Alice J. and Bruce M. Byrd are married taxpayers who file a joint return. Their Social Security numbers are 123-45-6789 and 111-11-1111, respectively. Alice’s birthday is September 21, 1960, and Bruce’s is June 27, 1959. They live at 473 Revere Avenue. Ames, MA 01850. Alice is the office manager for Ames Dental Clinic, 433 Broad Street, Ames, Ma 01850(employer identification number 98-765432). Bruce is the manager of a Super Burger fast-food outlet owned and operated by Plymouth Corporation, 1247 Central Avenue, Hauppauge, NY 11788 (employer identification number 11-1111111).
The following information is shown on their Wage and Tax Statements ( Form W-2) for 2007.
Line Description Alice Bruce
1 Wages, tips, other compensation $58,000 $62,100
2 Federal income tax withheld 4,500 6,300
3 Social Security wages 58,000 62,100
4 Social Security tax withheld 3,596 3,850
5 Medicare wages and tips 58,000 62,100
6 Medicare tax withheld 841 900
15 State Massachusetts Massachusetts
16 State wages, tips, etc. 58,000 62,100
17 State income tax withheld 2,950 3,100
The Byrds provide over half of the support of their two children, Cynthia (born January 25, 1983, Social Security number 123-45-6788) and John (born February 7, 1987, social Security number 123-45-6786. Both children are full-time students and live with the Byrds except when they are away at college. Cynthia earned $4,200 from a summer internship in 2007, and John earned $3,800 from a part-time job.
During 2007, the Byrds furnished 60% of the total support of Bruce’s widower father, Sam Byrds ( born March 6, 1931, Social Security number 123-45-6787). Sam lived alone and covered the rest of his support with Social Security benefits. Sam died in November, and Bruce, the beneficiary of a policy on Sam’s life, received life insurance proceeds of $800,000 on December 28.
The Byrds had the following expenses relating to their personal residence during 2007:
Property taxes $5,000
Qualified interest on home mortgage 8,800
Repairs of roof 5,750
Utilities 4,100
Fire and theft insurance 1,900
The following facts relate to medical expenses for 2007:
Medical insurance premiums $4,500
Doctor bill for Sam incurred in 2006 and not paid until 2007 7,600
Operation for Sam 8,500
Prescription medicines for Sam 900
Hospital expenses for Sam 3,500
Reimbursement from insurance company, received in 2007 3,600
The medical expenses for Sam represent most of the 60% Bruce contributed toward his father’s support.
Other relevant information follows:
• When they filed their 2006 state return in 2007, the Byrds paid additional state income tax of $900.
• During 2007, Alice and Bruce attended a dinner dance sponsored by the Ames police Disability Association ( a qualified charitable organization). The Byrds paid $300 for the tickets. The cost of comparable entertainment would normally be $50.
• The Byrds contributed $5,000 to Ames Presbyterian Church and gave used clothing (cost of $1,200 and fair market value of $350) to the Salvation Army. All donations are supported by receipts and are in very good condition.
• In 2007, the Byrds received interest income of $2,750, which was reported on a Form 1099-INT from Second National Bank.
• Alice’s employer requires that all employees wear uniforms to work. During 2007, Alice spent $450 on new uniforms and $225 on laundry charges.
• Bruce paid $400 for an annual subscription to the Journal of Franchise Management.
• Neither Alice’s nor Bruce’s employer reimburses for employee expenses.
• The Byrds do not keep the receipts for the sales taxes they paid and had no major purchases subject to sales tax.
• Alice and Bruce paid no estimated Federal income tax. Neither Alice nor Bruce wishes to designate $3 to the Presidential Election Campaign Fund.
Part 1 – Tax Computation
Compute net tax payable or refund due for Alice and Bruce Byrd for 2007. If they have overpaid, they want the amount to be refunded to them. If you use tax forms for your computations, you will need Forms 1040, Schedules A, B and Form 2106.
Part 2-Tax Planning
Alice and Bruce are planning some significant changes for 2008.They have provided you with the following information and asked you to project their taxable income and tax liability for 2008.
The Byrds will invest the $800,000 of life insurance proceeds in short term certificates of deposit(CD) and use the interest for living expenses during 2008. They expect to earn total interest of $32,000 on the CDs.
Bruce has been promoted to regional manager, and his salary for 2008 will be $88,000.He estimates that state income tax withheld will increase by $4,000.
Alice, Who has been diagnosed with a serious illness, will take a leave of absence from work during 2008. The estimated cost for her medical treatment is $15,400 of which $4,700 will be reimbursed by their
Insurance company in 2008. Their medical insurance premiums will increase to $5,000.
John will graduate from college in December 2007 and will take a job in New York City in January 2008.His starting salary will be $46,000.
Assume All the information reported in 2007 will be the same in 2008 unless other information has been
presented above.
So I need FORM 1040 ,Sch. A& B and FORM 2106..Please enter all the numbers inside the form Don’t worry about name or ss..etc….I just need the correct AGI, itemized deduction, exemption Taxable income and taxes….etc for part 1 and part 2.
Check figures:
Part 1
AGI 122,850….Taxable income 70,714…..Tax 10,529
Part 2
AGI 122,750….Taxable income 82,756….Tax 13,337
So those numbers are accurate %100
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