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Joe and Jessie are married and have one dependent child, Lizzie. Lizzie is currently in college at State University. Joe works as a design engineer for a manufacturing firm while Jessie runs a craft business from their home. Jessies craft business consists of making craft items for sale at craft shows that are held periodically at various locations. Jessie spends considerable time and effort on her craft business, and it has been consistently profitable over the years. Joe and Jessie own a home and pay interest on their home loan (balance of $220,000) and a personal loan to pay for Lizzies college expenses (balance of $35,000).

Neither Joe nor Jessie is blind or over age 65, and they plan to file as married-joint. Assume that the employer portion of the self-employment tax on Jessies income is $834. Joe and Jessie have summarized the income and expenses they expect to report this year as follows:

Income:

Joes salary $ 129,400

Jessies craft sales 18,430

Interest from certificate of deposit 1,680

Interest from Treasury bond funds 722

Interest from municipal bond funds 926

Expenditures: Federal income tax withheld from Joes wages $ 13,700

State income tax withheld from Joes wages 6,460

Social Security tax withheld from Joes wages 7,494

Real estate taxes on residence 6,260

Automobile licenses (based on weight) 316

State sales tax paid 1,180

Home mortgage interest 16,300

Interest on Masterdebt credit card 2,360

Medical expenses (unreimbursed) 1,720

Joes employee expenses (unreimbursed) 2,460

Cost of Jessies craft supplies 4,590

Postage for mailing crafts 148

Travel and lodging for craft shows 2,260

Self-employment tax on Jessies craft income 1,668

College tuition paid for Lizzie 5,840

Interest on loans to pay Lizzies tuition 3,260

Lizzies room and board at college 12,680

Cash contributions to the Red Cross 540

b-1. Complete page 1 of Form 1040 (through taxable income, line 15).

Visit the IRS website and download Form 1040 . Enter the required values in the appropriate fields. Save your completed Tax Form to your computer and then upload it here by clicking "Browse." Next, click "Save."