Question

Jack and Dana Smith support in nursing homes both Jack's parents and Dana's parents. Both Jack's parents are 70 and 68 years old respectively and have no income except for the $3,600 in Social Security they receive annually. Dana's parents, both 72 years of age, have the following sources of income:

Social Security=$9,800, Interest Income (joint ownership)=$2,600, Dividend Income =$900.

Jack's annual salary is $45,000 and his wife's annual salary is $55,000.

They have 2 small children who live at home. Also, they own an apartment house from which they derive $6,000 net rental income. two items from their rental property confused them so they did not include them in their rental income:

- Security deposits received and to be used against final month's rent= $500

- Two tenants paid rent in advance in December 2020. The rent was due Jan 1,2021. =$600.

Dana owned a stock prior to her marriage to Jack and received the following cash dividends:

- General Corp. Nonqualified common stock dividend= $300

- Live forever life insurance Co. (dividends)=$100

Jack and Dana have several sources of interest income:

- Interest income from savings income =$850

-Interest income from state of Tennessee Highway Bonds =$400

Dana entered the local area bake-off, won first place for her cherry pie, and received a $1,000 cash prize.

Jack, who is an accountant, made an arrangement with Harry the dentist. Jack would do Harry's tax work if Harold would take care of Jack and his family's dental work. During the year, Jack estimated that the value of his services to Harry was $900 and that Harry gave Jack and his family $1,800 worth of dental services. In Dec, Jack did a consulting assignment on a weekend and received $700. No social Security or taxes were withheld.

During the year, they had $15,000 withheld for federal taxes.

During 2020, Jack and Dana have $26,000 of itemized deductions. Compute Jack and Dana's net tax due, including self-employment tax. Assume dividends are taxed at ordinary rates.

(Notes: I need help on how to get to the answer, in order to take good notes as well. thank you)

Answer 1

	Amount		Amount	Notes
Wages, salaries, tips, etc. Attach Form(s) W-2			100000
Tax-exempt interest	400	Taxable interest. Attach Sch. B if required	850	Government bonds being tax exempt
Qualified dividends	100	Ordinary dividends. Attach Sch. B if required	300	No tax on dividends received from participating lofe insurance companies
IRA distributions	0	Taxable amount	0
Pensions and annuities	0	Taxable amount	0
Social security benefits	0	Taxable amount	0
Capital gain or (loss). Attach Schedule D if required. If not required, check here	0		0
Other income from Schedule 1, line 9		Cash price	10600	Cash prize exceeding $ 50 to be reported
Add lines 1, 2b, 3b, 4b, 4d, 5b, 6, and 7a. This is your total income			111750
Adjustments to income from Schedule 1, line 22		Contribution to IRA	0
Subtract line 8a from line 7b. This is your adjusted gross income			111750
Standard deduction or itemized deductions (from Schedule A		Itemized not condiered as it is lower	24400	Lower of 24400 or itemised deduction
Qualified business income deduction. Attach Form 8995 or Form 8995-A			0
Add lines 9 and 10			24400
Taxable income. Subtract line 11a from line 8b. If zero or less, enter -0-			87350
Tax (see inst.) Check if any from Form(s): 1
Add Schedule 2, line 3, and line 12a and enter the total			10246	9086
Child tax credit or credit for other dependents			10000	2000 each for 2 children 3000 each for each elderly dependent, in-home tax credit
Add Schedule 3, line 7, and line 13a and enter the total			10000
Subtract line 13b from line 12b. If zero or less, enter -0-			246
Other taxes, including self-employment tax, from Schedule 2, line 10			0
Add lines 14 and 15. This is your total tax			246
Federal income tax withheld from Forms W-2 and 1099			15000
Other payments and refundable credits			0
Earned income credit (EIC)			0
Additional child tax credit. Attach Schedule 8812			0
American opportunity credit from Form 8863, line 8			0
Schedule 3, line 14			0
Add lines 18a through 18d. These are your total other payments and refundable credits			0
Add lines 17 and 18e. These are your total payments			15000
If line 19 is more than line 16, subtract line 16 from line 19. This is the amount you overpaid			14754
Amount of line 20 you want refunded to you. If Form 8888 is attached, check here			14754
Routing number
Account number
Amount of line 20 you want applied to your 2020 estimated tax
Amount you owe. Subtract line 19 from line 16. For details on how to pay, see instructions
Estimated tax penalty (see instructions

Schedule 1	Amount	Notes
Taxable refunds, credits, or offsets of state and local income taxes
Alimony received
Date of original divorce or separation agreement (see instructions)
Business income or (loss). Attach Schedule C	1800	Fair market value of services received in bartering
Other gains or (losses). Attach Form 4797
Rental real estate, royalties, partnerships, S corporations, trusts, etc. Attach Schedule E	7100	includes advance rent & security deposit as final months' rent it is advance rent
Farm income or (loss). Attach Schedule F
Unemployment compensation
Other income. List type and amount	700	assignment income
	1000	Cash prize exceeding $ 50 to be reported
Combine lines 1 through 8. Enter here and on Form 1040 or 1040-SR, line 7a	10600