Please see attachment
Fill in the table below, using the information on this handout, based on what is best for the client. Bill and Judy Dodge are married, and are each 35 years old. They have three children, with ages as of Dec. 31, 2022 as listed: Parker, age 5, Lisa, age 2, and Kurt, age 4. Assume they did not itemize for their 2021 federal income tax return. The W2 table is for the 2022 income tax year. Assume tax laws in 2022 are as described in the textbook. If no information is given about something, assume zero, e.g., zero contributions to an IRA. Your answers should be what is best for the family.
2022 tables for all calculations. They received a state income tax refund of $1,000 in 2022.
Cash charitable contributions to public charity =$2,000. Medical expenses not covered by insurance = $900. Childcare expenses in 2022 for the 3 children = $2,800. Real estate taxes paid in 2022 = $7,800. Interest paid on home mortgage (taken out for a home purchase) in 2022 = $12,200.
| W2 forms | Bill | Judy |
| Box 1 wages | 125,000 |
|
| Box 3 & Box 5 wages | 130,000 | |
| Box 2 federal income tax withheld in 2022 | 11,000 | |
| Box 17, state income tax withheld in 2022 | 4,500 | |
| Box 19, local income tax withheld in 2022 | ||
| Box 4, Social Security tax withheld in 2022 | 7,130 | |
| Box 6, Medicare tax withheld in 2022 | 1667.5 |
Bill had $5,000 withheld from his paychecks for elective contributions to his employer’s 401k plan, and his employer contributed an additional $5,000. That is why his Box 1 wage is $5,000 less than his Box 3 & Box 5 wage.
Judy started a counseling business in January, 2022. She paid $40,000 in expenses for rent, utilities, advertising, and other items in 2022. The gross revenue for her business in 2022 was $50,000. She did not pay any federal or state income taxes or federal self-employment tax in 2022, but will pay the self-employment tax when she and Bill file their federal income tax return for 2022.
| A. Wages, salaries, tips, etc. | 1040 Line 1z= |
| Any other items in 1040 Lines 2a-7a that apply? Assume zero. | |
| B. Taxable refunds | Schedule 1 Line 1= |
| C. Business income or loss. From Schedule C. (see posted Schedule C or p.607 in textbook. Assume all expenses as “other”) | Schedule 1 Line 3 = |
| D. OTHER INCOME (net income from Judy’s business) | 1040 Line 8 = |
| E. 2022 Federal gross income $ = |
|
| F. Adjustments to gross income, Schedule 1, Lines 11-24 Assume that only Schedule 1, Line 15 applies: Deductible part of self-employment tax from Judy’s business. (see posted Schedule SE or p.604 in textbook) | 1040 Line 10 = |
| G. 2022 Federal adjusted gross income $ = | 1040 Line 11 = |
| H. Filing status = (single/married filing jointly, household head) | |
| I. Enter standard deduction (SD) $ = Enter itemized deductions (ID) and list below =
| 1040 Line 12 = |
| J. Qualified business income deduction =20% of (business income less self-employment deduction) | 1040 Line 13 = |
| K. Line 12 + Line 13 | 1040 Line 14 = |
| L. 2022 Federal taxable income $ = | 1040 Line 15 = |
| M. 2022 marginal tax rate (bracket) | |
| N. Income tax before credits for 2022 $ = | 1040 Line 16 = |
| O. Child tax credit or credit for other dependents | 1040 Line 19 = |
| P. Other nonrefundable credits from Schedule 3 (list) Credit for child care expenses | 1040 Line 20 = |
| Q. Line 19 + Line 20 | 1040 Line 21 = |
| R. Income tax after tax credits | 1040 Line 22 = |
| S. Other taxes, including self-employment tax on Judy’s business income (see posted form SE or p. 608 in textbook.) | 1040 Line 23 = |
| T. Total tax (income tax + self-employment tax; Lines 22+23) | 1040 Line 24 = |
| U. Federal Income Tax withheld | 1040 Line 25a = |
| V. Total payments | 1040 Line 33 = |
| W. Amount overpaid | 1040 Line 34 = |
| X. Amount owe | 1040 Line 37 = |
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