Question

Mrs. Cora Yank (age 42) is divorced and has full custody of her 10-year-old son, William. Mrs. Yank works as a medical technician in a Chicago hospital. Her salary was $38,400, from which her employer withheld $1,045 federal income tax and $2,938 employee FICA tax. Several years ago, Mrs. Yank was seriously injured in a traffic accident caused by another driver’s negligence. This year, she received a $25,000 settlement from the driver’s insurance company: $20,000 as compensation for her physical injuries and $5,000 for lost wages during her convalescent period. Because she was unable to work for the first seven weeks of the year, she collected $1,400 unemployment compensation from the state of Illinois. Mrs. Yank earned $629 interest on a savings account. She contributed $800 to a traditional IRA. She is not an active participant in any other qualified retirement plan. Mrs. Yank paid $10,800 rent on the apartment in which she and William live. She received $1,600 alimony and $2,350 child support from her former husband under a divorce agreement executed in 2013. Mrs. Yank is covered under her employer’s medical reimbursement plan. However, this year’s medical bills exceeded her reimbursement limit by $1,630. Mrs. Yank paid $1,062 income tax to Illinois. Mrs. Yank spent $470 on hospital shoes and uniforms. Her employer didn’t reimburse her for this expense. Mrs. Yank paid $1,300 for after-school child care for William. From the above information, compute Mrs. Yank’s 2019 federal income tax (including any AMT) and the amount due with her Form 1040 or the refund she should receive. Assume the tax year is 2019. Use Individual tax rate schedules and Standard deduction table. (Round all your intermediate calculations and final answers to the nearest whole dollar amount.)

	Adjusted gross income (AGI) Taxable income Mrs. Yank's regular income tax AMT Mrs. Yank's total tax liability (including AMT)

• Amount due
• Refund

> May I know where did you get 3,689?

Answer 1

Mrs. Yank’s salary                                                           $38,400

        Insurance settlement                               $25,000

              Compensation for physical injury   (20,000)

        Taxable portion of settlement                                       5,000

        Unemployment compensation                                      1,400

        Interest                                                                            629

        Alimony received                                                         1,600

        Deductible IRA contribution                                         (800)

        Adjusted gross income (AGI)                                  $46,229

        Standard deduction for head of household                (9,250)

        Exemption amount ($4,000 ´ 2)                                (8,000)

        Taxable income                                                         $28,979

        Pre-credit tax (HH)                                                    $3,689

        Dependent care credit ($1,300 ´ 20%)                          (260)

        Child credit                                                               (1,000)

        Mrs. Yank’s regular income tax                                 $2,429

        Income tax withholding                                              (2,700)

        Refund due to Mrs. Yank                                            $(271)

        AMT calculation:

        Taxable income                                                         $28,979

        Disallowed standard deduction                                   9,250

        Disallowed exemption amount                                    8,000

        AMTI before exemption                                          $46,229

        Exemption (unmarried)                                             (53,600)

        AMTI                                                                             -0-

Note : Mrs. Yank doesn’t owe AMT because her AMTI after exemption is zero.