Read the following letter and help Shady Slim with his tax situation. Please assume that his gross income is $178,480 (which consists only of salary) for purposes of this problem.
December 31, 2019
To the friendly student tax preparer:
Hi, its Shady Slim again. I just got back from my 55th birthday party, and Im told that you need some more information from me in order to complete my tax return. Im an open book! Ill tell you whatever I think you need to know.
Let me tell you a few more things about my life. As you may recall, I am divorced from my wife, Alice. I know that it's unusual, but I have custody of my son, Shady, Jr. The judge owed me a few favors and I really love the kid. He lives with me full-time and my wife gets him every other weekend. I pay the vast majority of my son's expenses. I think Alice should have to pay some child support, but she doesn't have to pay a dime. The judge didn't owe me that much, I guess.
I had to move this year after getting my job at Roca Cola. We moved on February 3 of this year, and I worked my job at Roca Cola for the rest of the year. I still live in the same state, but I moved 500 miles away from my old house. I hired a moving company to move our stuff at a cost of $2,480, and I drove Junior in my car. Junior and I got a hotel room along the way that cost us $65 (I love Super 8!).
Can you believe Im still paying off my student loans, even after 15 years? I paid a total of $21,240 in interest on my old student loans this year.
Remember when I told you about that guy that hit me with his car? I had a bunch of medical expenses that were not reimbursed by the lawsuit or by my insurance. I incurred a total of $21,800 in medical expenses, and I was only reimbursed for $11,900. Good thing I can write off medical expenses, right?
I contributed a lot of money to charity this year (and have receipt documentation for all contributions). Im such a nice guy! I gave $1,180 in cash to the March of Dimes. I contributed some of my old furniture to the church. It was some good stuff! I contributed a red velvet couch and my old recliner. The furniture is considered vintage and is worth $5,900 today (the appraiser surprised me!), even though I only paid $1,180 for it back in the day. When I contributed the furniture, the pastor said he didnt like the fabric and was going to sell the furniture to pay for some more pews in the church. Oh well, some people just have no taste, right? Roca Cola had a charity drive for the United Way this year and I contributed $198. Turns out, I dont even miss it, because Roca Cola takes it right off my paycheck every month . . . $33 a month starting in July. My pay stub verifies that I contributed the $198 to the United Way. Oh, one other bit of charity from me this year. An old buddy of mine was down on his luck. He lost his job and his house. I gave him $590 to help him out.
I paid a lot of money in interest this year. I paid a total of $1,130 in personal credit card interest. I also paid $18,900 in interest on my $590,000 home mortgage that helped me buy my dream home. I also paid $2,360 in real estate taxes for my new house.
A few other things I want to tell you about this year. Someone broke into my house and stole my kid's brand new bicycle and my set of golf clubs. The total loss from theft was $1,080. I paid $215 in union dues this year. I had to pay $1,200 for new suits for my job. Roca Cola requires its managers to wear suits every day on the job. I spent a total of $1,480 to pay for gas to commute to my job this year.
Oh, this is pretty cool. I've always wanted to be a firefighter. I spent $1,580 in tuition to go to the local firefighter's school. I did this because someone told me that I can deduct the tuition as an itemized deduction, so the money would be coming back to me.
That should be all the information you need right now. Please calculate my taxable income and complete pages 1 and 2 of Form 1040 (through taxable income, line 10) and Schedule A. You're still doing this for free, right?
Complete pages 1 and 2 of Form 1040 (through taxable income, line 10) and Schedule A.
Shady Slims address is 19010 N.W. 135th Street, Miami, FL 33054.
Social security numbers:
Shady Slim: 123-45-6789 Shady Slim,Jr: 222-22-2222
1040 PG 1 Schedule A 1040 PG 2 Page 1 of Form 1040. Use provided information and follow instructions on form Department of the Treasury-Internal Revenue Service (99) 2018 Form 1040 U.S. Individual Income Tax Return IRS Use Only-Do not write or staple in this space OMB No. 1545-0074 OSingle OMarried filing separately OQualifying widow (er) Filing status OMarried filing jointly OHead of household Your social security number (Enter as xxx-xx-xo00x) Your first name and initial Last name You are blind Your Standard deduction: |Someone can claim you as a dependent You were born before January 2, 1954 If joint return, spouse's first name and initial Last name Spouse's social security number (Enter as xxx-xx-xXxx) Spouse standard deduction: Someone can claim your spouse as a dependent ||Spouse was born before January 2, 1954 Full-year health care coverage or exempt (see inst.) Spouse is blind Spouse itemizes on a separate return or you were dual-status alien Presidential Election Campaign Home address (number and street). If you have a PO. box, see instructions. Apt. no. Check here if you want $3 to go to this fund (see inst) City, town or post office, state, and ZIP code.. If you have a foreign address, attach Schedule 6 You Spouse If more than four dependents, see inst and here Dependents (see instructions): (2) Dependent's social security number (Enter as --) if child under age 17 qualifies for (see inst.): (4) (3) Dependent's relationship to you Credit for other (1) First name Last name Child tax credit. dependents 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 Here correct, and complete. Declaration of preparer (other than taxpayer) is based on all information of which preparer has any knowledge Your signature Your occupation Date If the IRS sent you an Identity Protection PIN, enter it here (see inst.) Joint return? See instructions. Keep a copy for your records Spouse's occupation Spouse's signature. If a joint return, both must sign Date If the IRS sent you an Identity Protection PIN, enter it here (see inst.) Check if Preparer's signature Firm's EIN Preparer's name PTIN Paid Preparer Use Only 3rd Party Designee Firm's name Phone no Self-employed Firm's address For Disclosure, Privacy Act, and Paperwork Reduction Act Notice, see separate instructions Form 1040 (2018) Cat. No. 11320B THIS FORM ISA SIMULATION OF AN OFFICIAL U.S. TAX FORM. IT IS NOT THE OFFICIAL FORM ITSELF. DO NOT USE THIS FORM FOR TAX FILINGS OR FOR ANY PURPOSE OTHER THAN EDUCATIONAL. 2019 McGraw-Hill Education Form 1040 (2018) Page 2 1 Wages, salaries, tips, etc. Attach Form(s) W-2 1 b Taxable interest 2a Tax-exempt interest 2a 2b Attach Form(s) W-2 Also attach Form(s) W-2G and 1099-R if bOrdinary dividends 3a Qualified dividends 3b b Taxable amount 4a IRAS, pensions, and annuities 4a 4b tax was withheld. b Taxable amount 5a Social security benefits 8 Total income. Add lines 1 through 5. Add any amount from Schedule 1, line 22 5 5b 0 Standard deduction for- 7 Adjusted gross income. If you have no adjustments to income, enter the amount from line 8; otherwise, subtract Schedule 1 line 38, from line 6 7 Single or Married filing separately. $12,000 8 Standard deduction or itemized deductions (from Schedule A) 9 Qualified business income deduction (see instructions) 10 Taxable income. Subtract lines 8 and 9 from line 7. If zero or less, enter -0- 8 9 10 0 Married filing jointly or Qualifying widow(er) $24,000 11 (see inst.) check if any from: 1 Form(s) 8814 2. Form 4972 3. bAdd any amount from Schedule 2 and check here 11 12 a Child tax credit/credit for other dependents Head of household, $18,000 b Add any amount from Schedule 3 and check here 12 13 Subtract line 12 from line 11. If zero or less, enter -0- 13 14 Other taxes. Attach Schedule 4 14 If you checked any box 15 Total tax. Add lines 13 and 14 under Standard deduction, see instructions. 15 18 Federal income tax withheld from Forms W-2 and 1099 | 17 Refundable credits 16 a EIC (see inst.) b Sch. 8812 c Form 8883 d Add any amount from Schedule 5 17 18 Add lines 16 and 17. These are your total payments 18 Refund 19 If line 18 is more than line 15, subtract line 15 from line 18. This is the amount you overpaid 19 20a Amount of line 19 you want refunded to you. If Form 8888 is attached, check here 20a c Type: Checking b Routing number dAccount number 21 Amount of line 19 you want applied to your 2019 estimated tax 22 Amount you owe. Subtract line 18 from line 15. For details on how to pay, see instructions Savings Direct deposit? See instructions. 21 22 Amount You Owe 23 Estimated tax penalty (see instructions) 23 Go to www.irs.gov/Form1040 for instructions and the latest information Form 1040 (2018) THIS FORMIS A SIMULATION OF AN OFFICIAL US TAX FORM IT IS NOT THE OFFICIAL FORM ITSELF DO NOTUSE THIS FORM FOR Schedule A of Form 1040. Itemized Deductions SCHEDULE A OMB No. 1545-0074 (Form 1040) 2018 Go to www.irs.gov/ScheduleA for instructions and the latest information. Attach to Form 1040. Caution: If you are claiming a net qualified disaster loss on Form 4684, see the instructions for line 16. Department of the Treasury Attachment Sequence No. 07 Internal Revenue Service (99) Your social security number Name(s) shown on Form 1040 Medical and Dental Caution. Do not include expenses reimbursed or paid by others. Expenses Medical and dental expenses (see instructions) 1 Enter amount from Form 1040, line 7 3 Multiply line 2 by 10% (0.10) Subtract line 3 from line 1. If line 3 is more than line 1, enter -0 4 4 State and local taxes 5 Taxes You Paid State and local income taxes or general sales taxes. You may include a either income taxes or general sales taxes on line 5a, but not both. If you elect to include general sales taxes instead of income taxes, check this box 5a b State and local real estate taxes (see instructions) c State and local personal property taxes 5b 5c d Add lines 5a through 5c e Enter the smaller of line 5d and $10,000 (S5,000 if married filing separately) 5d 5e Other taxes. List type and amount Add lines 5e and 6 7 8 Home mortgage interest and points. If you didn't use all of your home Interest You Paid mortgage loan(s) to buy, build, or improve your home, see instructions and Caution: check this box a Home mortgage interest and points reported to you on Form 1098 8a b Home mortgage interest not reported to you on Form 1098. If paid to the Your mortgage interest deduction may be limited (see instructions). person from whom you bought the home, see instructionns and show that person's name, identifying no., and address 8b c Points not reported to you on Form 1098. See instructions for special rules 8c d Reserved 8d e Add lines 8a through 8c 8e Investment interest. Attach Form 4952 if required. (see instructions) 9 10 Add lines 8e and 9 10 Gifts by cash or check. If you made any gift of $250 or more, see instructions 11 Gifts to Charity 11 12 Other than by cash or check. If any gift of $250 or more, see instructions You must attach Form 8283 if over $500 12 If you made a gift and got a benefit for it, see instructions Carryover from prior year 13 13 14 Add lines 11 through 13 14 Casualty and Theft Losses 15 Casualty and theft loss(es) from a federally declared disaster (other than net qualified disaster losses). Attach Form 4684 and enter the amount from line 18 of that form. See instructions 15 16 Other-from list in instructions. List type and amount Other Itemized Deductions 16 17 Add the amounts in the far right column for lines 4 through 16. Also, enter this amount on Form 1040, line 8 17 Total Itemized 18 If you elect to itemize deductions even though they are less than your standard deduction, check here Deductions For Paperwork Reduction Act Notice, see the Instructions for Form 1040 Cat No. 17145C Schedule A (Form 1040) 2018 THIS FORM ISA SIMULATION OF AN OFFICIAL U.S. TAX FORM. IT IS NOT THE OFFICIAL FORM ITSELF. DO NOT USE THIS FORM FOR TAX FILINGS OR FOR ANY PURPO SE OTHER THAN EDUCATIONAL. 2019 McGraw-Hill Education 1040 PG 1 Schedule A 1040 PG 2 Page 1 of Form 1040. Use provided information and follow instructions on form Department of the Treasury-Internal Revenue Service (99) 2018 Form 1040 U.S. Individual Income Tax Return IRS Use Only-Do not write or staple in this space OMB No. 1545-0074 OSingle OMarried filing separately OQualifying widow (er) Filing status OMarried filing jointly OHead of household Your social security number (Enter as xxx-xx-xo00x) Your first name and initial Last name You are blind Your Standard deduction: |Someone can claim you as a dependent You were born before January 2, 1954 If joint return, spouse's first name and initial Last name Spouse's social security number (Enter as xxx-xx-xXxx) Spouse standard deduction: Someone can claim your spouse as a dependent ||Spouse was born before January 2, 1954 Full-year health care coverage or exempt (see inst.) Spouse is blind Spouse itemizes on a separate return or you were dual-status alien Presidential Election Campaign Home address (number and street). If you have a PO. box, see instructions. Apt. no. Check here if you want $3 to go to this fund (see inst) City, town or post office, state, and ZIP code.. If you have a foreign address, attach Schedule 6 You Spouse If more than four dependents, see inst and here Dependents (see instructions): (2) Dependent's social security number (Enter as --) if child under age 17 qualifies for (see inst.): (4) (3) Dependent's relationship to you Credit for other (1) First name Last name Child tax credit. dependents 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 Here correct, and complete. Declaration of preparer (other than taxpayer) is based on all information of which preparer has any knowledge Your signature Your occupation Date If the IRS sent you an Identity Protection PIN, enter it here (see inst.) Joint return? See instructions. Keep a copy for your records Spouse's occupation Spouse's signature. If a joint return, both must sign Date If the IRS sent you an Identity Protection PIN, enter it here (see inst.) Check if Preparer's signature Firm's EIN Preparer's name PTIN Paid Preparer Use Only 3rd Party Designee Firm's name Phone no Self-employed Firm's address For Disclosure, Privacy Act, and Paperwork Reduction Act Notice, see separate instructions Form 1040 (2018) Cat. No. 11320B THIS FORM ISA SIMULATION OF AN OFFICIAL U.S. TAX FORM. IT IS NOT THE OFFICIAL FORM ITSELF. DO NOT USE THIS FORM FOR TAX FILINGS OR FOR ANY PURPOSE OTHER THAN EDUCATIONAL. 2019 McGraw-Hill Education Form 1040 (2018) Page 2 1 Wages, salaries, tips, etc. Attach Form(s) W-2 1 b Taxable interest 2a Tax-exempt interest 2a 2b Attach Form(s) W-2 Also attach Form(s) W-2G and 1099-R if bOrdinary dividends 3a Qualified dividends 3b b Taxable amount 4a IRAS, pensions, and annuities 4a 4b tax was withheld. b Taxable amount 5a Social security benefits 8 Total income. Add lines 1 through 5. Add any amount from Schedule 1, line 22 5 5b 0 Standard deduction for- 7 Adjusted gross income. If you have no adjustments to income, enter the amount from line 8; otherwise, subtract Schedule 1 line 38, from line 6 7 Single or Married filing separately. $12,000 8 Standard deduction or itemized deductions (from Schedule A) 9 Qualified business income deduction (see instructions) 10 Taxable income. Subtract lines 8 and 9 from line 7. If zero or less, enter -0- 8 9 10 0 Married filing jointly or Qualifying widow(er) $24,000 11 (see inst.) check if any from: 1 Form(s) 8814 2. Form 4972 3. bAdd any amount from Schedule 2 and check here 11 12 a Child tax credit/credit for other dependents Head of household, $18,000 b Add any amount from Schedule 3 and check here 12 13 Subtract line 12 from line 11. If zero or less, enter -0- 13 14 Other taxes. Attach Schedule 4 14 If you checked any box 15 Total tax. Add lines 13 and 14 under Standard deduction, see instructions. 15 18 Federal income tax withheld from Forms W-2 and 1099 | 17 Refundable credits 16 a EIC (see inst.) b Sch. 8812 c Form 8883 d Add any amount from Schedule 5 17 18 Add lines 16 and 17. These are your total payments 18 Refund 19 If line 18 is more than line 15, subtract line 15 from line 18. This is the amount you overpaid 19 20a Amount of line 19 you want refunded to you. If Form 8888 is attached, check here 20a c Type: Checking b Routing number dAccount number 21 Amount of line 19 you want applied to your 2019 estimated tax 22 Amount you owe. Subtract line 18 from line 15. For details on how to pay, see instructions Savings Direct deposit? See instructions. 21 22 Amount You Owe 23 Estimated tax penalty (see instructions) 23 Go to www.irs.gov/Form1040 for instructions and the latest information Form 1040 (2018) THIS FORMIS A SIMULATION OF AN OFFICIAL US TAX FORM IT IS NOT THE OFFICIAL FORM ITSELF DO NOTUSE THIS FORM FOR Schedule A of Form 1040. Itemized Deductions SCHEDULE A OMB No. 1545-0074 (Form 1040) 2018 Go to www.irs.gov/ScheduleA for instructions and the latest information. Attach to Form 1040. Caution: If you are claiming a net qualified disaster loss on Form 4684, see the instructions for line 16. Department of the Treasury Attachment Sequence No. 07 Internal Revenue Service (99) Your social security number Name(s) shown on Form 1040 Medical and Dental Caution. Do not include expenses reimbursed or paid by others. Expenses Medical and dental expenses (see instructions) 1 Enter amount from Form 1040, line 7 3 Multiply line 2 by 10% (0.10) Subtract line 3 from line 1. If line 3 is more than line 1, enter -0 4 4 State and local taxes 5 Taxes You Paid State and local income taxes or general sales taxes. You may include a either income taxes or general sales taxes on line 5a, but not both. If you elect to include general sales taxes instead of income taxes, check this box 5a b State and local real estate taxes (see instructions) c State and local personal property taxes 5b 5c d Add lines 5a through 5c e Enter the smaller of line 5d and $10,000 (S5,000 if married filing separately) 5d 5e Other taxes. List type and amount Add lines 5e and 6 7 8 Home mortgage interest and points. If you didn't use all of your home Interest You Paid mortgage loan(s) to buy, build, or improve your home, see instructions and Caution: check this box a Home mortgage interest and points reported to you on Form 1098 8a b Home mortgage interest not reported to you on Form 1098. If paid to the Your mortgage interest deduction may be limited (see instructions). person from whom you bought the home, see instructionns and show that person's name, identifying no., and address 8b c Points not reported to you on Form 1098. See instructions for special rules 8c d Reserved 8d e Add lines 8a through 8c 8e Investment interest. Attach Form 4952 if required. (see instructions) 9 10 Add lines 8e and 9 10 Gifts by cash or check. If you made any gift of $250 or more, see instructions 11 Gifts to Charity 11 12 Other than by cash or check. If any gift of $250 or more, see instructions You must attach Form 8283 if over $500 12 If you made a gift and got a benefit for it, see instructions Carryover from prior year 13 13 14 Add lines 11 through 13 14 Casualty and Theft Losses 15 Casualty and theft loss(es) from a federally declared disaster (other than net qualified disaster losses). Attach Form 4684 and enter the amount from line 18 of that form. See instructions 15 16 Other-from list in instructions. List type and amount Other Itemized Deductions 16 17 Add the amounts in the far right column for lines 4 through 16. Also, enter this amount on Form 1040, line 8 17 Total Itemized 18 If you elect to itemize deductions even though they are less than your standard deduction, check here Deductions For Paperwork Reduction Act Notice, see the Instructions for Form 1040 Cat No. 17145C Schedule A (Form 1040) 2018 THIS FORM ISA SIMULATION OF AN OFFICIAL U.S. TAX FORM. IT IS NOT THE OFFICIAL FORM ITSELF. DO NOT USE THIS FORM FOR TAX FILINGS OR FOR ANY PURPO SE OTHER THAN EDUCATIONAL. 2019 McGraw-Hill Education
