Module 8 Graded Tax Return Problem Instructions Introduction This comprehensive problem serves two learning goals. By completing this activity, you will: (1) Demonstrate your ability to apply the tax knowledge you have gained during this course in order to determine a taxpayer's tax liability, and (2) Discover where items, which affect a taxpayer's tax liability, are reported on the tax return. Taxpayer's Facts Please read this file carefully as it includes components of income and expenses necessary to complete the tax return. You will need to determine which components affect the tax return and how much of each component, if any, should be reported on the tax return: Jared and Ashley have come to you for help filing their 2022 tax return. They are married on December 31, 2022 and are both age 40. They live with their three qualifying children, Nick, Betty, and Roger, who were 12, 14, and 17 years old, respectively, at the end of 2022. They have made the following requests: • They wish to file a joint tax return. • If they overpaid their taxes this year, they would like to receive half as a refund and have half applied to next year's federal tax return (hint: this is a commonly missed item on the quiz). Jared and Ashley have the following income items during 2022: • Jared's wages of $50,000 ●• Jared's unemployment compensation of $5,000 • Ashley's wages of $60,000 • Interest from a city of Chicago bond of $2,000 • Interest from a corporate bond of $3,000 • Ordinary dividends of $2,000 • Gift from Jared's father of a new computer that cost $3,000 • A $3,000 refund from the State of Illinois for income taxes paid in 2021 Jared and Ashley incurred the following expenses/losses during 2022: Contributions of $5,500 to each of Jared and Ashley's traditional IRAs, i.e., $11,000 total • (they are not covered by any other qualified retirement plans) • Qualified medical expenses of $9,000 • Personal credit card interest expense of $8,000 • Charitable contributions of $4,000 • Ten $25 parking tickets totaling $250 • Mortgage interest on primary residence of $8,000 (mortgage is $200,000) • Property taxes on the primary residence of $6,500 • Illinois state and local income taxes paid of $5,500 • Federal tax withholding on Jared and Ashley's W-2s of $10,000 They also provide you with the following information about their prior year return: • • On their prior year federal tax return, they claimed itemized deductions (itemized deductions exceeded the standard deduction by $5,000). And, they deducted all $9,800 of their state and local taxes on Schedule A (i.e., the SALT cap did not apply). Jared and Ashley elected to have $139 of their 2021 tax refund applied to 2022. Tax Rate Schedule & Form 1040 Instructions I have also included the 2022 tax rate schedule for married filing jointly and the instructions for Form 1040. And, in case you get stuck or need help getting started, I've included a "hint sheet" below that indicates all of the fields that you will need to complete (or at least consider completing) to finish this assignment. - Table 1 - section 1(j) (2) (A) – Married individuals filling joint returns and surviving spouses If taxable income is: Not over $20,550 Over $20,550 but not over $83,550 The tax is: 10% of the taxable income $2,055 plus 12% of the excess over $20,550 $9,615 plus 22% of the excess over $83,550 Over $83,550 but not over $178,150 Over $178,150 but not over $340,100 $30,427 plus 24% of the excess over $178,150 Over $340,100 but not over $431,900 $69,295 plus 32% of the excess over $340,100 Over $431,900 but not over $647,850 $98,671 plus 35% of the excess over $432,900 Over $647,850 $174,253.50 plus 37% of the excess over $647,850/n7. Question 7 What amount is reported on the Form 1040 line: amount you owe? Note: Enter whole numbers only. Do not enter a $ sign or a comma./n1. Question 1 What amount is reported on the Form 1040 line: federal income tax withheld from Forms W-2 and 1099? Note: Enter whole numbers only. Do not enter a $ sign or a comma. 2. Question 2 What amount is reported on the Form 1040, Schedule 5 line: estimated tax payments and amount applied from prior year return? Note: Enter whole numbers only. Do not enter a $ sign or a comma. 3. Question 3 What amount is reported on the Form 1040 line: total payments (Line 18)? Note: Enter whole numbers only. Do not enter a $ sign or a comma. 4. Question 4 What amount is reported on the Form 1040 line: amount you overpaid? Note: Enter whole numbers only. Do not enter a $ sign or a comma. 5. Question 5 What amount is reported on the Form 1040 line: Amount you want refunded to you? Note: Enter whole numbers only. Do not enter a $ sign or a comma. 6. Question 6 What amount is reported on the Form 1040 line: Amount you want applied to your next year's estimated tax? Note: Enter whole numbers only. Do not enter a $ sign or a comma.

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