Tax Case 3 Frank A. (SSN 811-00-3717) and Sandra K (SSN 820-00-9231) Anderson (ages 48 and 51, respectively) reside at 2121 Century Avenue, Middleton, CA 92657, with their three children whom they fully support: Mandy (age 9, SSN 998-00-5246), Charles (age 11, SSN 998-00-5247), and Carol (age 18, SSN 998-00-1827). The Andersons file a joint return, and neither elect to have $3 go to the Presidential election campaign. Frank is employed as a customer service representative. Sandra is employed as a computer operator. They do not have an interest in foreign accounts or trusts. Frank and Sandra did not have virtual currency. Details of their salaries and withholdings, are as follows: Gross Wages State Income Tax Withheld Federal Income tax Withheld Social Security Tax Withheld Medicare Tax Withheld Frank $66,500 $4,792 $6,700 $4,123 $964 Sandra $40,343 $3,087 $2,980 $2,501 $585 Franks employer provides him with full family health care coverage as a tax-free employee benefit. Part of Franks compensation package also includes group term life insurance equal to 75% of his annual salary. The cost to the company for the premium was $240. In August, Sandra earned $400 of interest when she cashed in a certificate of deposit from State Bank. The Middleton Farmers Bank credited $300 of interest to the Andersons joint savings account during the year. The Andersons received a refund from their 2020 state income taxes of $142 and had itemized. They received their refund in June 2021. The Andersons received a 1098 for their mortgage interest for $15,690. Since they both work outside the home, they are unable to be there when their children return home from school. The Andersons paid a neighbor, Gloria Dryden (SSN 992-00-4270), $4,100 to care for Mindy and Charles in her home after school hours and during the summer vacation period while the Andersons were at work. Glorias address is 2132 Century Avenue, Middleton, CA 92657. During the year, Sandra received unemployment compensation of $6,000. Frank is covered by a qualified pension plan at work; Sandra is not. Frank contributed $3,400 to his IRA and Sandra contributed $7,000. Cancelled checks, receipts, and paid bills support the following expenditures: Orlo T Miller, M.D. (not covered by insurance) $818 Qualified stop smoking program for Sandra $175 Alex B Kramer, DVM (treatment of Fritz, the Andersons dog $168 Life insurance premiums on Franks life (Sandra is the beneficiary) $1200 Kathryn R. Smith, dentist (not covered by insurance) $459 Weight loss program for Frank (cosmetic purposes) $180 Martin R. Jones, optometrist (not covered by insurance) $50 Eyeglasses for Mandy (not covered by insurance) $175 Drivers license renewal for Sandra $32 Fishing license for Frank $12 Credit card interest $275 Real estate taxes on the main home $6,851 Trash pickup fees $120 Home repairs and improvements $620 Homeowners insurance $500 General sales tax paid during the year $2,572 State excise taxes $98 Cash gift to First Unity Church (with receipt) $2,200 Value of Franks time volunteered to the Girl Scouts $300 Political contributions $50 Bingo and lottery tickets $260 Rental for safe deposit box to store investment items $67 Legal fees paid for preparation of the Andersons personal wills $875 In addition, on April 24, 2021, the Andersons paid $600 to Homer P Gill for preparation of their 2020 tax return. When Franks father died on Christmas Day, Frank inherited his fathers savings account. The account balance was $20,000. In March, Sandras best friend, Nancy, moved to Sweden. Nancys 17-year-old daughter, Inga, stayed with the Andersons for the rest of the year. Inga had a part-time job after school and earned $4,120. The Andersons provided over half of Ingas support. Hints: Make sure your forms have their names and social security number at the top (you can list his since he is the primary taxpayer (first person listed). Schedule A Line 5a- Notice it is either or; dont enter both Line 11- dont worry about the other instructions, go ahead and enter your amount Schedule B Do you have information in Part I for both banks? Schedule 1 Do you have refunds, unemployment, and IRA deductions on this form? Schedule 3 Do you have amount from 2441? 2441 Do you have parts I and II filled out? You can split the amount between the children equally. Schedule 8812 Line 5- You dont need to complete Line 5 worksheet. It is $3,000 per qualify child. Line 14c is $500 Other Items: Inga does not qualify as a dependent. Frank is not taxed on the employer-paid premiums on group-term life insurance since the policy was for less than $50,000 ($66,500 75% = $49,875). Schedule A (line 1): $818 + $175 + $459 + $50 + $175 = $1,677 IRA deduction (Form 1040, Schedule 1, line 20), $10,400 ($7,000 + $3,400). Since Sandra is not a participant in an employer-sponsored retirement plan and the Andersons' modified AGI does not exceed $198,000, she is allowed to contribute and deduct up to $7,000 ($6,000 + $1,000 for being age 50 or older). However, Frank is a participant in his employer's retirement plan and the Andersons' modified AGI falls between the $104,000 and $124,000 threshold for married couples filing a joint return. Thus, Frank's maximum deductible IRA contribution is computed as follows: Reduction factor for Frank: [($113,685 $105,000)/$20,000 phase-out range] $6,000 = $2,606 Contribution limit: $6,000 $2,606 = $3,394, rounded up to nearest $10: $3,400