Question

Please complete the 2018 federal income tax return for Tim and Linda Jones.  Ignore the requirement to attach the form(s) W-2 to the front page of the Form 1040.  If required information is missing, use reasonable assumptions to fill in the gaps.

 

Tim and Linda Jones live in Dyer brook, Maine.  Tim is the Vice-President of Sales at a small start-up company.  Linda is a former advertising executive who currently consults with former clients.  The Joneses have three children Holly (age 18), Rusty (age 15), and Robby (age 12). In January, Holly left home to attend a liberal arts college. She lived on campus for fall and spring semester.  They are not sure if Holly still qualifies as their dependent since she lived away from home so much, but they trust you to determine if she does or not. She had a full scholarship, so Tim & Linda didn’t have to pay for anything. They plan to file a joint tax return.  They provided the following information:

·       Tim’s social security number is 598-94-2583

·       Linda’s social security number is 301-52-2942

·       Holly’s social security number is 887-44-8710

·       Rusty’s social security number is 810-42-9092

·       Robby’s social security number is 855-11-3021

·       The Jones’s mailing address is 80 south Maple Drive, Dyer brook, Maine 04747

 

Tim Jones reported the following the following information relating to his employment during the year:

 

Employer	Gross Wages	Federal Income Tax   Withholding	State Income Tax Withholding
SACS	$118,325	$29,230	$15,000

 

The above amounts do not reflect any income items described below.  Tim’s employer withheld all payroll taxes it was required to withhold.  The entire Jones family was covered by minimum essential health insurance during each month in 2018.  The insurance was provided by Tim’s employer, SACS. He received the Form 1095-C from his employer indicating coverage for the full year.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Linda Jones received the following revenue during the year (she uses the cash method of accounting).

 

Consulting revenue reported to her on a Form 1099-MISC, Box 7

              Bonnie’s Delights                                         $12,000

              Bob’s Healthy Option Products                 $8,500

              Strategic Synergies                                      $3,750

                             Bountiful Sunshine, Inc.                             $6,500

 

 

 

 

 

 

 

During the year, Linda incurred and paid the following business expenses:

 

              Consultant-related (no personal days spent during trip):

                             Airfare                                                           $2,900

                             Hotel                                                              $1,450

                             Gifts (to clients)                                            $55

                             Entertainment (spent on clients)              $750

                             Meals (while traveling)                               $390

                             Parking                                                           $320

             

Linda drove 1,575 business miles for her consulting-related activities (she has documentation to verify)

 

             

Neither of Linda’s business activities required the filing of Form(s) 1099 to report payments she made during the tax year. She was very pleased to learn that she did qualify for the QBI (qualified business income) deduction and is not subjected to any limitations. In addition, she drove a 2016 Accord, purchased on January 1, 2016, for all her business mileage.  She drove the vehicle a total of 10,605 miles during the year for all purposes.  Linda has written documentation to support the mileage amounts.  She also has access to another vehicle for personal purposes. She paid in quarterly, estimated tax payments. She knew there would be a penalty if she owed more than a specific amount and had not paid in the appropriate estimated payments. She paid in $1,250 on April 1, June 1, September 1, & December 31. The total amount was $5,000 in estimated tax payments.

 

The Joneses also received the following during the year:

 

Interest income from First Bank of New Jersey                                 $320

Interest income from Patterson, New Jersey School District          $200

Interest income from U.S. Treasury Bond                                          $350

Interest income from General Mills corporate bond                       $400

 

The Joneses did not own, control or manage any foreign bank accounts, nor were they grantors or beneficiaries of a foreign trust during the tax year.

 

Linda’s father passed away last year on June 3, 2017, but the estate wasn’t settled until August 1, 2018. She was the sole beneficiary to his checking & savings account and home. The checking & savings had a cash balance of $132,645.23 on 8/1/18. He had purchased his home many years ago. He only paid $15,000 for it in June of 1952. The Fair Value at his date of death was $125,550. The fair value was $135,000 at the time estate was settled on 8/1/18. His personal possessions didn’t have any value.

 

The Joneses received a New Jersey state income tax refund of $400 in May of 2018.  The Joneses received the refund because they had overpaid their New Jersey state individual income tax in 2017.  On their 2017 Federal income tax return, the Joneses deducted and received tax benefit for all state tax income taxes paid in 2017.

 

In May, Tim was injured in a home accident.  The injury prevented Tim from working for about a month.  During this time, Tim received $15,000 in disability payments attributable to a disability insurance policy.  The disability policy premiums were paid on Tim’s behalf as a nontaxable fringe benefit. 

 

The Joneses paid the following expenses during the year:

 

Dentist (unreimbursed by insurance)                                                               $1,500

Doctors (unreimbursed by insurance)                                                              $ 2,425

Prescriptions (unreimbursed by insurance)                                                     $   675

Real property taxes on residence                                                                      $7,525

Vehicle property tax based upon value                                                            $1,250

Mortgage interest on principal residence                                                        $12,550

Contribution to Tanzania Water Well Projects                                                $2,750

    (non-profit organization in Tanzania)

Contribution to United Way                                                                               $2,000

Contribution to American Cancer Society                                                        $5,000

Contribution to neighborhood drive to oppose development project              $500

Contribution to the St. Mary’s Church                                                              $12,000

Fee paid to Mouser, Johnson, and Hintze CPAs for tax preparation              $450

 

The Joneses also donated clothing, electronics, furniture and other household goods to the Salvation Army of Dyer Brook, Maine on April 15, 2018. Estimated thrift value of the goods donated was $275. They have supporting documentation for all of their charitable contributions.

 

Miscellaneous Information

 

The Joneses would like to contribute to the Presidential Election Campaign Fund.  The Joneses would also like to receive a refund (if any) of tax they may have overpaid for the year.  Their preferred method of receiving the refund is by check.

I need to answer to fill form 1040 please