Question

Janice Morgan, age 24, is single and has no dependents. She is a freelance writer. In January 2018, Janice opened her own office located at 2751 Waldham Road, Pleasant Hill, NM 88135. She called her business Writers Anonymous. Janice is a cash basis taxpayer. She lives at 132 Stone Avenue, Pleasant Hill, NM 88135. Her Social Security number is 123-45-6782. Janice’s parents continue to provide health insurance for her under their policy. Janice wants to contribute to the Presidential Election Campaign Fund.

During 2018, Janice reported the following income and expense items connected with her business.

Income from sale of articles	$85,000
Rent	16,500
Utilities	7,900
Supplies	1,800
Insurance	5,000
Travel (including meals of $1,200)	3,500

Janice purchased and placed in service the following fixed assets for her business. Janice wants to elect immediate expensing under § 179, if possible.

• Furniture and fixtures (new) costing $21,000 on January 10

• Computer equipment (new) costing $12,400 on July 28

Janice’s itemized deductions include:

State income tax	$2,950
Home mortgage interest paid to First National Bank	6,000
Property taxes on home	2,500
Charitable contribution to her alma mater, State College	1,200

Janice did not keep a record of the sales tax she paid. The amount from the sales tax table is $437.

Janice reports interest income of $4,000 on certificates of deposit at Second National Bank. Janice makes estimated tax payments of $3,000 for 2018.

Compute Janice Morgan’s 2018 Federal income tax payable (or refund due). If you use tax forms for your computations, you will need Forms 1040 and 4562 and Schedules A, B, and C. Suggested software: ProConnect Tax Online.

Answer 1

Working 1
Janice Mrogan age of 24		Amount ($)	Amount ($)
Income from Sale of Articles			85,000
Less :
Rent		16,500
Utilities		7,900
Suppliers		1,800
Insurance		5,000
Travel Including (3500-1200)		2,300
Meals ( 50% $1200		600
Depreciation ( as per Code 179)		33,400
Total Cost			67,500
Income from Business($)			17,500
Depreciation working as per
IT Code 179
Furniture and Fixture
Costing ($)		21,000
Computer Equipment		12,400
Costing ($)
Furniture and Fixture
Costing ($)
As per Code 179 Limited Expenses		21,000
Cost recovery ($21000-$21000)*0.1429		-		Furniture and Fixture - 7 year recovery period
Deprreciation of FF		21,000
Computer Equipment
Costing ($)
As per Code 179 Limited Expenses		12,400
Cost recovery ($12400-$12400)*0.2		-		Computer - 5 year recovery period
Deprreciation of Computer		12,400
Working 2		Amount ($)
State Income Tax		2,950
Home Mortgage Interest paid		6,000
Property tax on home		2,500
Charitable Contribution to her alma matter		1,200
Total itemised deduction		12,650

Working 3
Self Employment tax		Amount ($)
net Earmings ( as above)		17,500
92.35%of your Net earnings from Self Employment		16,161
If the amount on Line 2$ 132900
apply tax rate 15.3%		2,473
50% of tax		1,236.34

		Amount ($)
Net Income form Writer Anonymous(a)		17,500	Derived - Working 1
Add: Interest Income (b)		4000	( As per Question)
Self Employed tax decution (c)		-1,236.34	Derived - Working 3
Adjusted gross Income (a+b+c)=D		20,264	Derived Number
Less - Itemised Deduction-(e)		(12,650)	Derived - Working 2
Personal Exemption(f)		(4,000)
Taxable income (d+e+f)=G		3,614
Self Employed tax		2,473	Derived - Working 3
As per Tax Table 2018
Tax rate -10% ( taxable Income - Single Income(0-$9525)		361	As per Slab
Less Estimated tax payment		3000
Net Tax payable /( refund due) 2018		(166)