In: Accounting
Reba Dixon is a fifth-grade school teacher who earned a salary
of $38,300 in 2019. She is 45 years old and has been divorced for
four years. She receives $1,230 of alimony payments each month from
her former husband (divorced in 2016). Reba also rents out a small
apartment building. This year Reba received $50,500 of rental
payments from tenants and she incurred $19,695 of expenses
associated with the rental.
Reba and her daughter Heather (20 years old at the end of the year)
moved to Georgia in January of this year. Reba provides more than
one-half of Heather’s support. They had been living in Colorado for
the past 15 years, but ever since her divorce, Reba has been
wanting to move back to Georgia to be closer to her family.
Luckily, last December, a teaching position opened up and Reba and
Heather decided to make the move. Reba paid a moving company $2,070
to move their personal belongings, and she and Heather spent two
days driving the 1,438 miles to Georgia.
Reba rented a home in Georgia. Heather decided to continue living
at home with her mom, but she started attending school full-time in
January and throughout the rest of the year at a nearby university.
She was awarded a $3,060 partial tuition scholarship this year, and
Reba helped out by paying the remaining $500 tuition cost. If
possible, Reba thought it would be best to claim the education
credit for these expenses.
Reba wasn't sure if she would have enough items to help her benefit
from itemizing on her tax return. However, she kept track of
several expenses this year that she thought might qualify if she
was able to itemize. Reba paid $5,860 in state income taxes and
$12,560 in charitable contributions during the year. She paid the
following medical expenses:
Insurance premiums | $8012 |
medical care expenses | $1160 |
prescription medicine | $410 |
non prescription medicine | $160 |
new contact lenses for heather | $260 |
Shortly after the move, Reba got distracted while driving and
she ran into a street sign. The accident caused $960 in damage to
the car and gave her whiplash. Because the repairs were less than
her insurance deductible, she paid the entire cost of the repairs.
Reba wasn’t able to work for two months after the accident.
Fortunately, she received $2,060 from her disability insurance. Her
employer, the Central Georgia School District, paid 60% of the
premiums on the policy as a nontaxable fringe benefit and Reba paid
the remaining 40% portion.
A few years ago, Reba acquired several investments with her portion
of the divorce settlement. This year she reported the following
income from her investments: $2,260 of interest income from
corporate bonds and $1,560 interest income from City of Denver
municipal bonds. Overall, Reba’s stock portfolio appreciated by
$12,060 but she did not sell any of her stocks.
Heather reported $6,320 of interest income from corporate bonds she
received as gifts from her father over the last several years. This
was Heather’s only source of income for the year.
Reba had $10,000 of federal income taxes withheld by her employer.
Heather made $1,000 of estimated tax payments during the year. Reba
did not make any estimated payments. Reba had qualifying insurance
for purposes of the Affordable Care Act (ACA).
(A) Determine Reba’s federal income taxes due or taxes payable for the current year
(B) Determine the amount of FICA taxes Reba was required to pay on her salary.
(C) Determine Heather’s federal income taxes due or payable.