Tim and Sarah Lawrence are married and filing a join return. Tims social security number is 111-11-1111 and date of birth: 1/1/1966; Sarahs social security number is 112-11-1112 and date of birth: 2/2/1970. They have two children as their dependents: Sean Lawrence (SSN: 212-22-2222, date of birth: 3/5/1993, Student) and Debra Lawrence (SSN: 211-11-1122, date of birth: 3/1/2006). They live at 11000 Bellaire Blvd., Houston, TX 77072.Sara worked throughout the year for Associates as a paralegal. Saras W-2 indicates gross wages of $42,500 and income tax withholding of $6,450. (You may omit the requirement to attach a copy of the W-2 to the tax return.)

Tims extensive travel caused him to reconsider his career. He left the employment of gasus International as of 1/4/2017 and started his own business doing all types of computer-related work locally. He operates this business as a sole proprietorship (under the business name IT Solutions) from the basement of his home. Tim collected revenues of $128,700 and paid the following expenses related to this business:

Employee wage expense	$26,425
Payroll tax expense	2,650
Taxes and licenses expense	1,512
Utilities expense	2,210
Supplies expense	1,895

All these expenses pass the 12-month rule test for tax recognition in 2017. Additionally, Tim fully documented business-related mileage of 975 miles that he put on his personal vehicle driving to various job sites. This is a service business, soTim had no cost of goods sold. He also elected to forego any deduction for the business use of his home (i.e. the home office deduction), and he opted to use the standard mileage rate to account for his business transportation expenses rather than his actual costs. (You may omit the requirement to complete Part IV of Schedule C.)

Tim knew his decision to pursue self-employment had tax consequences, so he came to you earlier in the year to ask for your help. You advised him to make estimated tax payments on Form 1040-ES totaling $16,000 to prepay an estimate of his self-employment and income tax liability. Tim followed your advice and made timely estimated tax payments.

Tim and Sara received a Form 1099-INT from Bank of America indicating they earned a total of $255 in interest income on their joint savings account.

They sold 230 shares of Quatum Corp stock for $35 per share on January 22, 2017. They originally paid $30 per share when they purchased the stock on September 19, 2003. They paid $176 to their broker to transact the sale. This information was reported on Form 1099-B.

Tim occasionally travels to Florida for work. When there, he always goes to the dog track. Tim is a habitual loser at the track, but on his last trip he laid odds, a winning greyhound, and collected $2,250 at the track.Tim keeps good records from his betting adventures and can support previous losses at the track of $350.

They also received a Form 1098 from Regions Bank indicating they paid a total of $9,984 in home mortgage interest. The loan qualified as acquisition debt, and the average outstanding principal balance of $316,000. They also paid $3,254 in property taxes on this home and $901 interest on personal debt (i.e. a car loan and credit cards).

They gave $5,342 to the American Red Cross for disaster relief. The Red Cross is an organization officially recognized by the IRS as a nonprofit, tax exempt entity.

Tim and Sara had no liability for Tennessee income tax, but they paid sales tax on all applicable, personal purchases. (Search for the sales tax deduction calculator on the IRS website, and use it to simplify the calculation of their deductible sales tax. Assume they had no additional large purchases that were subject to sales tax in 2017.)

The family had $12,000 in out-of-pocket medical expenses and a total of $325 in 2% miscellaneous itemized expenses. (Record the 2% miscellaneous itemized expenses on line 23 of Schedule A and omit providing any detail.)

Tim and Sara paid $9,254 for Sallys care after school and when school was not in session and Bobbys day care. The provider of this care is as follows: Happy Child Daycare (Fed ID # 12-3333333)11000 Bell Blvd., Houston, TX 77072.

Additional Notes:

Tim and Sara have adequate documentation to support each of the aforementioned expenses, and they have no carryforwards from previous years that will affect their return for the current year.

These taxpayers have no AMT liability, so you may omit Form 6251.

If any underpayment of taxes exists, assume that Tim and Sara paid in the appropriate percentage based on prior year taxes and are therefore not subject to any underpayment penalties.