Question

How to Complete page 1 of the 2017 federal 1040. (Tax Accouting Problem)

Richard S. and Mary A. Smith are Michigan residents and file a joint tax return, they have no dependents. Richard was born in 1949 and Mary in 1950. Richard is retired from the State of Michigan and receives a pension of $28,000; which is fully taxable for federal income purposes.   Richard also works part-time at Wal-Mart and earned $35,800. Mary spends her time volunteering; however, during the year received from E*Trade a $20,000 distribution from her IRA account; also 100% taxable for federal income purposes.

Richard and Mary invested in US Savings Bonds and their local Nowhere, MI municipal bonds. They redeemed a number of US Savings Bonds this year and thus earned interest of $1,200.   The municipal bond paid them $600 of interest. Richard and Mary also received qualified dividends of $9,000 this year.

Richard and Mary paid property taxes of $2,900 and their home which is assessed at $115,000. Richard had $900 withheld from his pension and $2,300 withheld from Wal-Mart for state income taxes (see attached for details). Mary did not have any funds withheld from her IRA distribution for state income taxes. Richard paid for medical and dental insurance for him and Mary which cost $2,100.

Richard and Mary purchased items from out of state but did track the receipts for these purchases and did not pay Michigan sales tax.

Social Security Numbers: Richard 123-43-5678   Mary 987-65-4321

School District Code 32000

Address: 123 Oak Street Nowhere, MI 49870

State Withholding Information

Company Name	State ID #	Wages	Withholdings
Walmart	38-9876541	$35,800	$2,300
State of MI	38-4569871	$28,000	$900
E*Trade	56-1234567	$20,000	$0

Answer 1

1. Interest from redeemed US saving bonds form there local nowhere MI and interest from Municipal bonds , Generally interest from US savings bonds and municipal bonds are is exempt from state level taxes so here we have considered both Interest income as state non-taxable since we have to report on federal income tax so we have report on 1040 line 8B, and we have upload page 1 of the 2017 federal 1040 .