 | Wages, tips, other compensation | $74,000 | $86,000 |
| 2 | Federal income tax withheld | 11,000 | 12,400 |
| 17 | State income tax withheld | 2,960 | 3,440 |
Freida sold a house on December 30, 2019, and will be paid a commission of $3,100 (not included in the $86,000 reported on the W2) on the January 10, 2020, closing date.
Other income (as reported on 1099 Forms) for 2019 consisted of the following:
| Dividends on CSX stock (qualified) | | $4,200 |
| Interest on savings at Second Bank | | 1,600 |
| Interest on City of Corbin bonds | | 900 |
| Interest on First Bank CD | | 382 |
The $382 from First Bank an original issue discount. Dan and Freida collected $16,000 on the First Bank CD that matured on September 30, 2019. The CD was purchased on October 1, 2017, 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 to the above information, Dan and Freida's itemized deductions included the following:
| Paid on 2019 Kentucky income tax | | $700 |
| Personal property tax paid | | 600 |
| Real estate taxes paid | | 1,800 |
| Interest on home mortgage (Corbin S&L) | | 4,900 |
| Cash contributions to the United Way | | 800 |
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. The Kentucky income tax rate is 4%.
Required:
Compute Dan and Freidas 2019 Federal income tax payable (or refund due). Use Form 1040 and Schedules 1, 3, 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 complete 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.
625 Oak Street Check here if you, or your spouse if filing jointly, want $3 to go to City, town or post office, state, and ZIP code. If you have a foreign this fund. Checking a box below will not change your tax or refund. address, also complete spaces below (see instructions) None Corbin, KY 40701 Foreign country name Foreign Foreign of more than four dependents, see instructions and here province/statcounty postal code Standard Deduction Someone can claim: None You: None Age/Blindness Spouse: None Dependents (see instructions) (2) Social security number (3) Relationship to you (4) If qualifies for (see instructions): (1) First name Last name Child tax credit Credit for other dependents Gina Butler 123-45-6788 Child No Yes Willie Butler 123-45-6787 Child Yer 1 Wages, salaries, tips, etc. Attach Form(s) W-2 160,000 2a 2b 1,982 3a 3b 4,200 4a b 4b #c 4d Sb b Taxable interest. 2a Tax-exempt interest .. Attach Sch. Bir 900 required Standard Deduction for b Ordinary dividends. Single or Married filing 3a Qualified dividends Attach Sch. Bir separately. $12,200 4,200 required Married filing jointly or Taxable amount Qualifying widow(er). $24,400 - IRA distributions.. Head of household, $18,350 . If you checked any box under Taxable amount Pensions and annuities Standard Deduction, see Instructions Taxable amount sa Social security benefits Capital gain or (less). Attach Schedule if required. If not required, check here Other income from Schedule 1, line 9. Add lines 1, 2, 3, 4, 456, 6, and 7a. This is your total income Adjustments to income from Schedule 1, line 22. Subtract lines from line 7. This is your adjusted gross income Standard deduction or itemized deductions (from Schedule A) 6 7a 7,000 7b 173,182 Ba Bb 173,182 10 Qualified business income deduction. Attach Form 8995 or 10 Form 8995-A. https://v2.cengagenow.com/imtakeAssignmentlakeAssigmentMain doinvokerStake AssignmentSessionLocatore&inprogress-false 2/10 10/3/21, 3:43 PM 110 XI. X CengageNoW2 Online teaching and learning resource from Cengage Learning 11a Add lines and 10. Taxable income. Subtract line 1la from line Sb. If zero or less, enter -... BAA For Disclosure, Privacy Act, and Paperwork Reduction Act Notice, see separate Instructions, Form 1040 (2019) Form 1040 (2019) Daniel 6. and Freida Butler 111-11-1112 Page 2 12a Tax (see Inst.) Check it any from Form(s): 108814 20 4972 30 115 12a 24,155 Qualified Dividends and Capital Gain Tax Worksheet-Line Keep for Your 12a Records Before you See the earlier instructions for line 122 to see if you can use this worksheet to figure your tax. begin: Before completing this worksheet, complete Form 1040 through line 11b. If you do not have to file Schedule and you received capital gain distributions, be sure you checked the box on Form 1040 or 1040-SR, line 6. 1. Enter the amount from Form 1040 or 1040-SR, line 116. However, you are filling Form 2555 or 2595-ez (relating to foreign eared income), enter the amount from line 3 of the Foreign Earned Income Tax Worksheet (Taxable income) 2. Enter the amount from Form 1040, line 32 2. __ 1. 0 3. Are you filing Schedule D? Enter the smaller of line 15 or 16 of Schedule D. Feltherine 15 or line 16 is blank or a Yes loss, enter-O- No Enter the amount from Form 1040 or 1040-SR, line 6. 4. Add lines 2 and 3 5. If filing Form 4952 (used to figure investment interest expense deduction), enter any amount from line 4g of that form. Otherwise, enter-O-. 6. Subtract lines from line 4. If zero or less, enter- los 7. 7. Subtractine 6 from line 1. If zero or less, enter- 8. Enter: $39,375 if single or married filing separately $78,750 if married fling jointly or qualifying widow(er), los logo 8. $52,750 if head of household 9. Enter the smaller of line 1 or line 3 9. X 13://v2.cengagenow.com/intake AssignmentlakeAssignmentMain.doFinvoker-Stake AssignmentSessionLocator=&inprogress=false 7/10 8/21, 3:43 PM 10. Enter the smaller of line 7 or line CengageNOW 2 Online teaching and learning resource from Cengage Learning 10. XO 11. 11. Subtract line 10 from line 9. This amount is taxed at 0% 12. Enter the smaller of line 1 or line 6 12 13. Enter the amount from line 11. 0 0 0 13. 14. Subtract line 13 from line 12 14. 15. Enter: $434,550 single, $244,425 if married filling separately. 15. 5488,850 if married filing jointly or qualifying widow(er). 5461,700 head of household 16. Enter the smaller of line 1 or line 15 16. 17. Add lines 7 and 11. 17. 18. 18. Subtract line 17 from line 16. W zero or less, enter- 19. . Enter the smaller of line 14 or in 19. Tax Planning Dan plans to reduce his work schedule and work only half-time for Win 2020. He has been writing songs for several years and wants to devote more time to developing a career as a songwriter. Because of the uncertainty in the music business, however, he would like you to make all computations assuming that he will have no income from songwriting in 2020. To make up for the loss of income, Freida plans to Increase the amount of time she spends selling real estate. She estimates that she will be able to eam $90,000 in 2020. . Assume that all other income and expense items will be approadmately the same as they were in 2019 (including the prize winnings). Assume that wille will be enrolled in college as a full-time student for the summer and fall semesters. No changes regarding Gina and Sam The $3,100 commission received on January 10, 2020, is included in the $90,000 income to be earned by Freida in 2020. The 22% 2019 marginal tax rate remains the same in 2020. Assume a payroll tax rate for FICA and Medicare of 7.65% and the Kentucky state income rate of 4% Assume Interest income, dividend income, rize income and the standard deduction will be the same for 2020. Complete the following letter regarding whether the Butlers will have more or less disposable income (after Federal income tax) in 2020. Maloney, Young, Nelen, a Perselin, CPAS 5191 Natorp Boulevard Mason, OH 45040 October 29, 2019 Dan and Freida Butler 625 Oak Street Corbin, KY 40701 Dear Dan and Freida You asked me to estimate your after-tax income under the assumption that Dan will work only halftime next year. The $ x reduction in Dan's pay will be partially offset by as X estimated increase in the amount Freide will earn. This net X reduction in salary and wages will also result in a decrease in your Kentucky income tax, Social Security tax, and Medicare tax. The net reduction in your after-tax cash flow will be approximately The calculations are presented below: Taxable Income Cash Flow ps:/V2.Cengagenow.com/intake Assignmentlake AssignmentMain do invoker=&take AssignmentSessionLocator=&inprogress=false 9/10 03/21, 3:43 PM CengageNOW 2 Online teaching and learning resource from Cengage Learning Decrease in salary and other earned income is X Decrease in Social Security and Medicare tax Decrease in Kentucky income tax XOXO X Decrease in Federal taxable income Decrease in Federal income tax Losley After-tax decrease in cash flow If you have any further questions, please call me. Sincerely, John Jones, CPA 2019 Tax Rate Schedules Use the 2019 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 amount listed in the tables.) 2019 Tax Rate Schedules Single-Schedule Head of household-Schedule z If taxable of the If taxable of the income is: But not amount income is: But not amount Over- over- The tax is: over- Over- over- The tax is: over $ 0 $ 9,700 ...... 10% $0 $0 $ 13,850 . . . . . . 10% $0 9,700 39,475 $ 970.00 + 12% 9,700 13,850 52,850 $ 1,385.00 + 12% 13,850 39,475 84,200 4,543.00 + 22% 39,475 52,850 84,200 6,065.00 + 22% 52,850 84,200 160,725 14,382.50 + 24% 84,200 84,200 160,700 12,962.00 + 24% 84,200 160,725 204,100 32,748.50 + 32% 160,725 160,700 204,100 31,322.00 + 32% 160,700 204,100 510,300 46,628.50 + 35% 204,100 204,100 510,300 45,210.00 + 35% 204,100 510,300 153,798.50 + 37% 510,300 510,300 152,380.00 + 37% 510,300 Married filing jointly or Qualifying widow(er)-Schedule Y-1 Married filing separately-Schedule Y-2 If taxable But not The tax is: of the If taxable But not The tax is: of the income is: over- amount income is: over- amount Over- over- Over- over- tps://v2.cengagenow.com/ilm/takeAssignment/takeAssignmentMain.do?invoker=&takeAssignmentSessionLocator=&inprogress=false 9/10 0/3/21, 1:17 PM ...... 10% $o $0 19,400 78,950 168,400 321,450 408,200 612,350 $ 19,400 78,950 168,400 321,450 408,200 612,350 CengageNOWV2 Online teaching and learning resource from Cengage Learning $0 $ 9,700 ...... 10% $0 $ 1,940.00 + 12% 19,400 9,700 39,475 $ 970.00 + 12% 9,700 9,086.00 + 22% 78,950 39,475 84,200 4,543.00 + 22% 39,475 28,765.00 + 24% 168,400 84,200 160,725 14,382.50 + 24% 84,200 65,497.00 + 32% 321,450 160,725 204,100 32,748.50 + 32% 160,725 93,257.00 + 35% 408,200 204,100 306,175 46,628.50 + 35% 204,100 164,709.50 + 37% 612,350 306,175 82,354.75 + 37% 306,175 625 Oak Street Check here if you, or your spouse if filing jointly, want $3 to go to City, town or post office, state, and ZIP code. If you have a foreign this fund. Checking a box below will not change your tax or refund. address, also complete spaces below (see instructions) None Corbin, KY 40701 Foreign country name Foreign Foreign of more than four dependents, see instructions and here province/statcounty postal code Standard Deduction Someone can claim: None You: None Age/Blindness Spouse: None Dependents (see instructions) (2) Social security number (3) Relationship to you (4) If qualifies for (see instructions): (1) First name Last name Child tax credit Credit for other dependents Gina Butler 123-45-6788 Child No Yes Willie Butler 123-45-6787 Child Yer 1 Wages, salaries, tips, etc. Attach Form(s) W-2 160,000 2a 2b 1,982 3a 3b 4,200 4a b 4b #c 4d Sb b Taxable interest. 2a Tax-exempt interest .. Attach Sch. Bir 900 required Standard Deduction for b Ordinary dividends. Single or Married filing 3a Qualified dividends Attach Sch. Bir separately. $12,200 4,200 required Married filing jointly or Taxable amount Qualifying widow(er). $24,400 - IRA distributions.. Head of household, $18,350 . If you checked any box under Taxable amount Pensions and annuities Standard Deduction, see Instructions Taxable amount sa Social security benefits Capital gain or (less). Attach Schedule if required. If not required, check here Other income from Schedule 1, line 9. Add lines 1, 2, 3, 4, 456, 6, and 7a. This is your total income Adjustments to income from Schedule 1, line 22. Subtract lines from line 7. This is your adjusted gross income Standard deduction or itemized deductions (from Schedule A) 6 7a 7,000 7b 173,182 Ba Bb 173,182 10 Qualified business income deduction. Attach Form 8995 or 10 Form 8995-A. https://v2.cengagenow.com/imtakeAssignmentlakeAssigmentMain doinvokerStake AssignmentSessionLocatore&inprogress-false 2/10 10/3/21, 3:43 PM 110 XI. X CengageNoW2 Online teaching and learning resource from Cengage Learning 11a Add lines and 10. Taxable income. Subtract line 1la from line Sb. If zero or less, enter -... BAA For Disclosure, Privacy Act, and Paperwork Reduction Act Notice, see separate Instructions, Form 1040 (2019) Form 1040 (2019) Daniel 6. and Freida Butler 111-11-1112 Page 2 12a Tax (see Inst.) Check it any from Form(s): 108814 20 4972 30 115 12a 24,155 Qualified Dividends and Capital Gain Tax Worksheet-Line Keep for Your 12a Records Before you See the earlier instructions for line 122 to see if you can use this worksheet to figure your tax. begin: Before completing this worksheet, complete Form 1040 through line 11b. If you do not have to file Schedule and you received capital gain distributions, be sure you checked the box on Form 1040 or 1040-SR, line 6. 1. Enter the amount from Form 1040 or 1040-SR, line 116. However, you are filling Form 2555 or 2595-ez (relating to foreign eared income), enter the amount from line 3 of the Foreign Earned Income Tax Worksheet (Taxable income) 2. Enter the amount from Form 1040, line 32 2. __ 1. 0 3. Are you filing Schedule D? Enter the smaller of line 15 or 16 of Schedule D. Feltherine 15 or line 16 is blank or a Yes loss, enter-O- No Enter the amount from Form 1040 or 1040-SR, line 6. 4. Add lines 2 and 3 5. If filing Form 4952 (used to figure investment interest expense deduction), enter any amount from line 4g of that form. Otherwise, enter-O-. 6. Subtract lines from line 4. If zero or less, enter- los 7. 7. Subtractine 6 from line 1. If zero or less, enter- 8. Enter: $39,375 if single or married filing separately $78,750 if married fling jointly or qualifying widow(er), los logo 8. $52,750 if head of household 9. Enter the smaller of line 1 or line 3 9. X 13://v2.cengagenow.com/intake AssignmentlakeAssignmentMain.doFinvoker-Stake AssignmentSessionLocator=&inprogress=false 7/10 8/21, 3:43 PM 10. Enter the smaller of line 7 or line CengageNOW 2 Online teaching and learning resource from Cengage Learning 10. XO 11. 11. Subtract line 10 from line 9. This amount is taxed at 0% 12. Enter the smaller of line 1 or line 6 12 13. Enter the amount from line 11. 0 0 0 13. 14. Subtract line 13 from line 12 14. 15. Enter: $434,550 single, $244,425 if married filling separately. 15. 5488,850 if married filing jointly or qualifying widow(er). 5461,700 head of household 16. Enter the smaller of line 1 or line 15 16. 17. Add lines 7 and 11. 17. 18. 18. Subtract line 17 from line 16. W zero or less, enter- 19. . Enter the smaller of line 14 or in 19. Tax Planning Dan plans to reduce his work schedule and work only half-time for Win 2020. He has been writing songs for several years and wants to devote more time to developing a career as a songwriter. Because of the uncertainty in the music business, however, he would like you to make all computations assuming that he will have no income from songwriting in 2020. To make up for the loss of income, Freida plans to Increase the amount of time she spends selling real estate. She estimates that she will be able to eam $90,000 in 2020. . Assume that all other income and expense items will be approadmately the same as they were in 2019 (including the prize winnings). Assume that wille will be enrolled in college as a full-time student for the summer and fall semesters. No changes regarding Gina and Sam The $3,100 commission received on January 10, 2020, is included in the $90,000 income to be earned by Freida in 2020. The 22% 2019 marginal tax rate remains the same in 2020. Assume a payroll tax rate for FICA and Medicare of 7.65% and the Kentucky state income rate of 4% Assume Interest income, dividend income, rize income and the standard deduction will be the same for 2020. Complete the following letter regarding whether the Butlers will have more or less disposable income (after Federal income tax) in 2020. Maloney, Young, Nelen, a Perselin, CPAS 5191 Natorp Boulevard Mason, OH 45040 October 29, 2019 Dan and Freida Butler 625 Oak Street Corbin, KY 40701 Dear Dan and Freida You asked me to estimate your after-tax income under the assumption that Dan will work only halftime next year. The $ x reduction in Dan's pay will be partially offset by as X estimated increase in the amount Freide will earn. This net X reduction in salary and wages will also result in a decrease in your Kentucky income tax, Social Security tax, and Medicare tax. The net reduction in your after-tax cash flow will be approximately The calculations are presented below: Taxable Income Cash Flow ps:/V2.Cengagenow.com/intake Assignmentlake AssignmentMain do invoker=&take AssignmentSessionLocator=&inprogress=false 9/10 03/21, 3:43 PM CengageNOW 2 Online teaching and learning resource from Cengage Learning Decrease in salary and other earned income is X Decrease in Social Security and Medicare tax Decrease in Kentucky income tax XOXO X Decrease in Federal taxable income Decrease in Federal income tax Losley After-tax decrease in cash flow If you have any further questions, please call me. Sincerely, John Jones, CPA 2019 Tax Rate Schedules Use the 2019 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 amount listed in the tables.) 2019 Tax Rate Schedules Single-Schedule Head of household-Schedule z If taxable of the If taxable of the income is: But not amount income is: But not amount Over- over- The tax is: over- Over- over- The tax is: over $ 0 $ 9,700 ...... 10% $0 $0 $ 13,850 . . . . . . 10% $0 9,700 39,475 $ 970.00 + 12% 9,700 13,850 52,850 $ 1,385.00 + 12% 13,850 39,475 84,200 4,543.00 + 22% 39,475 52,850 84,200 6,065.00 + 22% 52,850 84,200 160,725 14,382.50 + 24% 84,200 84,200 160,700 12,962.00 + 24% 84,200 160,725 204,100 32,748.50 + 32% 160,725 160,700 204,100 31,322.00 + 32% 160,700 204,100 510,300 46,628.50 + 35% 204,100 204,100 510,300 45,210.00 + 35% 204,100 510,300 153,798.50 + 37% 510,300 510,300 152,380.00 + 37% 510,300 Married filing jointly or Qualifying widow(er)-Schedule Y-1 Married filing separately-Schedule Y-2 If taxable But not The tax is: of the If taxable But not The tax is: of the income is: over- amount income is: over- amount Over- over- Over- over- tps://v2.cengagenow.com/ilm/takeAssignment/takeAssignmentMain.do?invoker=&takeAssignmentSessionLocator=&inprogress=false 9/10 0/3/21, 1:17 PM ...... 10% $o $0 19,400 78,950 168,400 321,450 408,200 612,350 $ 19,400 78,950 168,400 321,450 408,200 612,350 CengageNOWV2 Online teaching and learning resource from Cengage Learning $0 $ 9,700 ...... 10% $0 $ 1,940.00 + 12% 19,400 9,700 39,475 $ 970.00 + 12% 9,700 9,086.00 + 22% 78,950 39,475 84,200 4,543.00 + 22% 39,475 28,765.00 + 24% 168,400 84,200 160,725 14,382.50 + 24% 84,200 65,497.00 + 32% 321,450 160,725 204,100 32,748.50 + 32% 160,725 93,257.00 + 35% 408,200 204,100 306,175 46,628.50 + 35% 204,100 164,709.50 + 37% 612,350 306,175 82,354.75 + 37% 306,175
