Prepare the 2019 Form 1040 for Bill & June Spicer
Facts
William Spicer (123-45-5789) and June Spicer (937-65-4321) have two dependent children, Sophie (236-52-6587) age 9 and Carl (236-52-6588) age 7, both of whom live at home. William operates a gourmet market in Raleigh, NC Bills Market, as an accrual-basis sole proprietorship.
The information on gross sales, expenses, and property transactions is shown below. William receives no salary and therefore, there is no related FICA tax for him.
The Market sold a unique piece of equipment for $13,000. It had originally cost $5,000
when purchased on March 5, 2015; it had an adjusted basis of $3,000 when sold on August
15, 2019. The Market also sold a display case for $1,000 on December 12, 2019, that had cost
$12,000 when purchased on June 6, 2013; it had an adjusted basis of $4,000 when sold. The
gains or losses on these asset sales are the same for tax and financial accounting. The
business complies with all Form 1099 requirements.
William is also a 10 percent shareholder in Imagineers Corporation, an S corporation, but
takes no active role in the business. He received a Schedule K-1 from this S corporation
reporting $18,000 in ordinary business income.
June is a general partner in The Bridal Shop Partnership. She worked 3 days a week at the shop and received a Schedule K-1 reporting a $12,000 guaranteed payment and $8,000 in ordinary business income. June paid $3,800 for after-school and summer child care while she worked.
2019 financial results for Bills Market is as follows:
Gross sales ($1,300,000 from credit card sales) 3,700,000
Merchandise purchases 2,480,000
Expenses:
Advertising 40,000
Charitable contributions 20,000
Cleaning/maintenance 12,000
Depreciation (MACRS pre-2019 purchases) 3,000
Section 179 expense (2/1/19 display case) 5,000
Payroll taxes 18,000
Health insurance 15,000*
Insurance (excludes health) 18,000
Interest expense 1,000
Licenses/fees 4,000
Meals/entertainment 10,000
Office expenses 14,000
Rent 120,000
Salary/wages 210,000
Travel 8,000
Utilities 32,000
*Includes $3,000 for health insurance for William and his family.
The following information pertains to the completion of the Spicers personal tax return:
Interest income $ 500
Dividend income (all qualified) 1,300
Unreimbursed doctors bills 8,
Unreimbursed hospital bills 9,000
Dental bills 2,000
Mortgage interest 14,000
Real estate taxes 7,800
Contributions to their church 1,500
Investment advisor fees $3,659
The Spicers sold 10,000 shares of ABC stock on February 2, 2019 for $4,000. They had
purchased the stock on August 1, 2010 for $18,000. During 2019, the Spicers paid $300 with
their 2018 North Carolina state income tax return and made $4,600 in estimated payments for
2019 to NC. This amount exceeds their alternate state sales tax deduction. June is a volunteer at the
childrens school two days a week tutoring at-risk students. Her total mileage for her trips to
and from the school was 1,200 miles. She also had unreimbursed out-of-pocket expenses for
teaching materials for these students of $232. Additionally, the Spicers contribute $3,000 each to regular IRAs.
The Spicers made 2019 Federal quarterly estimated tax payments of $17,500 each quarter. All payments were made when due. Any refund that the Spicers have for 2019 is to be applied to their 2020 estimated taxes.
Form 1040 and Related Forms and Schedules required:
Form 1040: U.S. Individual Income Tax Return & Schedules 1-3
Schedule A: Itemized Deductions
Schedule C: Profit or Loss from Business (Sole Proprietorship)
Schedule D: Capital Gains and Losses
Schedule E: Supplemental Income and Loss
Schedule SE: Self-Employment Tax (2)
Form 2441: Child and Dependent Care Expenses
Form 4562: Depreciation and Amortization
Form 4797: Sales of Business Property
Form 8582: Passive Activity Loss Limitations
Form 8949: Sales and Other Disposition of Capital Assets
The Spicers will prepare only one joint tax return, their Form 1040, along with all the required
schedules and forms including the Schedule C where the income and expenses for Bills Market are reported. A Form 4797 is completed for the business property dispositions; the
sale of the stock is entered on the Form 8949; the net gain on the equipment disposition and
the gain or loss on the stock are both included on the Spicers Schedule D. The depreciation
recapture, if any, is also entered on Form 4797 and is transferred directly to the Spicers Form 1040.
Two other items are not included on the Schedule Cthe health insurance for William and
his family (which is deducted on page 1 of the Form 1040 as a deduction for AGI) and the
charitable contribution (which is included with the Spicers personal charitable deductions on
their Schedule A). June is allowed to deduct 14 cents per mile for the 1,200 miles driven
($168) for her volunteer work along with her out-of-pocket charitable expenses of $232.
Their other itemized deductions are $23,800 for mortgage interest and $680 for Personal Property taxes. Their dividend income is taxed at the Capital Gain rate, while the rest of their income is taxed at the regular rates.
(99) Department of the Treasury Internal Revenue Service 2019 OMB No. 1545-0074 IRS Use Only- Do not write or staple in this space. Filing Status Single Married filing jointly Married filing separately (MFS) Head of household (HOH) Qualifying widow(er) (QW) Check only one box. If you checked the MFS box, enter the name of spouse. If you checked the HOH or QW box, enter the child's name if the qualifying person is a child but not your dependent Your first name and middle initial Last name Your social security number If joint return, spouse's first name and middle initial Last name Spouse's social security number Home address (number and street). If you have a P.O. box, see instructions. Apt. no. Presidential Election Campaign Check here if you, or your spouse if filing jointly, want $3 to go to this fund. City, town or post office, state, and ZIP code. If you have a foreign address, also complete spaces below (see instructions). Checking a box below will not change your tax or refund. You Spouse Foreign country name Foreign province/state/county Foreign postal code If more than four dependents, see instructions and here Standard Someone can claim: You as a dependent Your spouse as a dependent Deduction Spouse itemizes on a separate return or you were a dual-status alien Age/Blindness You: Were born before January 2, 1955 Are blind Spouse: Was born before January 2, 1955 is blind 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 1 2a 2a 2b 3a 3b Standard 4a 4a 4b 4c 4d 5a 5a 6 6 7a 1 Wages, salaries, tips, etc. Attach Form(s) W-2 Tax-exempt interest b Taxable interest. Attach Sch. B if required Qualified dividends b Ordinary dividends. Attach Sch. B if required Deduction for IRA distributions. b Taxable amount Single or Married filing separately, Pensions and annuities d Taxable amount $12,200 Social security benefits b Taxable amount Married filing jointly or Qualifying Capital gain or loss). Attach Schedule Dif required. If not required, check here widower), Other income from Schedule 1, line 9 $24,400 Head of b Add lines 1, 26, 35, 46, 4d, 5b, 6, and 7a. This is your total income household 8a Adjustments to income from Schedule 1, line 22 $18,350 If you checked b Subtract line 8a from line 7b. This is your adjusted gross income any box under Standard 9 Standard deduction or itemized deductions (from Schedule A) Deduction, 10 10 see instructions. Qualified business income deduction. Attach Form 8995 or Form 8995-A 11a Add lines 9 and 10 b Taxable income. Subtract line 11a from line 8b. If zero or less, enter-O- For Disclosure, Privacy Act, and Paperwork Reduction Act Notice, see separate instructions. 7b 8b 9 11a 11b Cat. No. 11320B Form 1040 (2019) 8814 2 12a 14 15 16 17 18 a 18b e 20 21a Form 1040 (2019) Page 12a Tax (see inst.) Check if any from Form(s): 1 4972 3 b Add Schedule 2, line 3, and line 12a and enter the total 12b 13a Child tax credit or credit for other dependents. 13a b Add Schedule 3, line 7, and line 13a and enter the total 13b 14 Subtract line 13b from line 12b. If zero or less, enter-O- 15 Other taxes, including self-employment tax, from Schedule 2, line 10 16 Add lines 14 and 15. This is your total tax . 17 Federal income tax withheld from Forms W-2 and 1099 If you have a Other payments and refundable credits: qualifying child, Earned income credit (EIC). 18a attach Sch. EIC. If you have b Additional child tax credit. Attach Schedule 8812 nontaxable American opportunity credit from Form 8863, line 8 18c combat pay, see instructions. d Schedule 3, line 14 18d Add lines 18a through 18d. These are your total other payments and refundable credits 18e 19 Add lines 17 and 18e. These are your total payments 19 Refund If line 19 is more than line 16, subtract line 16 from line 19. This is the amount you overpaid 20 21a Amount of line 20 you want refunded to you. If Form 8888 is attached, check here Direct deposit? Routing number c Type: Checking Savings See instructions. Account number 22 Amount of line 20 you want applied to your 2020 estimated tax 22 Amount 23 Amount you owe. Subtract line 19 from line 16. For details on how to pay, see instructions 23 You Owe 24 Estimated tax penalty (see instructions) 24 Third Party Do you want to allow another person (other than your paid preparer) to discuss this return with the IRS? See instructions. Yes. Complete below. Designee No (Other than Designee's Phone Personal identification paid preparer) name number (PIN) Sign 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. Here Your signature Date Your occupation If the IRS sent you an Identity Protection PIN, enter it here Joint return? (see inst.) See instructions. Spouse's signature. If a joint return, both must sign. Date Spouse's occupation If the IRS sent your spouse an Keep a copy for Identity Protection PIN, enter it here your records. (see inst.) Phone no. Email address Preparer's name Preparer's signature Date PTIN Check it: Paid 3rd Party Designee Preparer Firm's name Phone no. Self-employed Use Only Firm's address Firm's EIN Go to www.irs.gov/Form1040 for instructions and the latest information. Form 1040 (2019) no. (99) Department of the Treasury Internal Revenue Service 2019 OMB No. 1545-0074 IRS Use Only- Do not write or staple in this space. Filing Status Single Married filing jointly Married filing separately (MFS) Head of household (HOH) Qualifying widow(er) (QW) Check only one box. If you checked the MFS box, enter the name of spouse. If you checked the HOH or QW box, enter the child's name if the qualifying person is a child but not your dependent Your first name and middle initial Last name Your social security number If joint return, spouse's first name and middle initial Last name Spouse's social security number Home address (number and street). If you have a P.O. box, see instructions. Apt. no. Presidential Election Campaign Check here if you, or your spouse if filing jointly, want $3 to go to this fund. City, town or post office, state, and ZIP code. If you have a foreign address, also complete spaces below (see instructions). Checking a box below will not change your tax or refund. You Spouse Foreign country name Foreign province/state/county Foreign postal code If more than four dependents, see instructions and here Standard Someone can claim: You as a dependent Your spouse as a dependent Deduction Spouse itemizes on a separate return or you were a dual-status alien Age/Blindness You: Were born before January 2, 1955 Are blind Spouse: Was born before January 2, 1955 is blind 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 1 2a 2a 2b 3a 3b Standard 4a 4a 4b 4c 4d 5a 5a 6 6 7a 1 Wages, salaries, tips, etc. Attach Form(s) W-2 Tax-exempt interest b Taxable interest. Attach Sch. B if required Qualified dividends b Ordinary dividends. Attach Sch. B if required Deduction for IRA distributions. b Taxable amount Single or Married filing separately, Pensions and annuities d Taxable amount $12,200 Social security benefits b Taxable amount Married filing jointly or Qualifying Capital gain or loss). Attach Schedule Dif required. If not required, check here widower), Other income from Schedule 1, line 9 $24,400 Head of b Add lines 1, 26, 35, 46, 4d, 5b, 6, and 7a. This is your total income household 8a Adjustments to income from Schedule 1, line 22 $18,350 If you checked b Subtract line 8a from line 7b. This is your adjusted gross income any box under Standard 9 Standard deduction or itemized deductions (from Schedule A) Deduction, 10 10 see instructions. Qualified business income deduction. Attach Form 8995 or Form 8995-A 11a Add lines 9 and 10 b Taxable income. Subtract line 11a from line 8b. If zero or less, enter-O- For Disclosure, Privacy Act, and Paperwork Reduction Act Notice, see separate instructions. 7b 8b 9 11a 11b Cat. No. 11320B Form 1040 (2019) 8814 2 12a 14 15 16 17 18 a 18b e 20 21a Form 1040 (2019) Page 12a Tax (see inst.) Check if any from Form(s): 1 4972 3 b Add Schedule 2, line 3, and line 12a and enter the total 12b 13a Child tax credit or credit for other dependents. 13a b Add Schedule 3, line 7, and line 13a and enter the total 13b 14 Subtract line 13b from line 12b. If zero or less, enter-O- 15 Other taxes, including self-employment tax, from Schedule 2, line 10 16 Add lines 14 and 15. This is your total tax . 17 Federal income tax withheld from Forms W-2 and 1099 If you have a Other payments and refundable credits: qualifying child, Earned income credit (EIC). 18a attach Sch. EIC. If you have b Additional child tax credit. Attach Schedule 8812 nontaxable American opportunity credit from Form 8863, line 8 18c combat pay, see instructions. d Schedule 3, line 14 18d Add lines 18a through 18d. These are your total other payments and refundable credits 18e 19 Add lines 17 and 18e. These are your total payments 19 Refund If line 19 is more than line 16, subtract line 16 from line 19. This is the amount you overpaid 20 21a Amount of line 20 you want refunded to you. If Form 8888 is attached, check here Direct deposit? Routing number c Type: Checking Savings See instructions. Account number 22 Amount of line 20 you want applied to your 2020 estimated tax 22 Amount 23 Amount you owe. Subtract line 19 from line 16. For details on how to pay, see instructions 23 You Owe 24 Estimated tax penalty (see instructions) 24 Third Party Do you want to allow another person (other than your paid preparer) to discuss this return with the IRS? See instructions. Yes. Complete below. Designee No (Other than Designee's Phone Personal identification paid preparer) name number (PIN) Sign 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. Here Your signature Date Your occupation If the IRS sent you an Identity Protection PIN, enter it here Joint return? (see inst.) See instructions. Spouse's signature. If a joint return, both must sign. Date Spouse's occupation If the IRS sent your spouse an Keep a copy for Identity Protection PIN, enter it here your records. (see inst.) Phone no. Email address Preparer's name Preparer's signature Date PTIN Check it: Paid 3rd Party Designee Preparer Firm's name Phone no. Self-employed Use Only Firm's address Firm's EIN Go to www.irs.gov/Form1040 for instructions and the latest information. Form 1040 (2019) no
