Question

Alfred E. Old and Beulah A. Crane, each age 42, married on September 7, 2016. Alfred and Beulah will file a joint return for 2018. Alfred's Social Security number is 111-11-1109. Beulah's Social Security number is 123-45-6780, and she adopted "Old" as her married name. They live at 211 Brickstone Drive, Atlanta, GA 30304.

Alfred was divorced from Sarah Old in March 2016. Under the divorce agreement, Alfred is to pay Sarah $1,250 per month for the next 10 years or until Sarah's death, whichever occurs first. Alfred pays Sarah $15,000 in 2018. In addition, in January 2018, Alfred pays Sarah $50,000, which is designated as being for her share of the marital property. Also, Alfred is responsible for all prior years' income taxes. Sarah's Social Security number is 123-45-6788.

Alfred's salary for 2018 is $150,000. He is an executive working for Cherry, Inc. (Federal I.D. No. 98-7654321). As part of his compensation package, Cherry provides him with group term life insurance equal to twice his annual salary. His employer withheld $24,900 for Federal income taxes and $8,000 for state income taxes. The proper amounts were withheld for FICA taxes.

Beulah recently graduated from law school and is employed by Legal Aid Society, Inc. (Federal I.D. No. 11-1111111), as a public defender. She receives a salary of $42,000 in 2018. Her employer withheld $7,500 for Federal income taxes and $2,400 for state income taxes. The proper amounts were withheld for FICA taxes.

Alfred and Beulah had interest income of $500. Alfred and Beulah receive a $1,900 refund on their 2017 state income taxes. They itemized deductions on their 2017 Federal income tax return (total of $15,000). Alfred and Beulah pay $4,500 interest and $1,450 property taxes on their personal residence in 2018. Their charitable contributions total $2,400 (all to their church). They paid sales taxes of $1,400, for which they maintain the receipts. Both spouses had health insurance for all months of 2018 and do not want to contribute to the Presidential Election Campaign.

Required:

Compute the Olds' net tax payable (or refund due) for 2018 to finish form 1040 by answering the questions below:

• It may be necessary to complete the tax schedule and worksheet before completing Form 1040.
• Enter all amounts as positive numbers.
• If an amount box does not require an entry or the answer is zero, enter "0".
• Make realistic assumptions about any missing data.
• When computing the tax liability, do not round your immediate calculations. If required round your final answers to the nearest dollar.
• Use the 2018 Tax Rate Schedule provided. Do not use the Tax Tables.

1. Wages, salaries, tips etc..............$192,000

2b. Taxable interest..........................$_________?

6. Total Income. Add lines 1 through 5. Add any amount from Schedule 1, line 22($2,200).......$__________?

7. Adjusted gross income. If you have no adjustments to income, enter the amount from line 6; otherwise subtract Schedule 1, line 36($15,000) from line 6........$_________?

8. Standard deduction or itemized deductions............$24,000

10. Taxable income. Subtract lines 8 and 9 from line 7. If zero or less, enter -0-.......$_________?

11a. Tax(see inst)......$__________?

11b. Add any amount from Schedule 2.......$__________?

13. Subtract line 12 from line 11. If zero or less, enter -0-........$________?

15. Total tax. Add lines 13 and 14.......................$__________?

16. Federal income tax withheld.........................$32,400

18. Add lines 16 and 17......................................$32,400

19. If line 18 is more than line 15, subtract line 15 from line 18. This is the amount you overpaid.........$__________?

20a. Amount of line 19 you want refunded to you. If Form 8888 is attached, check here...............$___________?

Answer 1

Computation of Old's Net Tax Payable for 2018

Adjusted Gross Income $ 179700

Taxable Income $ 155700

Refund is due for ($6267) /- in this case .

Note - Kindly verify the tax slab for 2018 as it is missing in the question , so assumption based it is calculated based on data available in site.

Working Notes  

Gross Income
Salary ( $ 150,000+$42,000)	$192,000
Group Term Life Insurance (WN1)	$300
Intrest Income	$500
State Tax Refund ( WN2)	$1,900
Total Gross Income	$194,700
Deductions from Adjusted Gross Total Income
Alimony Paid ( WN 3)	($15,000)
Adjusted Gross Income	$179,700
Itemized deductions
State Income Taxes ( WN 4)      $10400
Home Mortgage Intrest               $4500
Real Estate Taxes                            $1450
Cash Contributions                         $2400
Total Itemized Deduction - ($ 18750)
Greater of itemized deduction or Standard deduction $ 24000	($24,000)
Taxable Income	$155,700
Tax on Income ( $155700-$77400)*22/100+$8907	$26,133
Less : Federal Income Tax Witheld ( WN 4 )	$32,400
Net Tax Payable ( Refund Due )	($6,267)

* There is no personal exemptions for the Year 2018.

WN 1 Group Term Life Insurance

Group Term Life Insurance	Amount ( S)
Cost per $ 1000 of Protection for 1 month ( Age 42)	0.1
Group Term life imsurance in excess of $ 50,000 ( 300,000-50,000)	$250,000
Total cost for 1 month ( $250,000/1000*0.1)	$25.0
Group Term Life Insurance for Year ( 25*12)	$300

WN2 State Tax Refund Taxable

State Tax Refund
1)Itemized Deduction ( including $ 1900)	$15,000
2) Standard Deduction	$12,700
3)Greater of 1 and 2	$15,000
4_ Iremized deduction ( excluding $1900)	$13,100
5 ) Greater of (2) and (4)	$13,100
State Tax Refund Taxable	$1,900

WN 3 Alimony Paid

The $15,000 is deductible alimony. The $50,000 payment is a property settlement and is not deductible by Alfred.

WN 4 Tax withheld

	Federal Income Tax
Alfred	$24,900
Beulah	$7,500
Total	$32,400