Reference no: EM13954540
John and Kathy are married with two children. John has two children from a previous marriage. He paid alimony of $28,000 and child support of $19,000 to his ex-spouse. John has a written agreement as the non-custodial parent to claim the two children that live with his ex-spouse as his dependents. John has wages of $180,000 ($29,500 in withholding) and Kathy has wages of $27,000 ($10,250 in withholding). John received $1,100 in interest from is savings account. He also received dividends of $1,200 from his stock invested in Exxon. Kathy received $3,000 in unemployment ($600 in withholding). They paid $4,000 in taxes when they filed for an extension. John has rental property (an apartment) that he receives $18,000. He paid the following expenses for the rental property: $400-advertising, $500 in cleaning, $1,200 for insurance, $350 in legal fees related to preparing the rental agreement, $2,800 for the mortgage interest, $1,200 supplies, $200 in repairs, and $1,800 in real estate taxes. He did not materially participate in the business. Kathy has a small bookkeeping business. Her father gave her a gift of $20,000 in order to start her business. Her gross sales are $52,000. She paid the following expenses for her business: $500 in advertising, $10,500 for contract labor, $1,200 for insurance, $1,500 in legal fees for setting her business up, $4,800 for rent, $1,600 for office supplies, $750 for licenses, $2,600 for utilities, and $700 for miscellaneous office expenses. Additional expenses included the following:
1. Medical expenses of $25,000-no insurance reimbursement
2. Real estate taxes on home of $4,800
3. Mortgage interest on home of $6,900
4. Cash contributions to United Way-$600; St. Jude-$250; KERA-$300; UNT-$500
5. Contributed clothing articles to Goodwill-estimated FMV $600 (drove 20 miles to make contributions). 6. Tax preparation fees of $900
7. Attorney fees of $4,600 for IRS audit
8. Tax advice of $500
9. Bank fees of $100 for investment activities account
10. Safe deposit box of $75 for investment activities account
11. Use "General" Local sales tax of 1.5%
12. Employee business expenses:
a) Business mileage 3,750 miles, total mileage for year 15,000; daily commute round trip 45 miles (5 days/week; 50 weeks); auto placed in service 1/1/13 (use standard mileage of .565)
b) Meals-use standard rate of $46/day for 18 days
c) Parking fees and tolls-$250
d) Overnight travel expense-$4,000
e) Other job related expenses-$500
f) Reimbursed 3,200 for everything but meals (reimbursed $428 for meals) Use the attached 1040 forms and supporting schedules to calculate the taxable income. Standard deduction for married individuals, filing joint returns for 2013 is $12,200.
Note:
H&R Block software also calculated Alternative Minimum Tax of $1,188 on Form 6251.
1. Calculate Total Income
2. Calculate AGI
3. Calculate Itemized Deductions
4. Calculate Employee Business Expense.