Question

Problem 1 Faiz and Yagana are married with three children. Faiz's annual salary is $72,000 and taxable interest income is $2,000. They have itemized deductions of $13,000. They are filing a joint return. Using the most current version of Form 1040, calculate: a. Adjusted gross income b. Taxable income c. Income tax liability

Answer 1

a

Adjusted gross income = $74,000

($72,000+$2,000)

b.

Taxable income = $49,600

($74,000-$24,400)

(Standard deduction is chosen over itemized deduction because its more benifitial)

c

Income tax liability = - $436 (Refund)

Tax on $49,600:

Upto $19,400 = $1,940

$19,401-$49,600 = $30,200 * 12% =$3,624

total tax = $5,564

Child tax credit = $2000*3 =$6,000

Net tax = -$436

Form 1040:

Department of the Treasury - Internal Revenue Service (99) 2019 OMB No. 1545-0074 IRS Use Only-Do not write or staple in this space. Filing Status Single Married filing jointly Married filing separately (MFS) Head of household (HOH) Qualifying widow(er) (W) Check only If you checked the MFS box, enter the name of spouse. If you checked the HOH or QW box, enter the child's name if the qualifying person is one box a child but not your dependent. Your first name and middle initial Last name Your social security number Faiz If joint return, spouse's first name and middle initial Last name Spouse's social security number Yagana Home address (number and street). If you have a P.O.box, see instructions. Apt. no. Presidential Election Campaign Check here if you, or your spouse if filing jointly, want $3 to go to this fund. City, town or post office, state, and ZIP code. If you have a foreign address, also complete spaces below (see instructions). Checking a box below will not change your tax or refund. You Spouse Foreign country name Foreign province/state/county Foreign postal code If more than four dependents, see instructions and here Standard Someone can claim: You as a dependent Your spouse as a dependent Deduction Spouse itemizes on a separate return or you were a dual-status alien Age/Blindness You Were born before January 2, 1955 Are blind Spouse: Was born before January 2, 1955 Is blind Dependents (see instructions): (2) Social security number (3) Relationship to you (9) if qualities for (see instructions: (1) First name Last name Child tax credit Credit for other dependents 1 1 72000 2000 2b Standard 3b 4b 4d 5b 6 7a Wages, salaries, tips, etc. Attach Form(s) W-2 2a Tax-exempt interest 2a b Taxable interest. Attach Sch. B if required За Qualified dividends 3a b Ordinary dividends. Attach Sch. B if required Deduction for 4a IRA distributions. 4a b Taxable amount Single or Married с 4c Pensions and annuities filing separately. d Taxable amount $12.200 5a Social security benefits 5a b Taxable amount • Married filing 6 jointly or Qualifying Capital gain or (loss). Attach Schedule Dif required. If not required, check here widower). 7a Other income from Schedule 1, line 9 $24.400 • Head of b Add lines 1, 26, 35, 46, 4d, 5, 6, and 7a. This is your total income household 8a $18.350 Adjustments to income from Schedule 1, line 22 • If you checked _b Subtract line 8a from line 76. This is your adjusted gross income any box under 9 Standard Standard deduction or itemized deductions (from Schedule A) 24400 Deduction, 10 Qualified business income deduction. Attach Form 8995 or Form 8995-A 10 see instructions. 11a Add lines 9 and 10 b Taxable income. Subtract line 11a from line 8b. If zero or less, enter -- For Disclosure, Privacy Act, and Paperwork Reduction Act Notice, see separate instructions. Cat. No. 11320B 74000 7b 8а 8b 74000 9 11a 11b 49600 Form 1040 (2019)

Page 2 13a d e Form 1040 (2019) 12a Tax (see inst.) Check if any from Form(s): 1 8814 2 4972 3 12a 5567 b Add Schedule 2, line 3, and line 12a and enter the total 12b 5564 13a Child tax credit or credit for other dependents 6000 b Add Schedule 3, line 7, and line 13a and enter the total 13b 6000 14 Subtract line 136 from line 12b. If zero or less, enter - - -436 15 Other taxes, including self-employment tax, from Schedule 2, line 10 15 16 Add lines 14 and 15. This is your total tax . 16 -436 17 Federal income tax withheld from Forms W-2 and 1099 17 18 • If you have a Other payments and refundable credits: qualifying child Earned income credit (EIC) 18a attach Sch. EIC. b 18b . If you have Additional child tax credit. Attach Schedule 8812 nontaxable с American opportunity credit from Form 8863, line 8 18c combat pay, see instructions. Schedule 3, line 14. 18d Add lines 18a through 18d. These are your total other payments and refundable credits 18e 19 Add lines 17 and 18e. These are your total payments 19 -436 20 Refund 20 If line 19 is more than line 16, subtract line 16 from line 19. This is the amount you overpaid 21a Amount of line 20 you want refunded to you. If Form 8888 is attached, check here 21a 436 Direct deposit? ► Routing number c Type: Checking Savings See instructions. ► Account number 22 Amount of line 20 you want applied to your 2020 estimated tax 22 Amount 23 Amount you owe. Subtract line 19 from line 16. For details on how to pay, see instructions 23 You Owe 24 Estimated tax penalty (see instructions). 24 Third Party Do you want to allow another person (other than your paid preparer) to discuss this return with the IRS? See instructions. Yes. Complete below. Designee No (Other than Designee's Phone Personal identification paid preparer) name no. number (PIN) Sign Under penalties of perjury, I declare that I have examined this return and accompanying schedules and statements, and to the best of my knowledge and belief, they are true, correct, and complete. Declaration of preparer (other than taxpayer) is based on all information of which preparer has any knowledge. Here Your signature Date Your occupation If the IRS sent you an identity Protection PIN, enter it here Joint return? (see inst.) See instructions. Spouse's signature. If a joint return, both must sign Date Spouse's occupation If the IRS sent your spouse an Keep a copy for Identity Protection PIN, enter it here your records. (see inst) Phone no. Email address Preparer's name Preparer's signature Date Check if: Paid 3rd Party Designee Preparer Firm's name Phone no. Self-employed Use Only Firm's address Firm's EIN Go to www.irs.gov/Form 1040 for instructions and the latest information. Form 1040 (2019 PTIN