Nathan Cohen , age 45, is a single taxpayer who lives at 2245 Mardel St., San Jose, CA 95130. His social security number is 351-42-1961. Nathan’s earnings and withholdings as a marketing director at a high-tech company for 2019 are:
Earnings from Placeware, Inc. $297,000 (this is after subtracting his health insurance premiums –see below)
Federal Income tax withheld $50,000
State income tax withheld $23,500
Other facts and possibly useful information:
Nathan earns interest on a savings account at Bank of the West of $13,075.
Nathan is divorced and pays his ex-wife $4,000 per month. When their 15-year old daughter (who lives 100% with the ex-wife) reaches 18, the payments drop to $2,800 per month. The reason it drops is because he is no longer paying child support once his daughter turns 18. His ex-wife’s social security number is 857-51-6438. Nathan does not claim his daughter as a dependent.
Nathan paid the following amounts (he has records to prove payment):
California DMV renewal taxes (the value based part) : $300
Credit card interest expense $1,760
Auto Loan interest expense $4,300
Property taxes on his home $6,200
Blue Cross health insurance premiums $1,800 withheld from his paycheck (not deducted on Sch A, already paid with pretax dollars!).
Other medical expenses $790
Income tax preparation fees for his 2018 income tax return $900
Federal 2018 income taxes paid in April 2019 when he filed his 2018 federal income tax return $1,825
California 2018 income taxes paid in April 2019 when he filed his 2018 California tax return $500
Check to Boy Scouts of America $1,100
Check for fundraiser to build a new building at Harker School, where his daughter goes, $8,000. This payment was not related to tuition and neither Nathan nor his family received any specific benefits.
Check to St. Andrews Church $10,000
Stanford Business School Alumni Association $12,000 (fundraiser to support the business school)
Silicon Valley Democratic Party Fund $1,000 (2019 campaign fundraiser)
Nathan paid $100 to attend a fundraising dinner at the Tech Museum of Innovation, the value of the dinner is $50.
Nathan received a Form 1098 Mortgage Interest Statement from Bank of the West indicating $19,700 of interest expense on his mortgage (a qualified acquisition mortgage)
Complete Nathan’s Form 1040, all necessary schedules, Schedule A,Schedule B, Forms 8959 and 8960 . Don’t forget he paid state taxes and they should be deducted on Schedule A. If you need to make assumptions, they should be realistic. Hint: Form 8959, lines 17, 18 and 24 should be $873, and form 8960, Line 17 should be $454, and that the total of these additional taxes belong on Schedule 2 and on line 15 of Form 1040. Line 19 on page 2 of Form 1040 should be $50,873. The additional amount of $873 would have been on his W-2 because his employer would have deducted this amount. Yes, you calculate the $873 additional tax but because it was already withheld by the employer, it is considered tax withheld, a credit towards the tax liability calculated on the tax return.