Sarah Hamblin and her now ex-husband Kevin were legally divorced on March 1, 2022. As of the end of the year, Sarah was unmarried. Sarah and Kevin had only one child, an 11-year-old girl named Elizabeth. As part of the divorce decree, Sarah was given custody of Elizabeth and Kevin was required to pay 1) child support for Elizabeths care, and 2) alimony to Sarah until she remarries or dies. Because Kevin will be making child support payments, the divorce decree provided that Kevin will be permitted to claim the child tax credit for Elizabeth until Elizabeth no longer qualifies as a tax dependent of either parent and the decree obligates Sarah to sign and/or file any required forms to cause this result to occur. (In other words, Sarah cannot claim the child credit for Elizabeth for any reason for the current tax year.) Sarah rents a home (separate from Kevin) that she pays for herself. Elizabeth lives with Sarah most of the time, but she visits and stays with her father every other weekend and most holidays. During the year, Elizabeth stayed at Kevins house a total of 74 nights. Sarah provided the following information for 2022: Sarahs Social Security number is 123-43-4321 Elizabeths Social Security number is 123-34-1234 Sarahs mailing address is 1245 Rose Petal Drive, Middletown, Wisconsin 53562 Elizabeth is a U.S. citizen. The following was reported on Sarahs Form W-2: Employer Gross Wages 34,350 Federal Income Tax Withholding 6,950 State Income Tax Withholding 2,125 Central Wisconsin Heating and Air All applicable and appropriate payroll taxes were withheld by the employer. During the year, Sarah also received the following: Child Support Payment from Kevin Hamblin $12,000 Alimony Payment from Kevin Hamblin $16,000 Gift from her father to help with legal bills $ 8,500 Interest income on U.S. Treasury Bond $ 400 Interest income of Madison City Bond (municipal bond) $ 250 Interest income from First Bank of Madison $ 165 Life insurance proceeds on the death of her mother $45,000 Sarah is a 50% owner in a friends company, Bright Day Flowers Inc. Bright Day Flowers, Inc. (BDF) is a Subchapter S corporation. The company reported ordinary business income for the year of $22,000. Sarah acquired the stock several years ago. Sarah worked a total of 600 hours at the BDF shop in the evenings and on the weekends during 2022. Bright Day Flowers, Inc.s employer identification number is 56-3535353. (Hint: See page 5-14 and Example 5-13 on that page. A stockholder of an S corporation is taxed just like an owner/partner in a partnership). Sarah entered a contest sponsored by a radio station and won 10 gift cards to various restaurants. The value of the gift cards was $200 each. Sarah gave 5 of the gift cards to her coworkers. Sarah lost her job with Central Wisconsin Heating and Air on November 15 because of a reduction in the workforce. She collected $1,250 in unemployment benefits during the year. She is currently looking for another job. Sarah did not own, control, or manage any foreign bank accounts nor was she a grantor or beneficiary of a foreign trust during the tax year. Also, Sarah did not buy, sell, exchange, or otherwise acquire any financial interest in a virtual currency. Sarah was provided with the following benefits as part of her employment: Group-term life insurance coverage of $50,000. The cost to cover Sarah for the company for the tax year is $150. (Hint: See Exhibit 5-3 in ebook, Life insurance coverage.) Access to the company photocopy machine. Sarah estimates she made $14 worth of copies during the year, primarily for use with her church group activities. Sarah reported no itemized deductions other than any described above. Sarah does not want to contribute to the Presidential Election Campaign Fund. She would like to receive a refund (if any) of any tax she may have overpaid for the year. Her preferred method of receiving a refund is by check. Hints: The only forms/schedules you will use for this return are the following. Also listed are the Lines which you should fill in. Keep in mind that the number for a line can be zero! o Form 1040: Lines 1a, 1z, 2a, 2b, 8, 9, 11, 12, 13, 14, 15, 16, 18, 21, 22, 24, 25a, 25d, 32, 33, 34, 35a o Schedule 1: Lines 5 (related to what is on Schedule E), 7, 8i, 9, 10, 26 (just enter zero on this line). o Schedule E (to report income from Sarahs interest in an S corporation): Lines 28A (fill in only for boxes a, b, d, kwhich is nonpassive income from Schedule K-1, which is given above), 29a, 30, 31, 32. Sarah has no income from trusts or estates, so skip Part III and enter the amount from Line 32 on Line 41. o Form 8995 (used to calculate the Qualified Business Income Deduction): Enter taxpayers name and social security (ID) number, Lines 1i, 2, 4, 5, 10, 11, 13, 14, 15 (enter the amount from this line on Form 1040, Line 13. o Do NOT complete/submit Form 8867, even if Sarah qualifies to file as head of household instead of single. o Remember: Sometimes you will be working through the 1040 or some other form or schedule, and you will have to stop working on it and go fill out another form or schedule to get a certain number, and then return to the first form! Preparing tax returns sometimes can feel like youre going in a circle! For Sarahs filing status, the choice is between Single or Head-of-Household. Choose the status that gives her the best deal (assuming she qualifies for that status)