Tax Return Problems formerly Appendix C Individual Tax Return Problem 2 Required: Use the following information to complete Johnelle and Latoya Henrys 2020 federal income tax return. If any information is missing, use reasonable assumptions to fill in the gaps. The forms, schedules, and instructions can be found at the IRS website (www.irs.gov). The instructions can be helpful in completing the forms.

Facts:

1. Johnelle Henry is employed as a human resources manager for Toys Unlimited, Inc., and Latoya is a financial planner for her mothers company, Long-term Investments, Inc., a full-service wealth-planning firm. They provide the following information: They both want to contribute to the presidential election campaign. They live at 9876 Old Waverly, Charleston, South Carolina 29401. Johnelles birthday is 7/17/1966 and his Social Security number is 555-12-6789. Latoyas birthday is 9/11/1968 and her Social Security number is 987-65-4321. Johnelle and Latoya do not have any foreign bank accounts or trusts. Neither Johnelle or Latoya acquired, sold, or exchanged virtual currency in 2020.

2. Johnelle received a Form W-2 from Toys Unlimited, Inc. that contained the following information: Line 1 Wages, tips, other compensation $45,000 Line 2 Federal income tax withheld 7,500 Line 3 Social Security wages 45,000 Line 4 Social Security tax withheld 2,790 Line 5 Medicare wages and tips 45,000 Line 6 Medicare tax withheld 653 Line 17 State income tax 2,200

3. Latoya received a Form W-2 from Long-term Investments, Inc., that contained the following information: Line 1 Wages, tips, other compensation $85,000 Line 2 Federal income tax withheld 12,500 Line 3 Social Security wages 85,000 Line 4 Social Security tax withheld 5,270 Line 5 Medicare wages and tips 85,000 Line 6 Medicare tax withheld 1,233 Line 17 State income tax 4,200

4. Johnelle and Latoya incurred the following medical expenses for the year: Transportation to Chicago for Johnelles cancer treatment 2,000 miles Unreimbursed hospital charges for Johnelle $6,500 Unreimbursed prescription drug charges for Johnelle and Latoya 1,750 Unreimbursed physician charges for Johnelle and Latoya 2,200 Unreimbursed prescription glasses for Latoya 150 Laser hair treatment for Latoya (so that she will no longer need to shave her legs) 2,000

5. Johnelle and Latoya paid $12,000 of interest payments on their primary residence (acquisition debt of $225,000). They also paid $1,750 of interest expense on Latoyas car loan and $500 of interest on their Visa card.

6. Johnelle and Latoya paid $4,000 of real estate taxes on their home and $1,000 of real estate tax on a vacant lot they purchased with the hope of building their dream home in the future. They also paid $3,000 in sales tax on Latoyas car and other purchases and $1,000 of ad valorem personal property tax on their cars.

7. Johnelle and Latoya made the following contributions this year: American Red Cross $ 200 United Way 150 St. Josephs Catholic Church 8,000 Food for the family of Hannah Barbara (a neighbor who suffered a tragic car accident this past year) 225 Stock transfer to the University of South Carolina (originally purchased for $1,000 in January 2006) on July 1, 2020 750

8. Johnelle won $5,000 in the state lottery. He has been playing the lottery for years, spending $10 in lottery tickets every week ($520 in total) and is careful that he saves the old tickets to keep track of the numbers he plays.

9. Johnelle and Latoya did not buy, sell, exchange, or otherwise acquire any financial interest in a virtual currency.

10. Johnelle and Latoya received two Economic Impact Payments (stimulus checks) in the full amount before filing their 2020 tax return.