Question

Chapter 8 Tax Return (covers material from chapters 4, 5, 6, and 8)

In 2017, Caitlyn Smith's husband Ben passed away.The next year she moved from Louisiana to Texas.Caitlyn has not remarried as of the end of 2019 and currently lives in Portland, TX with her three children (ages as of the end of the year): Elizabeth (23), Joshua (16), and Anthony (11).Caitlyn would like to determine her federal income tax under the filing status that is most advantageous for her.

Caitlyn reported the following information:

Caitlyn's social security number is 194-38-4528

Elizabeth's social security number is 842-48-5684

Joshua's social security number is 842-43-8495

Anthony's social security number is 842-65-8429

Caitlyn's mailing address is 23 Freedom Road Portland, Texas, 78374

Elizabeth is single and enrolled as a full-time graduate student at TAMUCC (EIN 33-9654387).TAMUCC's address is 6300 Ocean Dr., Corpus Christi, TX. 78412.She completed her bachelor's degree in 2017 and is in her fifth year of full-time higher education schooling.While at school, Elizabeth works part-time at TAMUCC to help with her living expenses earning $2,500.Caitlyn paid for Elizabeth's rent, books, tuition, food, clothes, medicine, and other support items which totaled over 12,600 of support for the year.TAMUCC provided Elizabeth with a Form 1098-T at year end.

Elizabeth's higher education expenses for her university studies were as follows:

Tuition$6,325

Books$2,550

In order to for Caitlyn to maintain a full-time job, she sends Anthony to a day care program after school five days a week paying $4,300 for his care.

The day care details are as follows:

Legacy Preschool

902 Moore Ave

Portland, TX

EIN:34-8324659

Caitlyn's W-2s for the year reported the following:

Employer

Gross Wages

Federal Income Tax Withholding

Workforce Commission

$49,835

$3,950

Portland Real Estate

$2,550

$275

Caitlyn's employers withheld all applicable and appropriate payroll taxes.

On January 1, 2018 (prior year), Caitlyn started a side hustle selling Rodan and Fields.She doesn't have to carry inventory because everything is shipped directly from Corporate, but she does maintain a website and sends samples to her customers and potential customers. She also hosts an event each year to launch new products.This business has allowed her to earn additional money in her spare time to help support her daughter in college.She uses the cash method of accounting and did not have any obligation to file a Form 1099 to any payee during the year.Caitlyn reported the following revenue and expenses for her business this year:

Gross Revenue$4,300

Sample supplies$250

New Product Launch Event$175

Web site hosting fee$330

Caitlyn sold a couple of stocks she had been holding in order to send her kids to visit their grandparents this past summer.Both stocks had their basis reported to the IRS:

Asset

Date Purchased

Date Sold

Purchase Price

Selling Price

Mohawk Industries stock

9/15/18

5/17/19

$3,150

$5,850

TXU Stock

4/4/18

5/17/19

$2,000

$1,850

Caitlyn also received the following amounts in 2019:

Life Insurance Payment-Mutual Life (Father's passing)$182,000

Cash gift from her mom $8,500

Interest income-First Bank of Portland$350

Interest income-GE Bond$3,700

Interest income-G-PISD Municipal Bond $4,850

Interest income-San Pat County Improvement District Bond$1,750

LA state income tax refund* $375

*Refund was from state tax she paid in 2018.Caitlyn deducted all her state taxes as itemized deductions, and received full tax benefit for the deductions, on her 2018 federal tax return.

Caitlyn made the following payments during 2019:

Dentist (unreimbursed by insurance)$1,650

Doctors (unreimbursed by insurance)$725

Prescriptions (unreimbursed by insurance)$170

Real property taxes on residence$6,700

State sales tax paid$1,530

Vehicle registration fee based upon age of vehicle$100

Mortgage interest on principal residence (Form 1098 received)$6,000

Interest on Mastercard credit card$2,900

Contribution to the American Cancer Society$625

Contribution to the United Way$1,100

Contribution to First Baptist Church Corpus Christi$3,850

Contribution to Baylor University$400

Caitlyn wants to contribute to the Presidential Election Campaign Fund.She would like to receive a refund (if any) of any tax she may have overpaid for the year.Her preferred method of receiving the refund is by check.

Instructions:

1.Complete the 2019 federal income tax return for Caitlyn Smith.If required information is missing, use reasonable assumptions to fill in the gaps.Schedules C (business income), SE (self-employment tax), and 8812 (child tax credits) and Forms 2441 (child and dependent care credits) and 8863 (education credits) may be helpful to you when completing the necessary calculations for these forms, but do not need to be submitted.In excel, document any calculations you used to fill in the following required forms and schedules:

a.1040

b.Schedule 1

c.Schedule D

d.Form 8949

e.Schedule 2

f.Schedule 3