Primary Taxpayer Information:
Name - Emma Butler
SSN - 303-XX-XXXX (use random numbers in place of XX-XXXX)
Date of Birth - 05/20/1983
Address - 31 Roosevelt Road, Glenview, IL 60025
Telephone - 847-632-7394
Occupation - Caterer
Spouse - Patrick Butler (married but separated since May 2021 and does not want to file jointly)
Spouse SSN - 304-XX-XXXX
Neither taxpayer is blind or deceased.
2021 Case Facts:
1. Emma does not have a W-2.
2. The family received $4,200 for the third Economic Impact Payment.
3. Emma is not eligible for the self-employed health insurance deduction, but she feels she is eligible for a tax credit related to the Marketplace health insurance premiums she paid. The
Health Insurance Marketplace sent Emma and the IRS a Form 1095-A (information below).
4. Emma attended Oakton Community College (ID# 33-XXXXXXX) part time in a certificate program during the year. She is no longer eligible to claim the American Opportunity Credit. The tuition statement sent to taxpayers and the IRS, Form 1098-T, shows qualified tuition payments of $5,500 on line 1.
5. Emma owns a cash-basis catering business (income and expense information below).
6. Emma also had income from selling stocks in her name, not owned jointly (information below).
7. Emma earned around the same amount as last year, and she did not lose her job or become unemployed. This coronavirus relief information could be relevant for tax purposes.
8. Between the months of July and December of 2021, Emma received six payments of $250 in advance for the Child Tax Credit (reported to her on Letter 6419).
9. Emma and Patrick have one child, Myles (SSN: 305-XX-XXXX; 11/20/2011). Myles continues to live with Emma. Emma and Patrick agree that Emma will claim Myles as a dependent.

 

Income/Expenses from Emma's Catering:
Gross receipts: $43,726
Business Expenses:
Advertising: $600
Insurance: $1,100
Professional Legal services: $500
Professional Accounting services: $750
Transportation-related rental expenses: $1,200
Supplies: $3,200
Asset 1 - Used Stove; placed in service on 03/01/2021; cost = $2,750; percentage of business use = 100%; Emma would like to take the Special Depreciation Allowance (Bonus Depreciation), if possible. Stock sales reported on Form 1099-B:
Description Date Acquired Date Sold Selling Price Cost or Basis BAP (30 shares) 05/01/2010 11/01/2021 $40 per share $15 per share
AAA (5 shares) 01/01/2014 10/31/2021 $25 per share $17 per share
CPA (200 shares) 12/01/2000 07/01/2021 $22 per share $45 per share
Form 1095-A Information:
Part I Recipient Information: Line 2 shows a marketplace-assigned policy number of 18759_2021, and lines 10 and 11 show a policy start date of 10/1/2021 and end date of 12/31/2021.
Part II Covered Individuals: Lines 16 and 17 show Emma and Myles as the covered individuals.
Part III Coverage Information: Lines 30, 31, and 32 show amounts of $300 for each month of October, November, and December in both columns A (monthly enrollment premiums) and B (monthly second lowest cost silver plan (SLCSP) premium). There were no monthly advance payments of the Premium Tax Credit in column C.

Questions:
1. What is Emma's filing status?
2. What is Emma's total income from stock sales during the year? What recognition limitations exist when taxpayers show a net capital loss from selling stock?
3. Does Emma have any deductions FOR AGI? If so, what and how much are they?
4. Why is Emma's qualified business income (QBI) deduction limited to less than 20% of QBI? Show the limitation calculation.
5. What are Emma's marginal (MTR) AND effective tax rates (ETR)?
6. Specifically, how do Emma's health insurance premiums impact her tax return?
7. Which non-refundable tax credits is Emma able to use? How much are they?
8. Is the 2021 Child Tax Credit non-refundable? Specifically, how do the 2021 Child Tax Credit rules impact Emma's credit?
9. How much is Emma able to claim as the earned income credit (EIC)? Why is Emma not able to claim the maximum amount for the EIC?