Question

Imagine that you are preparing taxes for a local tax service provider. A married couple named Judy and Walter Townson has come to you to seeking assistance with their federal income taxes. During your meeting with the Townsons, you gather the following information:

-they are both 55 years of age
-They have two daughters and one son. One daughter (25) is married with children. One daughter (20) is living at home and attending college. Their son (16) is a junior in high school.
-They are currently paying for their college-student daughter to attend school full time.
- Judy is employed as a teacher and makes $60,000 a year. She used $500 of her personal funds to purchase books and other supplies for her classroom.
-Walter is employed as a CPA and makes $100,000 a year
- They provided you a 1099-INT which reported $4,500 in the interest of which $500 was saving bonds interest
- They offered you a 1099-DV which said $300 in dividends
-They received a state tax refund last year of $385
- They provided you a list of expenses including: doctors bill $800, Prescriptions $400, New glasses $2000, dental bills $560, braces $5000, Property taxes for their two cars of $800, which included $50 in decal fees, real estate taxes $4500, mortgage interest $12000, Gifts to charities $1,000, GoFunMe contribution to local families in need $100, and Taxes preparation fees for last years taxes $400.

Consider the most beneficial way for Judy and Walter to file their federal income tax return. Prepare a brief written summary that addresses the following:

-Estimated taxable income for Judy and Walter (please show compilations)
-Summary of tax return, including andy suggestions or tax planning consideration
- Explain how you determined the filing status, dependents, and use of standard/ itemized deduction

The specific course learning outcomes associated with this assignment are:

1. Review tax authories and sources of tax law
2. Assess the concepts of gross income and strategies to minimize gross income
3. Examine deductions from income, limitations on those deductions, and strategies for maximizing deductions.

Answer 1

Age	55	55
Particulars	Judy	Walter	Total Income
Total Income for the year	60,000	1,00,000	1,60,000
Interest income			4,500
Dividend Received			300
Gross Income -1	60,000	1,00,000	1,64,800
Personal expenditure
Purchase of Books	500		500
Doctor's Bill			800
Prescription			400
New Glasses			2,000
Dental Bills			560
Braces			5,000
Property Tax for cars			800
Decal Fees			50
Real estate taxes			4,500
Mortgage Interest			12,000
Gift to charities			1,000
Go fund me contribution			100
Tax Preparation Fees			400
Total Expenditure - 2	500		28,110
Net Income (1 -2)	59,500	1,00,000	1,36,690
Personal Exemption	4,050	4,050	8,100
Standard Deduction	6,350	6,350	12,700
Income after Personal Exepmtion and Standard Deduction (without personal expenditure)	49,600	89,600	1,44,000
Now let us compute the personal Federal Taxes
Married couple filing separately
Upto 37950	5,226
Above 37,950	2,913
Total	8,139
Married Filling Separately	18,530
Total Tax if filing Separately			26,669
Total Tax if filing Jointly			27,477.5
Since taking standard deduction is more benefecial, hence we have taken the same and thus personal expenditure have not been taken into account
Filing Separate return is more benefecial as compared to filing income return jointly