Richard McCarthy (born 2/14/64; Social Security number 100-10-9090) and Christine McCarthy (born 6/1/1966; Social security number 101-21-3434) have a 19-year-old son (born 10/2/99 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. Richard is the CEO at a national 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 $270,000 9,000 Returns Inventory: Beginning inventory $24,000 Purchases 120,000 30,000 Ending inventory Rent 24,000 11,000 Insurance Professional fees Payroll Payroll taxes 3,000 37,000 2,800 4,000 2,000 Utilities Office expenses Depreciation 5,000 The McCarthys have a nanny/housekeeper they paid $12,000 during 2018. They did not withhold income or FICA taxes. The McCarthys paid Pennsylvania state unemployment tax of $378 (based on the first $7,000 of wages) in 2018. Christine received a 2018 Form 1099-INT from the National Bank of Scranton that listed interest income of $23,400. Note that McCarthys reasonably allocate $1,278 to state income tax expense for purposes of the Net Investment Income tax. The McCarthys paid the following in 2018: Home mortgage interest Property taxes Estimated state income tax payments Estimated Federal income tax payments Charitable contributions (all cash) $15,600 5,600 3,000 11,000 7,600 Required: Complete the McCarthys' federal tax return for 2018. Use Form 1040, Schedule 1, Schedule 4, Schedule A, Schedule B, Schedule C, Schedule H, Schedule SE, Form 8959, and Form 8960 to complete this tax return. Make realistic assumptions about any missing data. The taxpayers had health insurance coverage for the entire year and do not want to contribute to the presidential election campaign. Enter all amounts as positive numbers. If an amount box does not require an entry or the answer is zero, enter "0". If required, round any dollar amount to the nearest dollar. Gross sales $270,000 9,000 Returns Inventory: Beginning inventory $24,000 Purchases 120,000 30,000 Ending inventory Rent 24,000 11,000 Insurance Professional fees Payroll Payroll taxes 3,000 37,000 2,800 4,000 2,000 Utilities Office expenses Depreciation 5,000 The McCarthys have a nanny/housekeeper they paid $12,000 during 2018. They did not withhold income or FICA taxes. The McCarthys paid Pennsylvania state unemployment tax of $378 (based on the first $7,000 of wages) in 2018. Christine received a 2018 Form 1099-INT from the National Bank of Scranton that listed interest income of $23,400. Note that McCarthys reasonably allocate $1,278 to state income tax expense for purposes of the Net Investment Income tax. The McCarthys paid the following in 2018: Home mortgage interest Property taxes Estimated state income tax payments Estimated Federal income tax payments Charitable contributions (all cash) $15,600 5,600 3,000 11,000 7,600 Required: Complete the McCarthys' federal tax return for 2018. Use Form 1040, Schedule 1, Schedule 4, Schedule A, Schedule B, Schedule C, Schedule H, Schedule SE, Form 8959, and Form 8960 to complete this tax return. Make realistic assumptions about any missing data. The taxpayers had health insurance coverage for the entire year and do not want to contribute to the presidential election campaign. Enter all amounts as positive numbers. If an amount box does not require an entry or the answer is zero, enter "0". If required, round any dollar amount to the nearest dollar
