Question

57. Janice Morgan, age 24, is single and has no dependents. She is a freelance writer. In Jan- ary 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 123-45-6789. 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. $85,000 Income from sale of articles 16,500 Rent 7,900 Utilities 1,800 Supplies 5,000 Insurance 3,500 Travel (including meals of $1,200) d Credits 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: $2,950 State income tax Home mortgage interest paid to First National Bank Property taxes on home Charitable contribution to her alma mater, State College 6,000 2,500 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 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. certificates of deposit at Second on

Answer 1

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SOLUTION: Compute Janice Morgan's 2016 Federal income tax payable (or refund due): Particulars Amount Amount Net Income from Writers Anonymus(note 3) $17,500 Interest Income 4,000 Self -employment tax deduction Adjudted Gross Income Less : Itemized deductions( note -2) ($1,237) $20,263 -11,700 ($4,000) $4,563 $458 Personal exemtion Taxable income Tax on taxble income from 2015 tax table Self -employment tax Less : Tax payments estimated 2,473 ($3,000) ($69) Net Tax payable (refund due) for 2015 Working Notes: 1)Calculation of Furniture Fixtures and computer equipment: $21,000 Sec 179 expenses limited Cost recovery ( $21,000-$21,000) 0.1429 $21,000 0 Computer equipment Sec 179 expenses limited Cost recovery ( $12,400-$12,400) 0.2 $12,400 $12,400 $33,400 0 Total deduction 2) calculation of Itemised deductions $3,000 $6,000 $1,500 $1,200 State Income Tax Home Mortgage interest Property Taxes on home Charitable Contributions $11,700 Total Itemised deductions 3) Calculation of Net Income of Writers Anonymous $85,000 Income From Sales $16,500 $7,900 $1,800 $5,000 $2,300 $600 $33,400 Less: Rent Utilities Supplies Insurance Travel Excluding Meals($3,500-$1,200) Meals ($1,200-$600($1,200*50%)) ($67,500) $17,500 Depreciation & Sec 179 Deductions (Note 1) Income From Business