You are going to prepare the 2019 taxes for Homer Simpson who lives in Springfield, TX. He works a single job at the Springfield Nuclear Power Plant. He holds money at Capital One and money and stock in Wells Fargo accounts. Homer is single, and has no other income or assets. Use the source documents to answer the 10 questions in this assessment. You may find it helpful to use the source documents in order to fill out a blank 1040 tax form in order to answer the assessment questions. You do not have to turn in the completed 1040 tax form. The documents in the “Source Documents” PDF are as follows: a W2 from Homer’s employer, a Schedule B form detailing interest and dividend income for the year, and 1099s for investment income from both Capital One and Wells Fargo. Additionally, the tax tables for the tax form 1040 are in the “Form 1040 Tax Tables” PDF.
We have not covered qualified dividends yet in this course. Qualified dividends are dividends which are eligible to be taxed at capital gains rates. You do not need to do anything other than enter $4 in line 3a of the tax form 1040 as Homer’s qualified dividends for the year. PDF page 13 of the source documents shows you that Homer earned $3.98 in qualified dividends in 2019.
Note: You can ignore all other 1040 schedules except Schedule B, which is included in the “Source Documents” PDF
Some links you may find helpful besides the textbook:
https://www.policygenius.com/taxes/guide-to-form-1040/
https://www.youtube.com/watch?v=ILwfyl2VMQw&t=213s
Tax Return Assessment Questions
What is the Adjusted Gross Income? (multiple choice)
$63,238
$65,106
$52,906
$78,686
Homer is going to file as an individual. What would the standard deduction be if Homer Simpson was a head of household?
$12,200
$18,350
$1,837
$15,447
Why is the amount Homer Simpson owes in line 23 of the 1040 lower than his total tax in line 16? Use some numbers in your explanation.(short Answer)
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What is Homer Simpson’s effective tax rate?
What is the taxable interest on 2b of the 1040?
Does Homer Simpson need to fill out a state tax return? Why or why not? (short answer)
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What is the amount of elective 401(k) contributions paid by Homer Simpson this year?
Is the cost of Homer Simpson’s employer-sponsored health coverage taxable?
What three taxes are being withheld?
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As noted above in the assignment introduction, Homer did not have any sales of stocks during the year in our Scenario Above. Now let’s Suppose he just gave you some additional information about the following three securities in his portfolio. How much additional tax (in dollars) would have had to be paid with these transactions for 2019 if they had to be included in his tax return? Show your calculations.
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Security
|
Purchase Date
|
Purchase Amount
|
Purchase Price (per share)
|
Sell Date
|
Sell Amount
|
Sale Price (per share)
|
Nickelodeon (NICK)
|
8/30/2016
|
100 shares
|
$25
|
2/14/2020
|
100 shares
|
$35
|
Krispy Kreme (K)
|
5/1/2019
|
20 shares
|
$40
|
12/3/2019
|
20 shares
|
$85
|
Sony (SONY)
|
2/20/2018
|
50 shares
|
$10
|
9/2/2019
|
20 shares
|
$30
|