Richard McCarthy (born 2/14/1965; Social Security number 100-10-9090) and Christine McCarthy (born 6/1/1967; Social security number 101-21-3434) have a 19-year-old son (born 10/2/2000 Social Security number 555-55-1212), Jack who is a full-time student at the University of Key West. The McCarthys also have a 12-year-old daughter (Social Security number 444-23-1212), Justine, that lives with them. The McCarthys can claim a $2,000 child tax credit for Justine and a $500 other dependent credit for Jack. Richard is the CEO at a paper company. His Form W-2 is provided.
Christine is an optometrist and operates her own practice ("The Eyes of March") in town as a sole proprietor. The shop address is 1030 Morgan Highway, Clarks Summit, PA 18411 and the business code is 621320. Christine keeps her books on the accrual basis and her bookkeeper provided the following information:
| Gross sales | | $270,541 | | Returns | | 8,994 | | Inventory: | | | | Beginning inventory | $24,000 | | | Purchases | 120,000 | | | Ending inventory | 30,000 | | | Rent | | 24,000 | | Insurance | | 11,019 | | Professional fees | | 2,998 | | Payroll | | 37,113 | | Payroll taxes | | 2,877 | | Utilities | | 3,961 | | Office expenses | | 1,995 | | Depreciation | | 5,000 | |
The McCarthys have a nanny/housekeeper they paid $12,600 during 2019. They did not withhold income or FICA taxes. The McCarthys paid Pennsylvania state unemployment tax of $378 in 2019.
Christine received a 2019 Form 1099-INT from the National Bank of Scranton that listed interest income of $23,467. Note that McCarthys reasonably allocate $761 to state income tax expense for purposes of the Net Investment Income tax.
The McCarthys received a Form 1099-G from Pennsylvania that reported a $451 state income tax refund from 2018. The McCarthys itemized deductions in 2018 and had $14,223 of state income tax expense that was limited to $10,000.
The McCarthys paid the following in 2019:
| Home mortgage interest | $15,661 | | Property taxes | 5,436 | | Estimated state income tax payments | 2,400 | | Estimated Federal income tax payments | 10,500 | | Charitable contributions (all cash) | 7,600 | |
Required: Complete the McCarthys' federal tax return for 2019. Use Form 1040, Schedule 1, Schedule 2, Schedule 3, Schedule A, Schedule B, Schedule C, Schedule H, Schedule SE, Form 8959, and Form 8960 to complete this tax return.
Ignore any alternative minimum tax. Do not complete Form 4952, which is used for depreciation.
Someone can daim: None eduction You: None Age/Blindness Spouse: None Dependents (see instructions): (2) Social security number (1) First name Last name Jack McCarthy 555-55-1212 (3) Relationship to you (4) Vif qualifies for (see instructions): Child tax credit Credit for other dependents Son Nov Yes Justine McCarthy 444-23-1212 Daughter Yes No 1 1 230,500. Wages, salaries, tips, etc. Attach Form(s) W-2 Standard Deduction for Single or Married filing separately, $12,200 Married filing jointly or Qualifying widow(er), $24,400 Head of household $18,350 b 2a Tax-exempt interest .. Taxable interest. Attach Sch. B 2a if required 2b b Ordinary dividends. Attach Sch. 3a Qualified dividends ... Bif required 3b 4a IRA distributions ..... b Taxable amount 4b 4c d c Pensions and annuities 4d Taxable amount b Sa Taxable amount Sb Sa Social security benefits 6 6 Capital gain or (loss). Attach Schedule D if required. If not required, check here za 7a Other income from Schedule 1. line 9 7b b Add lines 1, 2b, 3b, 46, 4d, Sb. 6, and 78. This is your total income Ba Ba Adjustments to income from Schedule 1. line 22 If you checked b Subtract line sa from line 75. INS is your adjusted gross income any box under 9 Standard Standard deduction or itemized deductions (from Deduction, see Schedule A). 9 instructions. 10 Qualified business income deduction. Attach Form 8995 or Form 8995-A. 10 11a Add lines 9 and 10... b Taxable income. Subtract line 11a from line 8b For Disclosure, Privacy Act, and Paperwork Reduction Act Notice, see separate instructions. 11a 11b 51,332 X Cat. No. 11320B Form 1040 (2019) Richard McCarthy 100-10-9090 Form 1040 (2019) Page 2 12a Tax (see inst.) Check if any from Form(s): 1 8814 2 4972 30 12a 12b b Add Schedule 2, line 3, and line 12a and enter the total 13a 13a Child tax credit or credit for other dependents 13b b Add Schedule 3, line 7, and line 13a and enter the total 14 14 Subtract line 13b from line 12b. If zero or less, enter -- 15 15 16 16 Other taxes, including self-employment tax, from Schedule 2, line 10 Add lines 14 and 15. This is your total tax. Federal income tax withheld from Forms W-2 and 1099 17 17 13a If you have a qualifying child, attach Sch. EIC. If you have nontaxable 18 Other payments and refundable credits: a Earned Income credit (EIC)..... b Additional child tax credit. Attach Schedule 8812 185 WILTTOMS WO - If you have a 18 Other payments and refundable credits: qualifying child, attach Sch. EIC. a Earned income credit (EIC).. 18a . If you have b Additional child tax credit. Attach Schedule 8812 nontaxable 18b combat pay, see C American opportunity credit from Form 8863, line 8 18c instructions. d Schedule 3, line 14.. 180 e Add lines 18a through 18d. These are your total other payments and refundable credits 19 Add lines 17 and 18e. These are your total payments. 20 Refund If line 19 is more than line 16, subtract line 16 from line 19. This is the amount you overpaid 21a Amount of line 20 you want refunded to you. If Form 8888 is attached, check here Direct deposit? Routing number c Type: Checking Savings 18e 19 ION 20 21a See instructions. d Account number 22 Amount of line 20 you want applied to your 2020 estimated tax ........ 22 23 Amount Amount you owe. Subtract line 19 from line 16. For details on how to pay, see instructions ...... 23 You Owe 24 Estimated tax penalty (see instructions). 24 Third Party Do you want to allow another person (other than your paid preparer) to discuss this return with Yes. Complete below. NO the IRS? See instructions Designee Phone Personal identification (Other than Designee's her / SCHEDULE 1 OMB No. 1545-0074 (Form 1040 or 1040-SR) Additional Income and Adjustments to Income 2019 Department of the Treasury Attach to Form 1040 or 1040-SR. Attachment Internal Revenue Service Go to www.irs.gov/Form 1040 for instructions and the latest information. Sequence No. 01 Name(s) shown on Form 1040 or 1040-SR Your social security number Richard and Christine McCarthy 100-10-9090 Part I Additional Income 1 Taxable refunds, credits, or offsets of state and local income taxes 1 2a Alimony received ... 2a b Date of original divorce or separation agreement (see instructions) 3 3 Business income or (loss). Attach Schedule c.. Other gains or losses). Attach Form 4797 5 5 Rental real estate, royalties, partnerships, S corporations, trusts, etc. Attach Schedule 6 Farm income or (loss). Attach Schedule F 7 7 Unemployment compensation Other income. Ust type and amount 8 4 6 9 9 Combine lines 1 through 8. Enter here and on Form 1040 or 1040-SR, line 7 Part II Adjustments to Income 10 Educator expenses. 11 Certain business expenses of reservists, performing artists, and fee-basis government officials. Attach Form 10 Calculator Print Item Combine lines 1 through 8. Enter here and on Form 1040 or 1040-SR, line 7a. Part 11 Adjustments to Income 9 10 Educator expenses....... 10 11 Certain business expenses of reservists, performing artists, and fee-basis government officials. Attach Form 2106 .... 11 12 Health savings account deduction. Attach Form 8889 12 13 Moving expenses for members of the Armed Forces. Attach Form 3903 13 14 Deductible part of self-employment tax. Attach Schedule SE.. 14 15 Self-employed SEP, SIMPLE, and qualified plans. 15 16 Self-employed health insurance deduction 16 17 Penalty on early withdrawal of savings. 17 18a Alimony paid 18a b Recipient's SSN c Date of original divorce or separation agreement (see instructions) 19 IRA deduction ..... 20 Student loan interest deduction .. 21 21 Reserved for future use 22 Add lines 10 through 21. These are your adjustments to income, Enter here and on Form 1040 or 1040-SR, 22 line sa.. For Paperwork Reduction Act Notice, see your tax return instructions. Cat. No. 71479F Schedule 1 (Form 1040 or 10-10-SR) 2019 19 20 Feedback SCHEDULE 2 OMB No. 1545-0074 (Form 1040 or 1040-SR) Additional Taxes 2019 Department of the Treasury Attach to Form 1040 or 1040-SR. Attachment Internal Revenue Service Go to www.irs.gov/Form 1040 for instructions and the latest information. Sequence No. 02 Name(s) shown on Form 1040 or 1040-SR Your social security number Richard and Christine McCarthy 100-10-9090 1 Part I Tax 1 Alternative minimum tax. Attach Form 6251 2 Excess advance premium tax credit repayment. Attach Form 8962 3 Add lines 1 and 2. Enter here and include on Form 1040 or 1040-SR, line 12b. Part II Other Taxes 2 3 6 Self-employment tax. Attach Schedule SE. 4 5 Unreported social security and Medicare tax from Form: a 4137 b 8919 5 6 Additional tax on IRAs, other qualified retirement plans, and other tax-favored accounts, Attach Form 5329 if required..... 7a Household employment taxes. Attach Schedule H.. 7a b 7b Repayment of first-time homebuyer credit from Form 5405. Attach Form 5405 if required 8 B Taxes from: a Form 8959 b Form 8960 Instructions; enter code(s) 9 9 Section 965 net tax liability installment from Form 965-A............ 10 Add lines 4 through 8. These are your total other taxes. Enter here and on Form 1040 or 1040-SR 10 line 15....... For Paperwork Reduction Act Notice, see your tax return instructions. Cat. No. 714730 Schedule 2 (Form 1040 or 1040-SR) 2019
