Tax Return Exercise

Meet the Millers

Tom, Julia and their two children Emma and Justin.

Tom works for a tech company and has a salary of $225,000 per year. He contributes $5,000 per year to his companys 401k plan. They live in Woodland Hills, California in a house they bought ten years ago. They currently have a mortgage in the amount of $400,000 on the house and pay interest to the bank of $14,000 per year. They also pay $9,000 per year in real estate taxes. The family contributes $2,000 per year to their church. They have two cars and the annual registration for these cars in the state of California amount to $1,200 per year. Tom employer provides the family with medical insurance, but Tom must contribute to this plan $300 per month from his check. They did incur $2,500 in medical cost that was not covered by insurance. Tom and Julia have an investment account with JP Morgan Chase, and they received $500 in dividends and $250 in interest during the year. Tom employer withholds federal income taxes for the year of $30,000. The employer also withholds California State income taxes in the amount of $14,000.

Prepare the Millers family Federal Income Tax Return. (You can use the actual IRS for 1040 or prepare a worksheet with the computations shown) Assume all Social Security (FICA) and Medicare tax has been paid in full and withheld from Tom paycheck.