Tax Return Project $$ Schmitz

To be completed after Chapter $8$

Required:

$$ Use the following information to complete Magdalena Schmitz$$s $2022$ 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.The instructions can be helpful in completing the forms.

Facts:

Magdalena Schmitz has undergone some major changes in her life recently. In $2021,$ at the age of $46,$ her husband, Roger, passed away. Magdalena has not remarried as of the end of $2022.$ Magdalena currently lives in Bedford, Pennsylvania. She was living in Pittsburgh when her husband passed away but she moved back to her childhood home so she could get help from her family raising her children. Magdalena was employed in Pittsburgh early in the year but left that job and relocated $100$ miles away to pursue a new life and start her new job. Magdalena has three children $($ages as of the end of the year$)$: Alyssa $(23),$ Tyler $(16),$ and Connor $(11).$ Magdalena would like to determine her federal income tax under the filing status that is most advantageous for her.

Magdalena reported the following information:

$$ Magdalena$$s social security number is $294-83-2845$

$$ Alyssa$$s social security number is $824-84-8456$

$$ Tyler$$s social security number is $824-34-9584$

$$ Connor$$s social security number is $824-56-2984$

$$ Magdalena$$s mailing address is $623$ S$.$ Liberty Road Bedford, Pennsylvania $15522$

Alyssa is unmarried and a full$-$time graduate student at Pennsylvania State University $($PSU$)($EIN $33-9876543).$ PSU$$s address is $1250$ Happy Valley, State College, PA $16801.$ She received her bachelor$$s degree the year her father passed away. This year represents her fifth year of full$-$time higher education schooling. Alyssa works part$-$time in State College to help with some of her living expenses. Alyssa earned $$2,300$ in gross income during the year and had her income tax return prepared on campus by Volunteer Income Tax Assistance $($VITA$)$ volunteers. Magdalena provided support for Alyssa including paying for rent, books, tuition, food, clothes, medicine, and other support items. In total, Magdalena provided $$12,700$ of support for the year. PSU provided Alyssa with a Form $1098-$T at year end.

Alyssa$$s higher education expenses for her university studies were as follows:

Tuition $$6,500$

Books $$2,000$

In order to for Magdalena to maintain a full$-$time job, she sends Connor to a day care program after school five days a week. During the year, Magdalena paid the day care operator $$4,250$ for Connor$$s care.

The day care details are as follows:

Horizon Day Care

$452$ S$.$ Patriot Road

Bedford, PA $15522$

EIN: $43-6598324$

Magdalena$$s W$-2$s for the year reported the following:

Employer Gross Wages Federal Income Tax Withholding State Income Tax Withholding

Juniata Development Corporation $$48,435$ $$900$ $$700$

Pittsburgh Real Estate $$2,450$ $$200$ $$125$

Magdalena$$s employers withheld all applicable and appropriate payroll taxes.

On January $1,2021($the prior year$),$ Magdalena started a photography business in which she takes bridal and wedding photographs. She does not do any of the professional printing. However, she provides all the digital files to her clients on a password$-$protected web site as part of her service. This unique service, along with her skill and reputation, has allowed her to earn additional money on the weekends, primarily in the summer, to help support her daughter in college. Magdalena rents all the camera equipment and does not currently own any equipment herself. The photography business uses the cash method of accounting. The business did not have any obligation to file a Form $1099$ to any payee during the year. Magdalena reported the following revenue and expenses for her business this year:

Gross Revenue $$6,500$

Photographic supplies $ $430$

Camera rental $$1,050$

Web site hosting fee $ $200$

Magdalena also received the following amounts in $2022$:

Life Insurance Payment$-$Mutual Life $($Mother$$s passing$)$ $$150,000$te

Cash gift from her father $ $5,000$te

Interest income$-$First Bank of Bedford $ $310$ t

Interest income$-$General Electric Bond $ $3,200$ t

Interest income$-$Bedford School District Municipal Bond $ $2,500$ te

Interest income$-$Johnstown Rural Improvement District Bond $ $1,300$ te

PA state income tax refund$*$ $ $325$

$*$Refund was from state tax she paid in $2021.$ Magdalena deducted all her state taxes as itemized deductions, and received full tax benefit for the deductions, on her $2021$ federal tax return.

Magdalena did not own, control or manage any foreign bank accounts, nor was she a grantor or beneficiary of a foreign trust during the tax year. She also did not receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency in $2022.$

Magdalena made the following payments during $2022$: