Tax Return Assignment #2 Paula Peralta Use the following information to complete Paula Peraltas 2021 federal income tax return. If information is missing, use reasonable assumptions to fill in the gaps. You will need the following forms and schedules in addition to form 1040 to complete the assignment: Schedule 1 (other income and deductions), Schedule 2 (other taxes such as SE Tax), Schedule C (for business income and deductions), Schedule SE (net self-employment income) and Form 8995 (qualified business income deduction). You need to determine if Schedule A is needed Are the total itemized deductions higher than the standard deduction for this filing status taxpayer? The forms, schedules, and instructions are available in the Blackboard course under instructor resources or at the IRS Web site (www.irs.gov). The instructions for the forms are very helpful and can be downloaded from the IRS website. Also, use Form Finder in the TR Checkpoint library for additional line by line instructions. Paula Peralta was married, however, her husband Peter passed away in 2018. Paula has two children, Randy and Rodrigo. Paula worked as the General Manager at the Portillo Bakery in Las Cruces, NM earning a salary of $89,300. She also did some advertising consulting work on the side and reported revenues of $16,700. Paula won $4,750 in gambling pools at work for college basketball. Lastly, she received $10,000 from Peters life insurance policy that paid out in 2021. DO NOT prepare any state income tax returns The Peraltas live at 3233 Apple Orchard, Santa Teresa, NM 88008 Paulas birthday is 12/23/1985 and her Social Security number is 526-11-1852 Rodrigos birthday is 7/21/2008 and his Social Security number is 582-22-1646 Randys birthday is 2/8/2010 and his Social Security number is 562-72-0539 The Peraltas do not have any foreign bank accounts or trusts, nor did they have any transactions with virtual currency Paula did file forms 1099 (contract labor) for her advertising consulting business as required and she uses the cash method of accounting for her business The Peraltas had health insurance coverage all year provided by Portillo Bakery The Peraltas want you to determine the best filing status for their family The Peraltas received all of the stimulus payments in which they qualifiedA $3,000 refundable child tax credit is available for each dependent child between the age of 6 and 17 (line 28 Form 1040). You do NOT need to use Schedule 8812. Do not consider AMT tax for the tax return Determine the qualified business income deduction available for Paulas advertising business (Form 8995 (line 5 and line 13 Form 1040).

The Peraltas reported the following activities and payments during the year 2021 Activity Paulas W2 Information: Salary $ 89,300 Federal income tax withheld 4,750 State income tax withheld 2,875 Social Security tax withheld 5,537 Medicare tax withheld 1,295 Business Activity Paulas Advertising Consulting Income $ 16,700 Business office expense 1,725 Contract labor expense 5,990 Business insurance expense 2,130 Airfare to fly to business conference 2,997 Tax preparation fees $ 765 Gambling losses for the year 4,000 Real estate taxes paid on residence 3,040 Home mortgage interest paid 5,988 (original loan $346,000 in 2012, outstanding balance of $191,000) Casualty loss on home from broken pipe 2,600 Medical expenses 4,286 Medical insurance reimbursement for expenses 1,920 Cash contributions to St Marks church (Paula has receipts) 2,750