Question

Comprehensive Problem 2-2A

Ray and Maria Gomez have been married for 3 years. They live at 1610 Quince Ave., McAllen, TX 78701. Ray is a propane salesman for Palm Oil Corporation and Maria works as a city clerk for the City of McAllen. Maria's Social Security number is 444-65-9912 and Ray’s is 469-21-5523. Ray’s birthdate is February 21, 1988 and Marie’s is December 30, 1990. Ray and Maria’s earnings are reported on the following Form W-2s:

a Employee's social security number 469-21-5523 OMB No. 1545-0008 Safe, accurate, FAST! Use IRS e ~ file Visit the IRS website at www.irs.gov/efile b Employer identification number (EIN) 21-7654321 1 Wages, tips, other compensation 30,129.00 2 Federal income tax withheld 4,120.00 c Employer's name, address, and ZIP code Palm Oil Corp. 11134 E. Pecan Blvd. McAllen, TX 78501 3 Social security wages 30,129.00 4 Social security tax withheld 1,868.00 5 Medicare wages and tips 30,129.00 6 Medicare tax withheld 436.87 7 Social security tips 8 Allocated tips d Control number 9 10 Dependent care benefits e Employee's first name and initial Ray Gomez 1610 Quince Avenue McAllen, TX 78701 Last name Suff. 11 Nonqualified plans 12a See instructions for box 12 C o d e 13 Statutory employee Retirement plan Third-party sick pay ☐ ☐ ☐ 12b C o d e 14 Other 12c C o d e 12d C o d e f Employee's address and ZIP code 15State TX Employer's state ID number 16 State wages, tips, etc. 17 State income tax 18 Local wages, tips, etc. 19 Local income tax 20 Locality name Form W-2 Wage and Tax Statement 2016 Department of the Treasury—Internal Revenue Service Copy B–To Be Filed With Employee's FEDERAL Tax Return. This information is being furnished to the Internal Revenue Service.

a Employee's social security number 444-65-9912 OMB No. 1545-0008 Safe, accurate, FAST! Use IRS e ~ file Visit the IRS website at www.irs.gov/efile b Employer identification number (EIN) 23-4444321 1 Wages, tips, other compensation 32,245.00 2 Federal income tax withheld 5,020.00 c Employer's name, address, and ZIP code City of McAllen 1300 W. Houston Ave. McAllen, TX 78501 3 Social security wages 32,245.00 4 Social security tax withheld 1,999.19 5 Medicare wages and tips 32,245.00 6 Medicare tax withheld 467.55 7 Social security tips 8 Allocated tips d Control number 9 10 Dependent care benefits e Employee's first name and initial Maria Gomez 1610 Quince Avenue McAllen, TX 78701 Last name Suff. 11 Nonqualified plans 12a See instructions for box 12 C o d e 13 Statutory employee Retirement plan Third-party sick pay ☐ ☐ ☐ 12b C o d e 14 Other 12c C o d e 12d C o d e f Employee's address and ZIP code 15State TX Employer's state ID number 16 State wages, tips, etc. 17 State income tax 18 Local wages, tips, etc. 19 Local income tax 20 Locality name Form W-2 Wage and Tax Statement 2016 Department of the Treasury—Internal Revenue Service Copy B–To Be Filed With Employee's FEDERAL Tax Return. This information is being furnished to the Internal Revenue Service.

Ray and Maria have interest income of $641 from a savings account at McAllen State Bank. In addition, they own U.S. Savings bonds (Series EE). The bonds had a value of $10,000 on January 1, 2016, and their value is $10,700 on December 31, 2016. They have not made an election with respect to these bonds.

Ray has an ex-wife named Judy Gomez. Pursuant to their divorce decree, Ray pays her $455 per month in alimony. All payments were made on time in 2016. Judy's Social Security number is 566-74-8765.

During 2016, Ray was in the hospital for a successful operation. His health insurance company reimbursed Ray $4,732 for all of his hospital and doctor bills.

In June 2016, Maria's father died. Under a life insurance policy owned and paid for by her father, Maria was paid death benefits of $25,000.

Maria bought a Texas lottery ticket on impulse during 2016. Her ticket was lucky and she won $3,900. The winning amount was paid to Maria in November 2016, with no income tax withheld.

Palm Oil Corporation provide Ray with a company car to drive while he is working. The Corporation spent $5,000 to maintain this vehicle during 2016. Ray never uses the car for personal purposes.

Required:

Complete the Gomez's federal tax return for 2016. Use Form 1040 below. Make realistic assumptions about any missing data. If an amount box does not require an entry or the amount is zero, enter "0".

Click here to access the tax table to use for this problem.

Form 1040 Department of the Treasury—Internal Revenue Service (99) U.S. Individual Income Tax Return 2016 OMB No. 1545-0074 IRS Use Only For the year Jan. 1–Dec. 31, 2016, or other tax year beginning , 2016, ending , 20 See separate instructions. Your first name and initial Ray Last name Gomez Your social security number 469-21-5523 If a joint return, spouse's first name and initial Maria Last name Gomez Spouse's social security number 444-65-9912 Home address (number and street). If you have a P.O. box, see instructions. 1610 Quince Avenue Apt. no. ▲ Make sure the SSN(s) above and on line 6c are correct. City, town or post office, state, and ZIP code. If you have a foreign address, also complete spaces below (see instructions). Mc Allen, TX 78701 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 Foreign country name Foreign province/state/country Foreign postal code Filing status Exemptions 6a Yourself. If someone can claim you as a dependent, do not check box 6a . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . } Boxes checked on 6a and 6b b Spouse . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . If more than four dependents, see instructions and check here. ► ▢ c Dependents: (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) No. of children on 6c who: • lived with you ________ (1) First name Last name • did not live with you due to divorce or separation (see instructions) ________ Dependents on 6c not entered above ________ d Total number of exemptions claimed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 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 9a 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 15a IRA distributions . . . . . . . . . . . 15a b Taxable amount . . . . 15b 16a 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 20a 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 31a 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 (2016)

Form 1040 (2016) Page 2 38 Amount from line 37 (adjusted gross income) 38 Tax and Credits 39a Check if: { ▢ You were born before January 2, 1952, ▢ Blind. ▢ Spouse was born before January 2, 1952, ▢ Blind. } Total boxes checked ► 39a 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, $6,300 Married filing jointly or Qualifying widow(er), $12,600 Head of household, $9,300 b If your spouse itemizes on a separate return or you were a dual-status alien, check here ► 39b ▢ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 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 $155,650 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 60a 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 If you have a qualifying child, attach Schedule EIC. 65 2016 estimated tax payments and amount applied from 2015 return 65 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 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 Direct deposit? See instructions. ► b Routing number ► c Type:  ▢ Checking  ▢ Savings ► d Account number 77 Amount of line 75 you want applied to your 2017 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 complete. Declaration of preparer (other than taxpayer) is based on all information of which preparer has any knowledge. ▶ Your signature Ray Gomez Date Your occupation Salesman Daytime phone number Spouse's signature. If a joint return, bothmust sign. Maria Gomez Date Spouse's occupation Clerk 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 EIN ► Firm's address ► Phone no. www.irs.gov/form1040 Form 1040 (2016)

Answer 1

Other Income : Lottery 3900+ Health Ins Reimbursement 4732+ Father Estate 25000=33632