Tax Return-Individual Number Four (after Chapter 8)
Instructions:
Please complete the 2018 federal income tax return for Magdalena Schmitz. Ignore the requirement to attach the form(s) W-2 to the front page of the Form 1040. If required information is missing, use reasonable assumptions to fill in the gaps.
Magdalena Schmitz has undergone some major changes in her life recently. In 2016, at the age of 46, her husband, Roger, passed away. Magdalena has not remarried as of the end of 2018. Magdalena currently lives in Bedford, Pennsylvania. She was living in Pittsburgh when her husband passed away but she moved back to her childhood home so she could get help from her family raising her children. Magdalena was employed in Pittsburgh early in the year but left that job and relocated 100 miles away to pursue a new life and start her new job. Magdalena has three children (ages as of the end of the year): Alyssa (23), Tyler (16), and Connor (11). Magdalena would like to determine her federal income tax under the filing status that is most advantageous for her.
Magdalena reported the following information:
· Magdalena’s social security number is 294-83-2845
· Alyssa’s social security number is 824-84-8456
· Tyler’s social security number is 824-34-9584
· Connor’s social security number is 824-56-2984
· Magdalena’s mailing address is 623 S. Liberty Road Bedford, Pennsylvania 15522
Alyssa is unmarried and a full-time graduate student at Pennsylvania State University (PSU) (EIN 33-9876543). PSU’s address is 1250 Happy Valley, State College, PA 16801. She received her bachelor’s degree the year her father passed away. This year represents her fifth year of full-time higher education schooling. Alyssa works part-time in State College to help with some of her living expenses. Alyssa earned $2,300 in gross income during the year and had her income tax return prepared on campus by Volunteer Income Tax Assistance (VITA) volunteers. Magdalena provided support for Alyssa including paying for rent, books, tuition, food, clothes, medicine, and other support items. In total, Magdalena provided $12,700 of support for the year. PSU provided Alyssa with a Form 1098-T at year end.
Alyssa’s higher education expenses for her university studies were as follows:
Tuition $6,500
Books $2,000
In order to for Magdalena to maintain a full-time job, she sends Connor to a day care program after school five days a week. During the year, Magdalena paid the day care operator $4,250 for Connor’s care.
The day care details are as follows:
Horizon Day Care
452 S. Patriot Road
Bedford, PA 15522
EIN: 43-6598324
Magdalena’s W-2s for the year reported the following:
Employer
|
Gross Wages
|
Federal Income Tax Withholding
|
State Income Tax Withholding
|
Juniata Development Corporation
|
$48,435
|
$900
|
$700
|
Pittsburgh Real Estate
|
$2,450
|
$200
|
$125
|
Magdalena’s employers withheld all applicable and appropriate payroll taxes. The entire Schmitz family was covered by minimum essential health insurance during each month in 2018. The insurance was provided by Magdalena’s employers.
On January 1, 2017 (prior year), Magdalena started a photography business in which she takes bridal and wedding photographs. She does not do any of the professional printing. However, she provides all the digital files to her clients on a password-protected web site as part of her service. This unique service, along with her skill and reputation, has allowed her to earn additional money on the weekends, primarily in the summer, to help support her daughter in college. Magdalena rents all the camera equipment and does not currently own any equipment herself. The photography business uses the cash method of accounting. The business did not have any obligation to file a Form 1099 to any payee during the year. Magdalena reported the following revenue and expenses for her business this year:
Gross Revenue $6,500
Photographic supplies $ 430
Camera rental $1,050
Web site hosting fee $ 200
Magdalena also received the following amounts in 2018:
Life Insurance Payment-Mutual Life (Mother’s passing) $150,000
Cash gift from her father $ 5,000
Interest income-First Bank of Bedford $ 310
Interest income-General Electric Bond $ 3,200
Interest income-Bedford School District Municipal Bond $ 2,500
Interest income-Johnstown Rural Improvement District Bond $ 1,300
PA state income tax refund* $ 325
*Refund was from state tax she paid in 2017. Magdalena deducted all her state taxes as itemized deductions, and received full tax benefit for the deductions, on her 2017 federal tax return.
Magdalena did not own, control or manage any foreign bank accounts, nor was she a grantor or beneficiary of a foreign trust during the tax year.
Magdalena made the following payments during 2018:
Dentist (unreimbursed by insurance) $1,500
Doctors (unreimbursed by insurance) $ 475
Prescriptions (unreimbursed by insurance) $ 255
Real property taxes on residence $ 950
Vehicle registration fee based upon age of vehicle $ 175
Mortgage interest on principal residence (Form 1098 received) $6,845
Contribution to the American Lung Association $ 600
Contribution to the Habitat for Humanity $1,000
Contribution to Methodist Church of PA $3,000
Contribution to Penn State University $ 400
Magdalena wants to contribute to the Presidential Election Campaign Fund. She would like to receive a refund (if any) of any tax she may have overpaid for the year. Her preferred method of receiving the refund is by check.