The given family consists of two parents and three children each of which is underage and, consequently, should be considered as the dependant. Based on the information provided that includes personal information, salary, receipts, expenditures, charitable donation of stock as well as miscellaneous, the tax return would be computed. The following points should be taken into account while completing Form 1040, Schedules A and B, and Form 8283:
- Eye exam and eyeglasses for Aubrynne as well as the orthodontic work to correct Bryson’s congenital defect are not deductible.
- Medical insurance premiums paid on an after tax basis is the medical expense that is limited to 10 percent of the AGI. The AGI is $ 106,700 while medical expenses are $ 1,800. In particular, $ 1, 800 – 10 % ($ 106,700) = $ 0.
- Overall five personal exemptions should be declared.
- The family donated Beta Trade Inc. stock to Lakeville Community College. It should be regarded as a long-term property as the stock was initially purchased in 2003.
In order to compute the tax return for the specified family, it is necessary to identify the taxable income. Thus, the overall itemized deductions would include state withholding for income tax, state income taxes paid with last year’s return, property tax on home, property tax on automobile, home mortgage interest, and cash contribution to church, and stock contribution as reported in the form 1040:
$ 7,200 + $ 500 + $ 1,100 + $ 300 + $ 9,700 + $ 3,900 + $ 700 = $ 23,400.
The data was implemented in the required forms. In particular, the Form 1040 contains the general information about all members of the family, the Schedule B of the Form 1040 include interest and dividend income, Schedule A of the Form 1040 contains the information concerning the itemized data, and the Form 8283 comprises the information regarding noncash charitable donation, namely, Beta Trade Inc. stock to Lakeville Community College.
First, according to the Form 1040, it is necessary to calculate the total income:
$ 70,000 + $32,000 = $ 106,000.
After that, the taxable income should be computed by subtracting itemized deductions and exemptions from the adjusted gross income:
$ 106,700 – $ 23,400 – $ 19,500 = $ 63,800.
Total credits would be $ 3,000 of the child tax credit. Submitting tax from the total credits, one receives the following amount:
$ 8,441 – $ 3,000 = $ 5,441.
Finally, the amount of $ 10,559 should be refunded to Peter and Amy Jones for 2014:
$ 16,000 (total payment) – $ 5,441 = $ 10,559.