Question

Instructions:

Please complete the 2018 federal income tax return for Magdalena Schmitz. 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.

Magdalena Schmitz has undergone some major changes in her life recently. In 2016, at the age of 46, her husband, Roger, passed away. Magdalena has not remarried as of the end of 2018. Magdalena currently lives in Bedford, Pennsylvania. She was living in Pittsburgh when her husband passed away but she moved back to her childhood home so she could get help from her family raising her children. Magdalena was employed in Pittsburgh early in the year but left that job and relocated 100 miles away to pursue a new life and start her new job. Magdalena has three children (ages as of the end of the year): Alyssa (23), Tyler (16), and Connor (11). Magdalena would like to determine her federal income tax under the filing status that is most advantageous for her.

Magdalena reported the following information:

  Magdalena’s social security number is 294-83-2845

  Alyssa’s social security number is 824-84-8456

Tyler’s social security number is 824-34-9584  

Connor’s social security number is 824-56-2984  

Magdalena’s mailing address is 623 S. Liberty Road Bedford, Pennsylvania 15522

Alyssa is unmarried and a full-time graduate student at Pennsylvania State University (PSU) (EIN 33-9876543). PSU’s address is 1250 Happy Valley, State College, PA 16801. She received her bachelor’s degree the year her father passed away. This year represents her fifth year of full-time higher education schooling. Alyssa works parttime in State College to help with some of her living expenses. Alyssa earned $2,300 in gross income during the year and had her income tax return prepared on campus by Volunteer Income Tax Assistance (VITA) volunteers. Magdalena provided support for Alyssa including paying for rent, books, tuition, food, clothes, medicine, and other support items. In total, Magdalena provided $12,700 of support for the year. PSU provided Alyssa with a Form 1098-T at year end.

Alyssa’s higher education expenses for her university studies were as follows: Tuition - $6,500; Books - $2,000

In order to for Magdalena to maintain a full-time job, she sends Connor to a day care program after school five days a week. During the year, Magdalena paid the day care operator $4,250 for Connor’s care.

The day care details are as follows: EIN – 43-6598324 Horizon Day Care 452 S. Patriot Road Bedford, PA 15522

Magdalena’s W-2s for the year reported the following:

Employer    Gross Wages     Federal IncomeTax withholding State Income Tax withholding

  

Juniata Development $48,435    $900    $700

Corporation

                                       

Pittsburgh Real Estate $2,450 $200    $125

Copyright © 2020 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Magdalena’s employers withheld all applicable and appropriate payroll taxes. The entire Schmitz family was covered by minimum essential health insurance during each month in 2018. The insurance was provided by Magdalena’s employers.

On January 1, 2017 (prior year), Magdalena started a photography business in which she takes bridal and wedding photographs. She does not do any of the professional printing. However, she provides all the digital files to her clients on a password-protected web site as part of her service. This unique service, along with her skill and reputation, has allowed her to earn additional money on the weekends, primarily in the summer, to help support her daughter in college. Magdalena rents all the camera equipment and does not currently own any equipment herself. The photography business uses the cash method of accounting. The business did not have any obligation to file a Form 1099 to any payee during the year. Magdalena reported the following revenue and expenses for her business this year:

Gross Revenue                $6,500

Photographic supplies             $ 430

Camera rental                    $1,050

Web site hosting fee                $ 200

  Magdalena also received the following amounts in 2018:

Life Insurance Payment-Mutual Life (Mother’s passing)                 $150,000

Cash gift from her father                                 $5,000

Interest income-First Bank of Bedford                        $ 310

Interest income-General Electric Bond                        $3,200

Interest income-Bedford School District Municipal Bond                 $2,500

Interest income-Johnstown Rural Improvement District Bond             $1,300

PA state income tax refund*                                 $325

*Refund was from state tax she paid in 2017. Magdalena deducted all her state taxes as itemized deductions, and received full tax benefit for the deductions, on her 2017 federal tax return.

Magdalena did not own, control or manage any foreign bank accounts, nor was she a grantor or beneficiary of a foreign trust during the tax year.

Magdalena made the following payments during 2018:

Dentist (unreimbursed by insurance)                        $1,500

Doctors (unreimbursed by insurance)                    $ 475

Prescriptions (unreimbursed by insurance)                     $ 255

Real property taxes on residence                        $ 950

Vehicle registration fee based upon age of vehicle                 $ 175

Mortgage interest on principal residence (Form 1098 received)     $6,845

Contribution to the American Lung Association                 $ 600

Contribution to the Habitat for Humanity                     $1,000

Contribution to Methodist Church of PA                    $3,000

Contribution to Penn State University                    $ 400

Magdalena wants to contribute to the Presidential Election Campaign Fund. She would like to receive a refund (if any) of any tax she may have overpaid for the year. Her preferred method of receiving the refund is by check.

Answer 1

Magdalena's eligible to use qualifying widow(er) with dependent child as filing status for 2 years following the year your spouse died. Her spouse died in the year of 2012.Magdalena has not remarried as of the end of 2014.

Magdalena's federal income tax under the filing status is Qualifying Widow(er) with Dependent Child.

Magdalena cann't claim alyssa?s higher education expenses for her university studies because alyssa itself filling tax return.

Magdalena paid the day care operator $4,250 for Connor?s care, Magdalena's total expenses Connor?s care, may use to the credit should not be more than $3,000= $$4,250 - $3,000 = $1,250.

Magdalena incurred moving-related expenses not having exemption because her change was not related with job ( because her main reason is pursue a life and then only start her new job. =$8050

She drove her car the 100 miles to Bedford as part of the move, she can claim upto 23.5 cents per miles,

totally she can claim upto =$2,350.

Magdalena?s employers withheld all applicable and appropriate payroll taxes so cann't claim exemption from withholding for the current year, because she does not qualify from any one reason mentioned below for claim.

If Magdalena claim exemption from withholding, her employer will not withhold federal income tax from wages.

For the prior year, Magdalena? had a right to a refund of all federal income tax withheld because she had no tax liability.

For the current year, Magdalena? expect a refund of all federal income tax withheld because her expect to have no tax liability.

Income

Gross Revenue                                                                                $6,500

ADD:

Life Insurance Payment-Mutual Life (Mother?s passing)                     $150,000

Cash gift from her father                                                                $    5,000

Interest income-First Bank of Bedford                                             $       310

Interest income-General Electric Bond                                            $    3,200

Interest income-Bedford School District Municipal Bond                   $    2,500

Interest income-Johnstown Rural Improvement District Bond         $    1,300

PA state income tax refund*                                                          $       325

                                                                                                 ___________

Total                                                                                            $169,135

                                                                                                _____________

Less:Expense

Dentist (unreimbursed by insurance)                                                    $1,500

Doctors (unreimbursed by insurance)                                                 $ 475

Prescriptions (unreimbursed by insurance)                                            $ 255

Real property taxes on residence                                               $ 950

Vehicle registration fee based upon age of vehicle                            $   175

Mortgage interest on principal residence (Form 1098 received)                $6,845

Contribution to the American Lung Association                                     $   500

Contribution to the Habitat for Humanity                              $1,000

Contribution to Methodist Church of PA                                                $3,000

Contribution to Penn State University                                                   $   500

Alyssa Expense                                                                               $12,700

Day care Expense (Connor )                                                               $1,250.  

Moving Expense                                                                                $8050

Contribute to the Presidential Election Campaign.                                     $3

                                                                                                       ________

Total                                                                                                  $37,203

                                                                                                    ____________

            Income = $169,135

Less:Expenses =    $37,203

                           ________

Total $131,932

Can claim up to $2,350 for 100 miles.