Question

Please refer to the USA. irs.gov for any refernce

Form 1040. William A. Gregg, a high school educator, and Mary W. Gregg, a microbiologist, are married and file a joint income tax return for 2019. Neither William nor Mary is over 50 years old, and both have excellent sight. They provide the sole support of their three children: Barry, Kimberly, and Rachel (all under age 17). The following information is from their records for 2019:

salaries and wages, William. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54,000

Federal income tax withheld. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000
Salaries and wages, Mary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,000

Federal income tax withheld. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,000
Interest income—Home Savings and Loan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 690

Interest income—City Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 220

Tax-exempt interest income—State of Texas Bonds . . . . . . . . . . . . . . . . . . . . . . 1,400
Itemized deductions as follows:

Hospitalization insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 320
Unreimbursed fees of doctors, hospitals, etc. . . . . . . . . . . . . . . . . . . . . . . . . 740

Unreimbursed prescription drugs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 310
Real estate taxes on residence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,300

State income taxes paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,700
State sales taxes paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 720

Interest paid on original home mortgage . . . . . . . . . . . . . . . . . . . . . . . . . . . .18,430
Charitable contribution—Faith Church. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,000

Charitable contribution—State University. . . . . . . . . . . . . . . . . . . . . . . . . . . .200
Quarterly estimated federal taxes paid. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,500

Calculate the 2019 Federal income tax and the tax due (or refund) for the Greggs assuming they file a joint return. Form 1040, along with Schedules A and B, may be completed. Supply fictitious information for the address and Social Security numbers. (Note: Use 2019 tax forms since the 2020 forms may not be available.)

Answer 1

Schedule A : Itemized deduction

Sr No	Particulars	Amount	Explanation
1.	Medical expense
	Hospitalisation insurance	$320	Unreimbursed medical expenses are within the limit of 7.5% of AGI. Hence entire amount will be allowed.
	Unreimbursed fees of doctors, hospitals etc	$740	Unreimbursed medical expenses are within the limit of 7.5% of AGI. Hence entire amount will be allowed.
	Unreimbursed prescription drug	$310	Unreimbursed medical expenses are within the limit of 7.5% of AGI. Hence entire amount will be allowed.
2.	State taxes
	Real taxes on residence	$6,300	As Greggs are filing jointly, state taxes will be allowed to itemize upto $10,000.
	State income tax paid	$2,700	State income taxes are higher than the state sales taxes. As any one of the same can be considered. So whichever is higher is considered here.
3.	Interest
	Interest on original home mortgage	$18,430	Entire interest will be allowed as deduction.
4.	Charitable Contribution
	Charitable Contribution- Faith church	$4,000	As charitable contributions are upto 60% of AGI, entire amount is allowed.
	Charitable Contribution- State University	$200	As charitable contributions are upto 60% of AGI, entire amount is allowed.
	Total	$33,000

Schedule B: Dividend and interest income

Particulars	Amount	Amount
Interest income - Home savings and loan	$690	-
Interest income - City Bank	$220	-
Tax exempt interest income	-	$1,400
Total	$910	$1,400

Child tax credit:

Greggs will be eligible for Child tax credit as all the children are below the age of 17 years and are also qualifying children. Hence $2,000 per child will be allowed as a tax credit. Out of $2,000 refundable credit is $1,400 per child.

Details for Form 1040

Particulars	Amount	Taxable Amount
1. Wages, salaries, tips etc.
William	$54,000
Mary	$60,000	$114,000
2a. Tax exempt interest	$1,400
2b. Taxable interest	$910	$910
Adjusted Gross Income		$114,910
9. Itemized deduction		$33,000
11b. Taxable income		$81,910
Tax on taxable income (based on tax table from IRS)		$9,741
13a. Child tax credit		$6,000
15. Other taxes (federal taxes quarterly paid)		$3,500
17. Federal income tax withheld		$11,000
20. Refund Amount		$10,759