Question

Note: This problem is for the 2018 tax year. 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 123-45-6789. 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. 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. She made estimated tax payments of $3,000 for 2018. Required: Compute Janice Morgan’s 2018 Federal income tax payable (or refund due) by providing the following information that would be reported on Form 1040 and Schedules A, B, C, and SE. Make realistic assumptions about any missing data. If an amount is zero, enter "0". Enter all amounts as positive numbers. When computing the tax liability, do not round your immediate calculations. If required, round your final answers to the nearest dollar. Provide the following that would be reported on Janice's Form 1040: 1. Filing status: The taxpayers' filing status: Single 2. Calculate taxable gross income. $ 3. Calculate the total adjustments for AGI. $ 4. Calculate adjusted gross income. $ 5. Calculate the greater of the standard deduction or itemized deductions. $ 6. Calculate the qualified busies income deduction. $ 7. Calculate total taxable income. $ 8. Calculate the income tax liability. $ 9 Calculate SE taxes due. $ 10. Calculate the total tax credits available. $ 11. Calculate total withholding and tax payments. $ 12. Calculate the amount overpaid (refund): $ 13. Calculate the amount of taxes owed: $

Answer 1

Answers:-

For 2018,the given taxes,

Janice and Morgan's income tax payable can calculated:-

Particulars	Amount ($)
Net income from writers	$ 17,500
Note-1 : Anonymous
Interest Income	$ 4,000
Self Employment tax Deduction	$ (1237)
Adjusted gross income	$ 20,263
Less (-) Itemized Deduction	$ (11,650)
Personal Exemption	$ (4,000)
Taxable Income	$ 4,613
Self Employment tax Payments	$ 2,473
Less :- Estimated Tax Payments	$ (3,000)
Net Tax Payable for 2018	$ (66)

Net Income from the Anonymous writers is calculation:-

Particulars	Debit ($)	Credit($)
Income From Sales		$ 85,000
Less:- Rent	$ 16,500
Utilities	$ 7,900
Supplies	$ 1,800
Travel excluding meals (3500 -1200)	$ 2,300
Meals (1200-600(1200*50%)	$ 600
Depreciation & 179 deducted	$ 33,400	$ (67,500)
Income from business		$ 17,500

The Itemized device Include :-

Particulars	Amount ($)
State Income tax	$ 2,950
Home Mortgage interest	$ 6,000
Property taxes on home	$ 1,500
Charitable Contributions	$ 1,200
Total	$ 11,650

Furniture & Fixtures and the Computer Equipment

Particulars	Amount ($)
Furniture and Fixtures	$ 21,000
Computer Equipment	$ 12,400
	$ 33,400

Calculation of tax of the Self Employment.

Particulars	Amount($)
Net Earnings from self employment
Multiply live-1 by (35%)
If the amount on line-2 is $118,500 or less, multiply the live-2 amount by 15.3%.Thus its a employment tax.
One half of the self employment tax or $1237 is a deduction for AGI.