TAX RETURN PROBLEM #2: Mindy J. and Frank M. Jones are married taxpayers who file a joint return. Their Social Security numbers are 123-45-6789 and 111-11-1112, respectively. Mindys birthday is August 24, 1973, and Franks is May 27, 1972. They live at 473 River Avenue, Stony Brook, 11850. Mindy is the office manager for Stony Brook Dental Clinic, 433 Broad Street, Stony Brook, NY 01850 (employer identification number 98-7654321). Frank is the manager of a Super Snacks fast-food outlet owned and operated by Plymouth Corporation, 1247 Central Avenue, Hauppauge, NY 11788 (employer identification number 11-1111111).

The following information is shown on their Wage and Tax Statements (Form W2) for 2020.

Line Description Mindy Frank

1 Wages, tips, other compensation $58,000 $62,100

2 Federal income tax withheld 4,500 5,300

3 Social Security wages 58,000 62,100

4 Social Security tax withheld 3,596 3,850

5 Medicare wages and tips 58,000 62,100

6 Medicare tax withheld 841 900

15 State New York New York

16 State wages, tips, etc. 58,000 62,100

17 State income tax withheld 2,950 3,100

The Joness provide over half of the support of their two children, Cheryl (born January 25, 1996, Social Security number 123-45-6788) and Jack (born February 7, 2000, Social Security number 123-45-6786). Both children are full-time students and live with the Joness except when they are away at college. Cheryl earned $6,200 from a summer internship in 2020, and Jack earned $3,800 from a part-time job. Both children received scholarships covering tuition and materials.

During 2020, the Joness provided 60% of the total support of Franks widower father, Stan Jones (born March 6, 1944, Social Security number 123-45-6787). Stan lived alone and covered the rest of his support with his Social Security benefits. Stan died in November, and Frank, the beneficiary of a policy on Stans life, received life insurance proceeds of $1,600,000 on December 28.

The Joness had the following expenses relating to their personal residence during 2020:

Property taxes $5,000

Qualified interest on home mortgage (acquisition indebtedness) 8,700

Repairs to roof 5,750

Utilities 4,100

Fire and theft insurance 1,900

The Joness had the following medical expenses for 2020:

Medical insurance premiums $4,500

Doctor bill for Stan incurred in 2019 and not paid until 2020 7,600

Operation for Stan 8,500

Prescription medicines for Stan 900

Hospital expenses for Stan 3,500

Reimbursement from insurance company, received in 2020 3,600

The medical expenses for Stan represent most of the 60% that Frank contributed toward his fathers support.

Other relevant information follows:

o When they filed their 2019 New York State tax return in 2020, the Joness paid additional NYS income tax of $900.

o During 2020, Mindy and Frank attended a dinner dance sponsored by the Stony Brook Police Disability Association (a qualified charitable organization). The Joness paid $300 for the tickets. The cost of comparable entertainment would normally be $50.

o The Joness contributed $5,000 to Stony Brook Presbyterian Church and gave used clothing (cost of $1,200 and fair market value of $350) to the Salvation Army. All donations are supported by receipts, and the clothing is in very good condition.

o Via a crowdfunding site (gofundme.com), Mindy and Frank made a gift to a needy family who lost their home in a fire ($400). In addition, they made several cash gifts to homeless individuals downtown (estimated to be $65).

o In 2020, the Joness received interest income of $2,750, which was reported on a Form 1099INT from Second National Bank, 125 Oak Street, Stony Brook, NY 01850 (Employer Identification Number 98-7654322).

o The home mortgage interest was reported on Form 1098 by Stony Brook Commercial Bank, P.O. Box 1000, Stony Brook, NY 01850 (Employer Identification Number 98-7654323). The mortgage (outstanding balance of $425,000 as of January 1, 2020) was taken out by the Joness on May 1, 2016.

o Mindys employer requires that all employees wear uniforms to work. During 2020, Mindy spent $850 on new uniforms and $566 on laundry charges.

o Frank paid $400 for an annual subscription to the Journal of Franchise Management and $741 for annual membership dues to his professional association.

o Neither Mindys nor Franks employer reimburses for employee expenses.

o The Joness do not keep the receipts for the sales taxes they paid and had no major purchases subject to sales tax.

o This year the Joness gave each of their children $2,000, which was then deposited into their Roth IRAs.

o Mindy and Frank paid no estimated Federal income tax and they did not engage in any virtual currency transactions during the year. Neither Mindy nor Frank wants to designate $3 to the Presidential Election Campaign Fund.

o The Jones received the appropriate recovery rebates (economic impact payments.)

Any related questions in the tax software program should be ignored REQUIRED: Tax Computation Prepare their Federal income tax return. Compute net tax payable or refund due for Mindy and Frank Jones for 2020. If they have overpaid, they want the amount to be refunded to them. Please do this in accordance with the current tax laws that apply to the problem.