Mrs. Cora Yank (age 42) is divorced and has full custody of her 10-year-old son, William. From the following information, compute Mrs. Yank's federal income tax (including any AMT) and the amount due with her Form 1040 or the refund she should receive. Mrs. Yank works as a medical technician in a Chicago hospital.
Her salary was $38,400, from which her employer withheld $3,412 federal income tax and $2,938 employee FICA tax. Several years ago, Mrs. Yank was seriously injured in a traffic accident caused by another driver's negligence. This year, she received a $25,000 settlement from the driver's insurance company: $20,000 as compensation for her physical injuries and $5,000 for lost wages during her convalescent period. Because she was unable to work for the first seven weeks of the year, she collected $1,400 unemployment compensation from the state of Illinois. Mrs.
Yank earned $629 interest on a savings account. She contributed $800 to a regular IRA. She is not an active participant in any other qualified retirement plan. Mrs. Yank paid $10,800 rent on the apartment in which she and William live. She received $1,600 alimony and $2,350 child support from her former husband.
Mrs. Yank is covered under her employer's medical reimbursement plan. However, this year's medical bills exceeded her reimbursement limit by $1,630. Mrs. Yank paid $2,062 income tax to Illinois. Mrs. Yank spent $470 on hospital shoes and uniforms. Her employer did not reimburse her for this expense. Mrs. Yank paid $1,300 for after-school child care for William.
3. Tom and Allie Benson (ages 53 and 46) are residents of Fort Worth, Texas, and file a joint federal income tax return. They provide the entire support for their three children, ages 19, 18, and 14. On the basis of the following information, compute Mr. and Mrs. Benson's federal income (including any AMT) and SE tax and the amount due with their Form 1040 or the refund they should receive. Mr. Benson is an attorney who practices in partnership with 18 other attorneys.
His ordinary income was $278,300, and his net earnings from self-employment were $257,010 (92.35 percent of $278,300).
The Bensons made estimated tax payments totaling $58,000 to the IRS and a $28,500 contribution to the qualified Keogh plan maintained by the partnership. The Bensons earned $10,365 interest income and $13,790 qualified dividend income from their investment portfolio. They also received a $4,218 long-term capital gain distribution from a mutual fund.
They have a $9,723 capital loss carryforward from last year. The Bensons received a Schedule K-1 from an S corporation in which they own 6 percent of the stock. Their share of the corporation's business loss was $4,930.
The S corporation operates a mink farm in Maine. Mrs. Benson received a $50,000 cash inheritance from her great aunt. The Bensons moved from San Antonio to Fort Worth in April so that Mr. Benson could manage the Fort Worth office. The cost of moving their household goods was $11,260. The law firm reimbursed Mr. Benson for $10,000 of this expense.
The Bensons paid $33,890 interest on a $573,000 first mortgage and $4,120 interest on a $90,000 second mortgage on their personal residence.
They incurred the first mortgage to buy the home and the second mortgage to purchase new furniture. The Bensons paid $8,400 real property tax on their home and $2,920 for homeowners insurance.
The Bensons made $21,980 cash donations to various qualified charities. The Bensons paid $1,911 state and local sales tax. (Texas has no individual income tax.) The Bensons paid $3,350 to the CPA who prepared their Form 1040.