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Acc 151 ACCT 1125, Individual Federal Income Tax 2021 Exam #3 Take Home Test ACCT 1125, Individual Federal Income Tax 2021 Exam #3 Take Home Test Name____________________________________________ Complete Form 1040, with all necessary schedules, worksheets, and attachments, for the following taxpayers: A. General Information: 1. Taxpayer: Joseph Allen 278-43-8249 Age 72 at 12/31/2020 CPA 2. Spouse: Charlene Allen 374-43-1851 Age 53 at 12/31/2020 Design Consultant 3. Address: 5681 Gates Mill Trace Grayson, Georgia 30017 B. Dependents: 1. Erin C. Allen 256-34-1274 Age 05 at 12/31/2020 2. Ashley K. Bridges (Charlene's stepdaughter from 1st marriage) 816-49-1988 Age 24 at 12/31/2020 Full-time student at Georgia State University Wages from summer job, $5,400; $540 Federal income tax withheld (Assume support test met; all dependents lived with taxpayers during the entire year). Other Information: 1. On December 24, 2020, Joseph died of a heart attack. 2. On December 31, 2020, Charlene received $500,000 in proceeds from Joseph's life insurance policy. 3. Charlene desires to file a joint return with her deceased husband. 2020 Wage Information: C. Wages: Employer Gross Federal W/H State W/H Joseph Welden & Wood $110,000 $19,000 $4,750 Charlene Sugarbakers $ 95,000 $11,500 $5,000 D. Investment Income (all dividends are ordinary dividends): 1. Interest on CDs at Northside Bank - $7,675 2. Interest on Polk County School Bonds - $2,540 3. Interest earned on checking account at Wells Fargo - $475 4. Dividends from Fidelity Magellan Fund - $3,750 5. Dividends from Verizon Wireless - $1,600 6. Dividends on Home Depot Stock - $625 The dividends from Verizon Wireless and Home Depot are qualified dividends. E. Other Income:/Payments 1. Joseph received total social security benefits of $15,000 in 2020. 2. State of Georgia income tax refund from 2019 received in 2020 was $1,125. (Assume fully taxable) 3. Prior to his death, Joseph received a total of $12,000 in 2020 (this covered January-December 2020) from an annuity with Northwestern Mutual Life. The annuity was purchased in 1971, at a cost of $20,000. On January 1, 2014, the date Joseph began receiving payments from the annuity, his life expectancy was ten (10) years. Use the general rule for this annuity. (Do not round percentage once calculated, but round once exclusion is calculated). 4. On November 17, 2020, Joseph purchased a lottery ticket at his local QuickTrip for $1. The ticket was a winner and paid him $700 in winnings. 5. Joseph paid $300 per month in alimony to his ex-wife, Anna Michele, S.S. # 257-91-4384. Divorce agreement established in June 2000. F. Medical Expenses: 1. Doctors, Dentists and Hospitals - $15,675 2. Glasses - $350 3. Dentures for Joseph - $575 4. Payment of medical insurance premiums - $6,600 5. Miles driven for medical purposes - 5,400 miles (450 miles each month). G. Taxes Paid: 1. Payment to State of Georgia in 2020 as a result of tax audit - $4,573. Of this amount, $3,573 was interest & penalties. This amount represents an audit adjustment from their 2019 State Income Tax Return. 2. Payments of Georgia Estimated Tax for the following years: 2019: April 15, 2019 $300 June 15, 2019 300 September 15, 2019 300 January 15, 2020 300 2020: April 15, 2020 $350 June 15, 2020 350 September 15, 2020 350 January 15, 2021 350 3. Real estate taxes paid in 2020: $3,500 for 2019, and $3,800 for 2020. 4. Auto Ad Valorem tax paid in 2020 on the value of the vehicle: $795. (Remember all the components that are considered state tax payments; also, remember taxes are limited to $10,000) H. Interest Paid: 1. On January 4, 2020, The Allen's purchased a house to be used as their principal residence. The purchase price was $500,000. At closing, they paid three (3) points on this loan. The amount of interest paid on this loan and reported to them on Form 1098 was $18,000. The discount points were not reported on Form 1098, but amounted to $9,000. 2. On October 1, 2020, the Allen's decided to refinance their mortgage with a 5%, 15-year mortgage. The amount refinanced was $75,000 to make an addition to the house. The total amount of interest paid on this loan and reported on Form 1098 was $5,200. I. Contributions (taxpayer’s have all required documentation): 1. Georgia State University (donation not tuition related)- $2,500 2. United Way - $800 3. Governor’s Gubernatorial Election Campaign Fund - $250 4. Saint Oliver Church - $1,200 5. Miles driven in connection with work done for St. Vincent De Paul Society as a volunteer - 2,000 miles. 6. Hours worked at St. Vincent De Paul Thrift Shop - 150 hours by Charlene. She feels her time was worth $5.50 per hour. 7. Clothes and household items given to Goodwill (123 Main Street, Snellville, GA 30078) on 7/19/2020; Original purchase cost was $3,600; Estimated Thrift Shop Value was $800. J. Other items: 1. Joseph added up all his scratch off lottery tickets and realized his gambling losses for the year were $1,231. 2. On September 26, 2020, Charlene received a cash gift from her Uncle Wally of $14,000. K. Child Care Expenses: 1. During 2020 Joseph & Charlene paid the following amounts for the care of Erin while they worked: 2. $1,500 to Brats-B-Gone, 1750 Skyland Drive, Snellville, GA, 30078. The company’s EIN is 58-6571935. 3. $2,000 to Charlene’s great aunt, Oda Mae Brown, 1024 Old Oak Run, Dacula, GA, 30019. Her social security number is 257-91-4192. L. Other Amounts Paid: 1. Tax Prep Fee - $6,000 2. Union Dues - $2,850 2 2020 Form 1040 Fo rm1040 2020U.S. Individual Income Tax Return Department of the Treasury—Internal Revenue Service (99) OMB No. 1545-0074 IRS Use Only—Do not write or staple in this space. Filing Status Check only one box. Single Married filing jointly Married filing separately (MFS) Head of household (HOH) Qualifying widow(er) (QW) If you checked the MFS box, enter the name of your spouse. If you checked the HOH or QW box, enter the child’s name if the qualifying person is a child but not your dependent ▶ Your first name and middle initial Last name Your social security number If joint return, spouse’s first name and middle initial Last name Spouse’s social security number Home address (number and street). If you have a P.O. box, see instructions. Apt. no. City, town, or post office. If you have a foreign address, also complete spaces below. State ZIP code Foreign country name Foreign province/state/county Foreign postal code 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 At any time during 2020, did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency? Yes No Standard Deduction Someone can claim: You as a dependent Your spouse as a dependent Spouse itemizes on a separate return or you were a dual-status alien Age/Blindness You: Were born before January 2, 1956 Are blind Spouse: Was born before January 2, 1956 Is blind Dependents (see instructions): If more than four dependents, see instructions and check here ▶ (2) Social security number (3) Relationship to you (4) ✔ if qualifies for (see instructions): (1) First name Last name Child tax credit Credit for other dependents 1 Wages, salaries, tips, etc. Attach Form(s) W-2 . . . . . . . . . . . . . . . . 1 Attach Sch. B if required. 2a Tax-exempt interest . . . 2a b Taxable interest . . . . . 2b 3a Qualified dividends . . . 3a b Ordinary dividends . . . . . 3b 4a IRA distributions . . . . 4a b Taxable amount . . . . . . 4b 5a Pensions and annuities . . 5a b Taxable amount . . . . . . 5b 6a Social security benefits . . 6a b Taxable amount . . . . . . 6b 7 Capital gain or (loss). Attach Schedule D if required. If not required, check here . . . . ▶ 7 8 Other income from Schedule 1, line 9 . . . . . . . . . . . . . . . . . . . 8 9 Add lines 1, 2b, 3b, 4b, 5b, 6b, 7, and 8. This is your total income . . . . . . . . . ▶ 9 10 Adjustments to income: a From Schedule 1, line 22 . . . . . . . . . . . . . . 10a b Charitable contributions if you take the standard deduction. See instructions 10b c Add lines 10a and 10b. These are your total adjustments to income . . . . . . . . ▶ 10c 11 Subtract line 10c from line 9. This is your adjusted gross