Question

Joe and Jessie are married and have one dependent child. Lizzie. Lizzie is currently in college at State University. Joe works as a design engineer for a manufacturing firm while Jessie runs a craft business from their home. Jessie's craft business consists of making craft items for sale at craft shows that are held periodically at various locations. Jessie spends considerable time and effort on her craft business and it has been consistently profitable over the years. Joe and Jessie own a home and pay interest on their home loan (balance of $220,000) and a personal loan to pay for Lizzie's college expenses (balance of $35,000). Neither Joe nor Jessie is blind or over age 65, and they plan to file as married joint. Based on their estimates, determine Joe and Jessie's AGI and taxable income for the year (2019) and complete pages and 2 of Form 1040 (through taxable income, line 10) Schedule 1 and Schedule A. Assume that the employer portion of the self- employment tax on Jessie's income is $831. Joe and Jessie have summarized the income and expenses they expect to report this year as follows:

Income: Joe's salary $129,100

Jessie's craft sales 18,400

Interest from certificate of deposit 1,650

Interest from Treasury bond funds 716

Interest from municipal bond funds 920

Expenditures: Federal income tax withheld from Joe's wages 13,700

State income tax withheld from Joe's wages 6,400

Social Security tax withheld from Joe's wages 7,482

Real estate taxes on residence Automobile licenses (based on weight) 310

State sales tax paid 1,150

Home mortgage interest 14,000

Interest on Masterdebt credit card 2,300

Medical expenses (unreimbursed) 1,690

Joe's employee expenses (unreimbursed) 2,400

Cost of Jessie's craft supplies 4,260

Postage for mailing crafts 145

Travel and lodging for craft shows 2,230

Self- employment tax on Jessie's craft income 1,662

College tuition paid for Lizzie 5,780

Interest on loans to pay Lizzie's tuition 3,200

Lizzie's room and board at college 12,620

Cash contributions to the Red Cross 525

Answer 1

Answer:

Joe and Jessie The Income and Expenses account to report this year will be as follows:

Income & Expenditure Account For Joe & Jessie For The Year
Particulars		Amount
Income
Salary Income
Joe's Salary	A	$        1,29,100.00
Business Income
Jessie's Craft Sales	B	$           18,400.00
Interest Income
Interest From Certificate of Deposit		$              1,650.00
Interest From Treasury Bond Funds		$                 716.00
Interest From Muncipal Bond Funds		$                 920.00
	C	$              3,286.00
Annual Gross Income	1 = A+B+C	$        1,50,786.00
Expenditure
Taxes Paid
Federal Income Tax		$           13,700.00
State Income Tax		$              6,400.00
Social Security Tax		$              7,482.00
Real Estate Tax		$                 310.00
State Sales Tax		$              1,150.00
	i	$           29,042.00
Interest Expenses
Mortgage Interest	ii	$           14,000.00
Business Expenses
Cost of Jessie's Craft Supplies		$              4,260.00
Travel & Lodging for Craft Shows		$              2,230.00
Self Employment Tax on Jessie's Income		$              1,662.00
Postage for Mailing Crafts		$                 145.00
	iii	$              8,297.00
Other Expenses
Medical Expenses		$              1,690.00
Joe's Employee Expenses		$              2,400.00
College Tution Paid for Lizzie		$              5,780.00
	iv	$              9,870.00
Gift Expenses
Cash Contribution to Red Cross	v	$                 525.00
Total Deductible Expenses	2 = i to v	$           61,734.00
Taxable Income	(1 - 2)	$   89,052.00
Note: Interest on Masterdebit Credit Card, Interest on loan to pay Lizzie's tution fee and Lizzie's Room and board at college all this 3 expenses are of personal nature, hence not considered while computing the taxable income.