Problems: Chapter 8-53 (Janice Morgan) South-Westerns Federal Taxation, Comprehensive Volume (2021). Prepare the Tax Return for 2020.
Changes to Problem: Change all year-ends to one year later; that is, 2019 becomes 2020.
The following information should be helpful in your preparation of the tax return.
(1) (a) Requirement: Prepare the federal income tax return on the appropriate IRS forms. (Even if you use a software program, you must turn in manual entries on IRS forms.) Copies of those forms and instructions are available at
(b) Additional Requirements: Prepare a brief top sheet summarizing the factual information in the format of the tax formula.
(2) Strategy: You might want to start with page 1 of the 1040 and manually make entries (pencil recommended). You may then need to do subsidiary forms (e.g., Schedules C). You might also want to work out the figures for the tax formula roughly first before beginning the return.
(3) Check figures:
Adjusted gross income 20,263 Itemized deductions 12,650
Taxable income 6,090 None of SE tax is deferred
(4) Check forms: (please include in your return):
(5) Grading:
a. Per the syllabus, this manual return is 16% of the grade; i.e., 40 points, since the four exams are worth 75 points each of the 400 possible points.
b. Actual maximum, manual return, 43 points (3 points extra credit)
c. Forms: 1040 pages 1 and 2; Schedules 1, 2, 3, A, B, C, SE; Forms 8995 and 4562
(6) Additional helpful information:
a. Please use the sequence numbers in the upper right-hand corner of the official IRS forms for the proper order
b. Do not calculate next years estimates or any late filing penalty or interest.
c. There is a QBI deduction on Form 1040, page 1, line 10.
Tax return problem is down below:
Janice Morgan, age 24, is single and has no dependents. She is a freelance writer. In January 2019, 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. Janices parents continue to provide health insurance for her under their policy. Janice did not engage in any virtual currency transactions during the year and wants to contribute to the Presidential Election Campaign Fund.
During 2019, 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
Janices itemized deductions include:
State income tax $2,950
Home mortgage interest paid to First National Bank 6,000
Property taxes on home2,500
Charitable contribution to her alma mater, State College 1,200
Janice did not keep a record of the sales tax she paid. The amount allowed by 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 2019.
Compute Janice Morgans 2019 Federal income tax payable (or refund due). If you use tax forms for your computations, you will need Forms 1040, 4562, 8995, and Schedules 1, 2, 3, A, B, C, and SE. Suggested software: ProConnect Tax Online.
