Question

Tim and Sarah Lawrence are married and file a joint return. Tim's Social Security number is 123-45-6789, and Sarah's Social Security number is 111-11-1111. They reside at 100 Olive Lane, Covington, LA 70434. They have two dependent children, Sean and Debra, ages 12 and 16, respectively. Sean's Social Security number is 123-45-6788, and Debra's Social Security number is 123-45-6787. Tim is self-employed as the sole proprietor of an unincorporated business, and Sarah is a corporate executive. Tim reports the following 2018 income and expenses from his business. Gross income $325,000 Business expenses 201,000 Sarah was covered for the entire year by her employer's health insurance policy. Other records related to Sarah's employment provide the following information. Salary $145,000 Unreimbursed travel expenses (including $200 of meals) 1,100 Unreimbursed entertainment expenses 500 Other pertinent 2018 information follows. Proceeds from sale of stock acquired on July 15, 2017 (cost of $12,000), and sold on August 1, 2018 $ 9,800 Proceeds from sale of stock acquired on September 18, 2017 (cost of $5,000), and sold on October 5, 2018 3,800 Wages paid to full-time domestic worker for housekeeping and child supervision 10,000 Interest income received 7,000 Total itemized deductions (not including any potential deductions above) 27,900 Federal income tax withheld 31,850 Estimated payments, Federal income tax 20,000 *****REQUIREMENTS Compute the 2018 net tax payable or refund due for Tim and Sarah Lawrence.

Answer 1