Question

John and Sandy Ferguson got married eight years ago and have a seven-year-old daughter, Samantha. In 2019, John worked as a computer technician at a local university earning a salary of $152,600, and Sandy worked part-time as a receptionist for a law firm earning a salary of $29,600. John also does some Web design work on the side and reported revenues of $4,600 and associated expenses of $1,050. The Fergusons received $920 in qualified dividends and a $230 refund of their state income taxes. The Fergusons always itemize their deductions and their itemized deductions were well over the standard deduction amount last year. The Fergusons had qualifying insurance for purposes of the Affordable Care Act (ACA). Use Exhibit 8-9, Tax Rate Schedule, Dividends and Capital Gains Tax Rates for reference. The Fergusons reported making the following payments during the year: State income taxes of $4,550. Federal tax withholding of $21,000. Alimony payments to John’s former wife of $10,300 (divorced in 2014). Child support payments for John’s child with his former wife of $4,160. $12,260 of real property taxes. Sandy was reimbursed $630 for employee business expenses she incurred. She was required to provide documentation for her expenses to her employer. $3,600 to Kid Care day care center for Samantha’s care while John and Sandy worked. $14,600 interest on their home mortgage ($400,000 acquisition debt). $3,090 interest on a $41,200 home-equity loan. They used the loan to pay for a family vacation and new car. $15,300 cash charitable contributions to qualified charities. Donation of used furniture to Goodwill. The furniture had a fair market value of $460 and cost $2,300. Comprehensive Problem 8-85 Part b [MUST MANUALLY GRADE] Download the Tax Form and enter the required values in the appropriate fields. Please right click on the attached Adobe document and select open in new window. Then, download the Tax Form and enter the required values in the appropriate fields. Save your completed Tax Form to your computer and then upload it here by clicking "Browse." Next, click "Save." (Use 2019 tax rules regardless of year on form.)

Answer 1

Description	Amount
Gross income:
Salary (152600+29600)	$182200
Self-employment revenues	4,600
Dividends	920
State income tax refund	230
(1) Gross income	187950
For AGI deductions:
Self-employment expenses	1050
Employer portion of self-employment taxes (4600-1050)*92.35%*2.9%/2	48
Alimony	10,300
(2) Total for AGI deductions	11398
(3) AGI	176552
Itemized deductions:
Taxes (state income taxes + real property taxes,(4550+12260) upto the limit of 10000)	10,000
Home mortgage interest expense	14,600
Charitable contributions cash	15,300
Charitable contributions property	460
(4) Total  itemized deductions (itemized deduction is greater than standard deduction 24400)	40360
(5) Deduction for qualified business income (4600-1050)*20%	710
(6) Total from AGI deductions	41070
Taxable income	$135482
(7) Tax on income other than qualified dividends ($135,482 – 920 = $134562 MFJ tax rate schedule [$9086 + (22% × (134,562 – 78950))]	$21,321
(8) Tax on qualified dividends (920*15%)	138
(9) Total Federal income tax	$21459
(10) Self Employment tax (4600-1050)*92.35%*2.9%	95
(11) Alternative Minimum tax	0
(12) Total taxes	$21,554
(13) Child and dependent care credit	600
(14) Child tax credit	2,000
(15) Federal tax withholding	21,000
Tax payable (refund)	($2046)

Description	Amount
(1) Child and dependent care expenditures	$3,600
(2) Limit on qualifying expenditures for one dependent	$3,000
(3) John’s earned income (152600+3550)	$156150
(4) Sandy’s earned income	$29,600
(5) Expenditures eligible for credit Least of (1), (2), (3), and (4)	$3,000
(6) Credit percentage rate	20%
Child and dependent care credit	$600

Description	Amount
(1) Taxable income	$135482
Plus adjustments:
(2) Taxes	10,000
Minus adjustments:
(3) State income tax refund	(230)
(4) Alternative minimum taxable income	$145252
(5) AMT Exemption	$117700
(6) AMT base	$27552
(7) TMT ((27552-920)*26%) + (920*15%)	$ 7062
(8) Regular tax	21,459
AMT (regular tax is greater than TMT)	$0