Question

Marc and Michelle are married and earned salaries this year of $73,200 and $15,450, respectively. In addition to their salaries, they received interest of $350 from municipal bonds and $1,650 from corporate bonds. Marc contributed $3,650 to an individual retirement account, and Marc paid alimony to a prior spouse in the amount of $2,650. Marc and Michelle have a 10-year-old son, Matthew, who lived with them throughout the entire year. Thus, Marc and Michelle are allowed to claim a $2,000 child tax credit for Matthew. Marc and Michelle paid $8,300 of expenditures that qualify as itemized deductions and they had a total of $7,170 in federal income taxes withheld from their paychecks during the course of the year. (Use the tax rate schedules.)

a. What is Marc and Michelle’s gross income?

description	amount
gross income

    

b. What is Marc and Michelle’s adjusted gross income?

    

c. What is the total amount of Marc and Michelle’s deductions from AGI?

    

d. What is Marc and Michelle’s taxable income?

    

e. What is Marc and Michelle’s taxes payable or refund due for the year?

    

Marc and Michelle are married and earned salaries this year of $73,200 and $15,450, respectively. In addition to their salaries, they received interest of $350 from municipal bonds and $1,650 from corporate bonds. Marc contributed $3,650 to an individual retirement account, and Marc paid alimony to a prior spouse in the amount of $2,650. Marc and Michelle have a 10-year-old son, Matthew, who lived with them throughout the entire year. Thus, Marc and Michelle are allowed to claim a $2,000 child tax credit for Matthew. Marc and Michelle paid $8,300 of expenditures that qualify as itemized deductions and they had a total of $7,170 in federal income taxes withheld from their paychecks during the course of the year. (Use the tax rate schedules.)

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federal tax procedure

1040 Department of the Treasury—Internal Revenue Service (99) U.S. Individual Income Tax Return 2017 OMB No. 1545-0074 IRS Use Only—Do not write or staple in this space. For the year Jan. 1–Dec. 31, 2017, or other tax year beginning , 2017, ending , 20 See separate instructions. Your first name and initial Last name Your social security number
If a joint return, spouse’s first name and initial Last name Spouse’s social security number
▲ Make sure the SSN(s) above and on line 6c are correct.
Home address (number and street). If you have a P.O. box, see instructions. Apt. no.
City, town or post office, state, and ZIP code. If you have a foreign address, also complete spaces below (see instructions).
Foreign country name                                        Foreign province/state/county                        Foreign postal code  
Presidential Election Campaign Check here if you, or your spouse if filing jointly, want $3 to go to this fund. Checking a box below will not change your tax or refund. You Spouse
Filing Status
Check only one box.
1 Single 2 Married filing jointly (even if only one had income) 3 Married filing separately. Enter spouse’s SSN above and full name here. ▶
4 Head of household (with qualifying person). (See instructions.) If the qualifying person is a child but not your dependent, enter this child’s name here. ▶ 5 Qualifying widow(er) (see instructions) Exemptions 6a Yourself. If someone can claim you as a dependent, do not check box 6a . . . . . b Spouse . . . . . . . . . . . . . . . . . . . . . . . . } c Dependents: (1) First name                         Last name (2) Dependent’s social security number (3) Dependent’s relationship to you (4) ✓ if child under age 17 qualifying for child tax credit (see instructions)
If more than four dependents, see instructions and check here ▶
d Total number of exemptions claimed . . . . . . . . . . . . . . . . .
Boxes checked on 6a and 6b No. of children on 6c who: • lived with you • did not live with you due to divorce or separation (see instructions) Dependents on 6c not entered above Add numbers on lines above ▶
Income
Attach Form(s) W-2 here. Also attach Forms W-2G and   1099-R if tax was withheld.
If you did not get a W-2,   see instructions.
7 Wages, salaries, tips, etc. Attach Form(s) W-2 . . . . . . . . . . . . 7 8a Taxable interest. Attach Schedule B if required . . . . . . . . . . . . 8a b Tax-exempt interest. Do not include on line 8a . . . 8b 9 a Ordinary dividends. Attach Schedule B if required . . . . . . . . . . . 9a b Qualified dividends . . . . . . . . . . . 9b 10 Taxable refunds, credits, or offsets of state and local income taxes . . . . . . 10 11 Alimony received . . . . . . . . . . . . . . . . . . . . . 11 12 Business income or (loss). Attach Schedule C or C-EZ . . . . . . . . . . 12 13 Capital gain or (loss). Attach Schedule D if required. If not required, check here ▶ 13 14 Other gains or (losses). Attach Form 4797 . . . . . . . . . . . . . . 14 15 a IRA distributions . 15a b Taxable amount . . . 15b 16 a Pensions and annuities 16a b Taxable amount . . . 16b 17 Rental real estate, royalties, partnerships, S corporations, trusts, etc. Attach Schedule E 17 18 Farm income or (loss). Attach Schedule F . . . . . . . . . . . . . . 18 19 Unemployment compensation . . . . . . . . . . . . . . . . . 19 20 a Social security benefits 20a b Taxable amount . . . 20b 21 Other income. List type and amount 21 22 Combine the amounts in the far right column for lines 7 through 21. This is your total income ▶ 22
Adjusted Gross Income
23 Educator expenses . . . . . . . . . . . 23 24 Certain business expenses of reservists, performing artists, and fee-basis government officials. Attach Form 2106 or 2106-EZ 24 25 Health savings account deduction. Attach Form 8889 . 25 26 Moving expenses. Attach Form 3903 . . . . . . 26 27 Deductible part of self-employment tax. Attach Schedule SE . 27 28 Self-employed SEP, SIMPLE, and qualified plans . . 28 29 Self-employed health insurance deduction . . . . 29 30 Penalty on early withdrawal of savings . . . . . . 30 31 a Alimony paid b Recipient’s SSN ▶ 31a 32 IRA deduction . . . . . . . . . . . . . 32 33 Student loan interest deduction . . . . . . . . 33 34 Tuition and fees. Attach Form 8917 . . . . . . 34 35 Domestic production activities deduction. Attach Form 8903 35 36 Add lines 23 through 35 . . . . . . . . . . . . . . . . . . . 36 37 Subtract line 36 from line 22. This is your adjusted gross income . . . . . ▶ 37 For Disclosure, Privacy Act, and Paperwork Reduction Act Notice, see separate instructions. Cat. No. 11320B Form 1040 (2017)
Form 1040 (2017) Page 2
Tax and Credits
38 Amount from line 37 (adjusted gross income) . . . . . . . . . . . . . . 38 39a Check if: { You were born before January 2, 1953, Blind. Spouse was born before January 2, 1953, Blind.}Total boxes checked ▶ 39a b If your spouse itemizes on a separate return or you were a dual-status alien, check here ▶ 39b
Standard Deduction for— • People who check any box on line 39a or 39b or who can be claimed as a dependent, see instructions. • All others: Single or Married filing separately, $6,350 Married filing jointly or Qualifying widow(er), $12,700 Head of household, $9,350
40 Itemized deductions (from Schedule A) or your standard deduction (see left margin) . . 40 41 Subtract line 40 from line 38 . . . . . . . . . . . . . . . . . . . 41 42 Exemptions. If line 38 is $156,900 or less, multiply $4,050 by the number on line 6d. Otherwise, see instructions 42 43 Taxable income. Subtract line 42 from line 41. If line 42 is more than line 41, enter -0- . . 43 44 Tax (see instructions). Check if any from: a Form(s) 8814 b Form 4972 c 44 45 Alternative minimum tax (see instructions). Attach Form 6251 . . . . . . . . . 45 46 Excess advance premium tax credit repayment. Attach Form 8962 . . . . . . . . 46 47 Add lines 44, 45, and 46 . . . . . . . . . . . . . . . . . . . ▶ 47 48 Foreign tax credit. Attach Form 1116 if required . . . . 48 49 Credit for child and dependent care expenses. Attach Form 2441 49 50 Education credits from Form 8863, line 19 . . . . . 50 51 Retirement savings contributions credit. Attach Form 8880 51 52 Child tax credit. Attach Schedule 8812, if required. . . 52 53 Residential energy credits. Attach Form 5695 . . . . 53 54 Other credits from Form: a 3800 b 8801 c 54 55 Add lines 48 through 54. These are your total credits . . . . . . . . . . . . 55 56 Subtract line 55 from line 47. If line 55 is more than line 47, enter -0- . . . . . . ▶ 56
Other Taxes
57 Self-employment tax. Attach Schedule SE . . . . . . . . . . . . . . . 57 58 Unreported social security and Medicare tax from Form: a 4137 b 8919 . . 58 59 Additional tax on IRAs, other qualified retirement plans, etc. Attach Form 5329 if required . . 59 60 a Household employment taxes from Schedule H . . . . . . . . . . . . . . 60a b First-time homebuyer credit repayment. Attach Form 5405 if required . . . . . . . . 60b 61 Health care: individual responsibility (see instructions) Full-year coverage . . . . . 61 62 Taxes from: a Form 8959 b Form 8960 c Instructions; enter code(s) 62 63 Add lines 56 through 62. This is your total tax . . . . . . . . . . . . .   ▶ 63 Payments 64 Federal income tax withheld from Forms W-2 and 1099 . . 64 65 2017 estimated tax payments and amount applied from 2016 return 65 If you have a qualifying child, attach Schedule EIC. 66a Earned income credit (EIC) . . . . . . . . . . 66a b Nontaxable combat pay election 66b 67 Additional child tax credit. Attach Schedule 8812 . . . . . 67 68 American opportunity credit from Form 8863, line 8 . . . 68 69 Net premium tax credit. Attach Form 8962 . . . . . . 69 70 Amount paid with request for extension to file . . . . . 70 71 Excess social security and tier 1 RRTA tax withheld . . . . 71 72 Credit for federal tax on fuels. Attach Form 4136 . . . . 72 73 Credits from Form: a 2439 b Reserved c 8885 d 73 74 Add lines 64, 65, 66a, and 67 through 73. These are your total payments . . . . .   ▶ 74 Refund
Direct deposit? See instructions.
75 If line 74 is more than line 63, subtract line 63 from line 74. This is the amount you overpaid 75 76a Amount of line 75 you want refunded to you. If Form 8888 is attached, check here . ▶ 76a ▶
▶
b Routing number ▶ c Type: Checking Savings d Account number 77 Amount of line 75 you want applied to your 2018 estimated tax ▶ 77
Amount You Owe
78 Amount you owe. Subtract line 74 from line 63. For details on how to pay, see instructions    ▶ 78 79 Estimated tax penalty (see instructions) . . . . . . . 79
Third Party Designee
Do you want to allow another person to discuss this return with the IRS (see instructions)? Yes. Complete below. No Designee’s name ▶ Phone no. ▶ Personal identification number (PIN)              ▶
Sign Here Joint return? See instructions. Keep a copy for your records.
Under penalties of perjury, I declare that I have examined this return and accompanying schedules and statements, and to the best of my knowledge and belief, they are true, correct, and accurately list all amounts and sources of income I received during the tax year. Declaration of preparer (other than taxpayer) is based on all information of which preparer has any knowledge. Your signature Date Your occupation Daytime phone number
Spouse’s signature. If a joint return, both must sign. Date ▲
Spouse’s occupation If the IRS sent you an Identity Protection PIN, enter it here (see inst.)
Paid Preparer Use Only
Print/Type preparer’s name Preparer’s signature Date
Check         if self-employed
PTIN
Firm’s name     ▶ Firm’s address ▶
Firm’s EIN ▶ Phone no. Go to www.irs.gov/Form1040 for instructions and the latest information. Form 1040 (2017)

Answer 1

Description	amount	computation
(1) Realized income from all sources	90650	73200 salary + 15450 salary + 350 municipal bond interest + 1650 corporate bond interest
(2) Excluded or deferred income	350	Nontaxable municipal bond interest
(3) Gross income	90300	(1) - (2)
(4) For AGI deductions	6300	3650 + 2650
(5) Adjusted gross income	84000	(3) - (4)
(6) Standard deduction	12700
(7) Itemized deductions	8300
(8) Greater of standard deductions or itemized deductions	12700	(6) > (7)
(9) Personal and dependency exemptions	12150	(4050*3)
(10) Total deductions from AGI	24850	(8) + (9)
(11) Taxable income	59150	(5) - (10)
(12) Income tax liability	7940	1865 + ((59150-18650)*15%)
(13) Other taxes	0
(14) Total tax	7940	(12) +(13)
(15) Credits	(2000)
(16) Prepayments	(7170)
Taxes refund	(1230)	(14) + (15) + (16)

Part A

Marc and Michelle’s gross income = 90300

Part B

Marc and Michelle’s adjusted gross income = 84000

Part C

the total amount of Marc and Michelle’s deductions from AGI = 24850

Part D

Marc and Michelle’s taxable income = 59150

Part E

Marc and Michelle’s taxes refund due for the year = 1230