Question

John and Sandy Ferguson got married eight years ago and have a seven-year-old daughter, Samantha. In 2019, John worked as a computer technician at a local university earning a salary of $152,000, and Sandy worked part-time as a receptionist for a law firm earning a salary of $29,000. John also does some Web design work on the side and reported revenues of $4,000 and associated expenses of $750. The Fergusons received $800 in qualified dividends and a $200 refund of their state income taxes. The Fergusons always itemize their deductions and their itemized deductions were well over the standard deduction amount last year. The Fergusons had qualifying insurance for purposes of the Affordable Care Act (ACA). Use Exhibit 8-9, Tax Rate Schedule, Dividends and Capital Gains Tax Rates for reference.

The Fergusons reported making the following payments during the year:

• State income taxes of $4,400. Federal tax withholding of $21,000.
• Alimony payments to John’s former wife of $10,000 (divorced in 2014).
• Child support payments for John’s child with his former wife of $4,100.
• $12,200 of real property taxes.
• Sandy was reimbursed $600 for employee business expenses she incurred. She was required to provide documentation for her expenses to her employer.
• $3,600 to Kid Care day care center for Samantha’s care while John and Sandy worked.
• $14,000 interest on their home mortgage ($400,000 acquisition debt).
• $3,000 interest on a $40,000 home-equity loan. They used the loan to pay for a family vacation and new car.
• $15,000 cash charitable contributions to qualified charities.
• Donation of used furniture to Goodwill. The furniture had a fair market value of $400 and cost $2,000.

What is the Fergusons' 2019 federal income taxes payable or refund, including any self-employment tax and AMT, if applicable? (Round your intermediate computations to the nearest whole dollar amount.)

Answer 1

	John & Sandy Ferguson Married with 7 yearold daughter
			Amount($)	Amount($)
	Salary of John		1,52,000
	Salary of Sandy		29,000
	Additonal Income from design Income		4,000
	Qualified Dividend		800
	Refund of tax		200
	Gross Total Income		1,86,000	C
	AGI Deduction
	Alimony	10,000		A
	Employee portion of Self Employment Tax( Working Note1)	283		B
	Total AIG deduction]		10,283	(A+B)=D
	AGI itemized deduction		1,75,717	(C-D)=E
	State Income Tax	4,400		1
	Real property Tax	12,200		2
	Home Mortgage tax	14,000		3
	Home Equity Loan Interest Expenses	3,000		4
	Charitable contribution	15,000		5
	Charitable contribution property	400		6	( fair market value basis)
	AGI itemized deduction		49,000	sum( 1-6)	A
	Personal and dependency Exemption		11,400	($3800*3	B
	Total from AIG deduction		60,400	A+B=F
	Taxable Income		1,15,317	(E-F)
	Tax on Income other than dividend - Working Note -2		16,308
	Tax on Qualified Dividend		-	( this Dividend Income is not ordinary income
	Total Federal income Tax		16,308		A
	Self Employment tax( as below)		283		B
	Total Tax		16,590	(A+B)

	Working Note -1
1	Child care		3,600
2	Limit on Qualifying for One Kid		3,000
3	John Total Income ( including Web design Income)( as above)		1,85,000
4	Expenditure eligible for allowed ( Lower of 1,2,3 )		3,000
5	Credit % rate		20%
	Child and dependent care		600	(4*5)
	Tax on Self Employement Income 0 John ( Web design )	4,000
	( under wage base limit for Social Security)
	$4000*92.35%*13.3%	491
	Employee portion of Self Employment Tax	283
	$ 491*57.51%
	Working Note -2
	Taxable Income ( as above)	1,15,317	A
	Dividend Income ( as above)	800	B
	Taxable Income ( Excld Dividend )	1,14,517	(A-B)
	MFJ tax rate
	Schedule as per	1740	A
	15%* ( 114517-17400)	14,568	B
	Tax on Income other than Dividend	16,308	(A+B)