Required: Use the information below to prepare the individual income tax return for Phyllis and Robert Vance for the tax year ended December 31, 2020. Tax forms must be handwritten. One of the best ways to learn tax return preparation is to complete a tax return by hand! Please make sure that your handwriting is clear and legible

Information Provided by Phyllis and Robert

Assume that all information pertains to tax year 2020 unless otherwise indicated.

1) Phyllis (age 46) and Robert (45) are blissfully married. They have an 8-year-old son,

Michael, who lives with them. They also have a 19-year old daughter, Jan. Jan also lives

at home, and is a full-time student at the University of Illinois. Jan earned $8,500 in 2020

from a part-time job. This is less than half the cost of supporting Jan.

2) Phyllis works at a marketing firm where she earned $140,000 in 2020. According to her

W-2 forms, Phyllis employer withheld a total of $35,000 in federal income taxes and

$7,500 in Illinois income taxes from her paychecks during the tax year.

3) Robert is a landscape designer. His business is taxed as a sole proprietorship and uses the

cash method of accounting. During 2020, Robert collected $221,000 in sales revenue

(including $15,000 from invoices for services that he provided in 2019). Additionally, in

2020 he completed the landscaping for three clients that have not yet paid their invoices

which total $32,000. Robert does not have any employees and made no payments

requiring issuance of a Form 1099. Roberts expenses include advertising costs of

$5,000, legal and consulting fees of $5,500, business insurance of $4,000, landscape

materials and supplies of $60,000 and $500 of office supplies. Roberts business does not

involve inventory.

Robert also has a truck that he uses 75% for business (25% personal). He purchased the

truck in 2017 and has always used the standard mileage method to determine business

expenses. In 2020, he drove the truck 35,800 total miles. He has supporting

documentation for his business miles.

Robert paid $6,000 each quarter in estimated payments for federal income tax. (There are

four installments in a year.) He did not make quarterly payments for Illinois state taxes.

4) Phyllis and Robert received $700 of interest income from bonds issued by the City of

Chicago. They also received $1,500 of qualified dividend income (Form 1099-DIV) from

NBC Corp.

5) Robert and Phyllis paid $13,530 in principal payments and $8,987 in interest payments

on their home mortgage for their primary residence (Form 1098). They also paid local

real property taxes of $5,320 on their home.

6) Robert and Phyllis paid $750 of interest related to credit card debt.

7) The Vances also paid $20,000 in tuition and fees for their daughter to attend UIUC.

8) The Vances made the following charitable contributions: $2,500 to the United Way;

$2,000 to the American Cancer Society; $500 to the University of Illinois Alumni

Association; and a $450 contribution of household goods to Goodwill. Other than the

Goodwill donation, all gifts were made by check. Appropriate documentation has been

maintained for all charitable contributions.

9) Phyllis and Robert provided documentation for the following additional income/expenses

during tax year 2020:

a. $300 state personal property taxes on Phyllis car

b. $4,500 gambling winnings and $6,000 gambling losses

c. $18,200 of qualified medical expenses

d. $37,000 gift from Roberts great uncle

e. $0 payment/refund of state income taxes. In 2019 their withholding was exactly equal

to their state income tax liability (which was amazing because it means they do not

have to worry about the implications of any refund/payment of state income taxes

from the prior year)!

10) The Vance family lives at 555 Scranton Drive, Champaign, IL 61822. Their family SSNs

are as follows:

Robert 123-45-6789

Phyllis 234-56-7890

Michael 345-67-8901

Jan 456-78-9012

11) Additional information:

a. If Phyllis and Robert overpaid their 2020 taxes, they would like the entire

overpayment to be refunded to them.

b. Phyllis and Robert are not subject to AMT

c. They do not wish to contribute to the Presidential Election Campaign fund.

d. They do not have foreign bank accounts or other foreign investments.

e. Phyllis and Robert are not subject to an underpayment penalty.

f. The family had full-year minimum essential health coverage through Phyllis

employer.

g. The Vances have never had any financial interests in virtual currency