Dan and Cheryl are married, file a joint return, and have no
children. Dan, age 45, is an independent contractor working in pharmaceutica l
sales and Cheryl, age 42, is a nurse at a local hospital. Dan’s SSN is 400
-20-1000 and Cheryl’s SSN is 200-40-8000 and they reside at 2033 Palmetto
Drive, Atlanta, GA 30304. Dan is paid according to commissions from sales, and
he has no income tax or payroll tax withholdings. Dan operates his business
from his home office. During 2018, Dan earned tota l commissions in his
business of $125,000. Cheryl earned a salary during 2018 of $45,400, with the
following withhold – ings: $6,000 federal taxes, $1,800 state taxes, $2,815
OASDI, and $658 Medicare taxes.
During 2018, Dan and Cheryl had interest income from
corporate bonds and bank accounts of $1,450 and qualified dividends from stocks
of $5,950. Dan also actively trades stocks and had the following results for
2018:
He had no capita l loss carryovers from previous years. Dan
does a considerable amount of travel in connection with his business and uses
his own car. During 2018, Dan drove his car a total of 38,000 miles, of which
32,000 were business related. He also had business-related parking fees and
tolls during the year of $280. Dan uses the mileage method for deducting auto
expenses. Dan also had the following travel expenses while away from home
during the year:
Dan uses the simplified method to deduct expenses for his
office-in-home. His office measures 15 feet by 12 feet in size. Cheryl incurred
several expenses in connection with her nursing job. She paid $450 in professional
dues, $200 in professional journals, and $350 for uniforms. Dan and Cheryl had
the following other expenditures during the year:
During 2018, Dan and Cheryl paid federal and state estimated
tax payments on a quarterly basis. Federal payments for the year amounted to
$24,000. State estimated payments for the year amounted to $2,200. Compute Dan
and Cheryl’s income tax liability for 2018. Disregard the alternative minimum
tax.
Leave a Reply