Beth R. Jordan lives at 2322 Skyview Road, Mesa, AZ 85201. She is a tax accountant with Mesa… 1 answer below »

Beth R. Jordan lives at 2322 Skyview Road, Mesa, AZ 85201. She is a tax accountant with Mesa Manufacturing Company, 1203 Western Avenue, Mesa, AZ 85201 (employer identification number 11-1111111). She also writes computer software programs for tax practitioners and has a part-time tax practice. Beth is single and has no dependents. Beth’s birthday is July 4, 1972, and her Social Security number is 123-45-6789. She wants to contribute $3 to the Presidential Election Campaign Fund.

The following information is shown on Beth’s Wage and Tax Statement (Form W–2) for 2018.

Line Description Amount
1 Wages, tips, other compensation $65,000.00
2 Federal income tax withheld 10,500.00
3 Social Security wages 65,000.00
4 Social Security tax withheld 4,030.00
5 Medicare wages and tips 65,000.00
6 Medicare tax withheld 942.50
15 State Arizona
16 State wages, tips, etc. 65,000.00
17 State income tax withheld 1,954.00

During the year, Beth received interest of $1,300 from Arizona Federal Savings and Loan and $400 from Arizona State Bank. Each financial institution reported the interest income on a Form 1099–INT. She received qualified dividends of $800 from Blue Corporation, $750 from Green Corporation, and $650 from Orange Corporation. Each corporation reported Beth’s dividend payments on a Form 1099–DIV.

Beth received a $1,100 income tax refund from the state of Arizona on April 29, 2018. On her 2017 Federal income tax return, she reported total itemized deductions of $8,200, which included $2,200 of state income tax withheld by her employer.

Fees earned from her part-time tax practice in 2018 totaled $3,800. She paid $600 to have the tax returns processed by a computerized tax return service.

On February 8, 2018, Beth bought 500 shares of Gray Corporation common stock for $17.60 a share. On September 12, 2018, Beth sold the stock for $14 a share.

Beth bought a used sport utility vehicle for $6,000 on June 5, 2018. She purchased the vehicle from her brother-in-law, who was unemployed and was in need of cash. On November 2, 2018, she sold the vehicle to a friend for $6,500.

On January 2, 2018, Beth acquired 100 shares of Blue Corporation common stock for $30 a share. She sold the stock on December 19, 2018, for $55 a share.

During the year, Beth records revenues of $16,000 from the sale of a software program she developed. Beth incurred the following expenditures in connection with her software development business.

Cost of personal computer $7,000
Cost of printer 2,000
Furniture 3,000
Supplies 650
Fee paid to computer consultant 3,500

Beth elected to expense the maximum portion of the cost of the computer, printer, and furniture allowed under the provisions of § 179. These items were placed in service on January 15, 2018, and used 100% in her business.

Although her employer suggested that Beth attend a convention on current developments in corporate taxation, Beth was not reimbursed for the travel expenses of $1,420 she incurred in attending the convention. The $1,420 included $200 for the cost of meals.

During the year, Beth paid $300 for prescription medicines and $2,875 for doctor bills and hospital bills. Medical insurance premiums were paid for her by her employer. Beth paid real property taxes of $1,766 on her home. Interest on her home mortgage (Valley National Bank) was $3,845, and interest to credit card companies was $320. Beth contributed $2,080 to various qualifying charities during the year. Professional dues and subscriptions totaled $350.

Beth paid estimated taxes of $1,000.

Required:

Compute the Beth R. Jordan’s net tax payable or refund due for 2018 by providing the following information that would be reported on Form 1040, Schedules A, B, C, D, SE, Form 8949, and Form 4562.

  • Make realistic assumptions about any missing data.
  • If an amount box does not require an entry or the answer is zero, enter “0”.
  • Enter all amounts as positive numbers.
  • Assume Beth’s qualified dividends and long-term capital gains tax rate is 15%.
  • It may be necessary to provide information regarding the other schedules and forms before completing the requested information for Form 1040.
  • When computing the tax liability, do not round your immediate calculations. If required round your final answers to the nearest dollar.

noneXForm 1040 Information

Provide the following that would be reported on the Beth Jordan’s Form 1040:

1. Filing status: The taxpayer’s filing status:
Single

  • Single
  • Married filing jointly
  • Married filing separately
  • Head of household
  • Qualifying widow(er)

2. Calculate taxable gross income.
$

3. Calculate the total deductions for AGI.
$

4. Calculate adjusted gross income.
$

5. Calculate the greater of the standard deduction or itemized deductions.
$

6. Calculate the deduction for qualified business income.
$

7. Calculate total taxable income.
$

8. Calculate the income tax liability.
$

9. Calculate the self-employment taxes due.
$

10. Calculate total withholding and tax payments.
$

11. Calculate the amount overpaid (refund):
$

12. Calculate the amount of taxes owed:
$

Feedback

The calculation of taxable income begins with gross income. Gross income includes all income, unless the tax law provides for a specific exclusion. Individual taxpayers have two categories of deductions: (1) deductions for adjusted gross income (deductions from gross income to arrive at adjusted gross income) and (2) deductions from adjusted gross income. As a general rule, personal expenditures are disallowed as deductions in arriving at taxable income. However, Congress allows specified personal expenses as deductions from AGI (commonly referred to as itemized deductions). AGI is an important subtotal that serves as the basis for computing percentage limitations on certain itemized deductions such as medical expenses, charitable contributions, and certain casualty losses.

noneXSchedule A Informationn

Answers: $0; $3,720; $3,845; $2,080; $9,645.

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A taxpayer must file certain forms based on the type of income, deductions or credits. Schedule A is completed by individuals who itemize their deductions.nItemized deductions on Schedule A include medical expenses, certain taxes, certain interest, charitable contributions, certain casualty and theft losses, and certain other miscellaneous deductions.

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  • n
  • n Medical Expenses:n
    Medical expenses are the first itemized deduction on Schedule A. Taxpayers are allowed a deduction for the medical expenses paid for themselves, their spouse, and dependents. Expenses that are deductible as medical expenses include the cost of items for the diagnosis, cure, mitigation, treatment, and prevention of disease. Unreimbursed medical expenses for taxpayers can only be deducted to the extent that they exceed 7.5 percent of the taxpayer’s AGI. In this case, the Beth has medical expenses of $3,175. However, any medical expenses are reduced by 7.5% of her AGI. As a result, none of the expenses are deductible.
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  • n
  • nnTaxes:n
    The next itemized deduction that taxpayers are allowed is the deduction for certain state, local, and foreign taxes paid during the year. If a taxpayer itemizes his or her deductions on Schedule A, the following taxes are deductible for 2018: the greater of income taxes (state, local, and foreign) or sales tax; real estate property taxes (state, local, and foreign); personal property taxes (state and local). State income taxes of $1,954, withheld from Beth’s salary, are deductible. No deduction is permitted for federal income taxes paid or withheld. Real estate taxes of $1,766, on her residence, are deductible. Note: The total deduction for taxes may not exceed $10,000.
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  • n
  • nInterest:n
    Taxpayers are allowed a deduction for certain interest paid or accrued during the tax year. Interest is defined as an amount paid for the use of borrowed funds. The following types of personal interest are deductible: Qualified residence interest (mortgage interest); Mortgage interest prepayment penalties; Investment interest; certain interest associated with a passive activity. Beth’s home mortgage interest of Interest of $3,845 is deductible on Schedule A. There is no deduction for credit card interest.
    n
  • n
  • nnContributions:n
    To encourage individuals to be socially responsible, the Internal Revenue Code allows a deduction for charitable contributions. To be deductible, the donation must be made in cash or property; the value of free use of the taxpayer’s property by the charitable organization does not qualify. In addition, out-of-pocket expenses related to qualified charitable activities are deductible as charitable contributions. In this case, the taxpayer may deduct the $1,560 (52 weeks x $30) paid to the church and the $520 (52 weeks x $10) paid to the United Way.
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  • n
  • Since Beth’s standard deduction of $12,000 exceeds her itemized deductions of $9,645, she will choose the standard deduction.

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Provide the following that would be reported on the Beth Jordan’s Schedule A:

1. Calculate the deduction allowed for medical and dental expenses.
$

2. Calculate the deduction for taxes.
$

3. Calculate the deduction for interest.
$

4. Calculate the charitable deduction allowed.
$

5. Calculate total itemized deductions:
$

FeedbackIncorrect noneXSchedule B Informationnn

Answers: $1,700; $2,200.

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Interest and Dividend Income:n

Any interest or dividend income a taxpayer receives or that is credited to his or her account is taxable income, unless it is specifically exempt from tax such as state or municipal bond interest. If the interest or dividends total more than $1,500, the taxpayer is required to file Schedule B of Form 1040, which lists the amounts and sources of the income. nt

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In this case, the taxpayer must include as interest income the $1,300 from Arizona Federal Savings andnLoan and $400 from Arizona State Bank, for a total of $1,700. She also reports the qualified dividends of $800 from BluenCorporation, $750 from Green Corporation, and $650 from Orange Corporation, for a total of $2,200. Note: The dividends are qualified dividends and are subject to a special tax rate of 15%.n”],”user-raw-answer”:[“%40answerChecked=1&1=114&2=2%2C200&%40checkMyWorkAttempts=15&%40submitted=0”]}}’>

Provide the following that would be reported on the Beth Jordan’s Schedule B:

1. Calculate the interest amount.
$

2. Calculate the ordinary dividends.
$

FeedbackPartially correct noneXSchedule C Information -Tax Practicenn

Answers: $3,800; $600; $3,200; Net profit.

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A taxpayer must file certain forms based on the type of income, deductions or credits. Schedule C is used to report income and expense from a trade or business. A separate Schedule C is required for each trade or business. The net earnings are subject to self-employment tax.

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Beth has two businesses, software programming and a tax practice. The tax practice business reports the following income and expenses:
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nnnnnnGross receiptsn</td205″”>nnnExpenses:n</td205″”””>nnnCommissions/feesn</td205″”””>nnnNet profitn</td205″”””>nnn