Note: This problem is for the 2021 tax year.
Beth R. Jordan lives at 2322 Skyview Road, Mesa, AZ 85201. She is a tax accountant with Mesa Manufacturing Company, 1203 Western Avenue, Mesa, AZ 85201 (employer identification number 11-1111111). She also writes computer software programs for tax practitioners and has a part-time tax practice. Beth is single and has no dependents. Beth was born on July 4, 1975, and her Social Security number is 123-45-6785. She did not engage in any virtual currency transactions during the year, and she wants to contribute $3 to the Presidential Election Campaign Fund. Beth received the appropriate coronavirus recovery rebates (economic impact payments); related questions in ProConnect Tax should be ignored.
The following information is shown on Beth’s Wage and Tax Statement (Form W-2) for 2021.
| Line | Description | Amount |
| 1 | Wages, tips, other compensation | $65,000.00 |
| 2 | Federal income tax withheld | 9,500.00 |
| 3 | Social Security wages | 65,000.00 |
| 4 | Social Security tax withheld | 4,030.00 |
| 5 | Medicare wages and tips | 65,000.00 |
| 6 | Medicare tax withheld | 942.50 |
| 15 | State | Arizona |
| 16 | State wages, tips, etc. | 65,000.00 |
| 17 | State income tax withheld | 1,954.00 |
During the year, Beth received interest of $1,300 from Arizona Federal Savings and Loan and $400 from Arizona State Bank. Each financial institution reported the interest income on a Form 1099-INT. She received qualified dividends of $800 from Blue Corporation, $750 from Green Corporation, and $650 from Orange Corporation. Each corporation reported Beth’s dividend payments on a Form 1099-DIV.
Beth received a $1,100 income tax refund from the state of Arizona on April 29, 2021. On her 2020 Federal income tax return, she used the standard deduction.
Fees earned from her part-time tax practice in 2021 totaled $3,800. She paid $600 to have the tax returns processed by a computerized tax return service.
On February 8, 2021, Beth bought 500 shares of Gray Corporation common stock for $17.60 a share. On September 12, 2021, Beth sold the stock for $14 a share.
On January 2, 2021, Beth acquired 100 shares of Blue Corporation common stock for $30 a share. She sold the stock on December 19, 2021, for $55 a share. Both stock transactions were reported to Beth on Form 1099-B; basis was not reported to the IRS.
Beth bought a used sport utility vehicle for $6,000 on June 5, 2021. She purchased the vehicle from her brother-in-law, who was unemployed and was in need of cash. On November 2, 2021, she sold the vehicle to a friend for $6,500.
During the year, Beth records revenues of $16,000 from the sale of a software program she developed. Beth incurred the following expenses in connection with her software development business.
| Cost of personal computer | $7,000 |
| Cost of printer | 2,000 |
| Furniture | 3,000 |
| Supplies | 650 |
| Fee paid to computer consultant | 3,500 |
Beth elected to expense the maximum portion of the cost of the computer, printer, and furniture allowed under the provisions of § 179. These items were placed in service on January 15, 2021, and used 100% in her business.
Although her employer suggested that Beth attend an in-person conference on current developments in corporate taxation, Beth was not reimbursed for the travel expenses of $1,420 she incurred in attending the meeting. The $1,420 included $200 for the cost of meals.
During the year, Beth paid $300 for prescription medicines and $2,875 for doctor bills and hospital bills. Medical insurance premiums were paid by her employer. Beth paid real property taxes of $1,766 on her home. Interest on her home mortgage (Valley National Bank) was $3,845, and credit card interest was $320. Beth contributed $2,080 in cash to various qualifying charities during the year. Professional dues and subscriptions totaled $350.
Beth paid estimated taxes of $1,000.
Required:
Compute Beth Jordan’s 2021 Federal income tax payable (or refund due), and complete her 2021 tax return using appropriate forms and schedules and the Qualified Dividends and Capital Gain Tax Worksheet.
- Make realistic assumptions about any missing data.
- If an amount box does not require an entry or the answer is zero, enter “0”.
- Enter all amounts as positive numbers, unless instructed otherwise.
- It may be necessary to complete the tax schedules before completing Form 1040.
- When computing the tax liability, do not round your immediate calculations. If required round your final answers to the nearest dollar.
- Use the 2021 Tax Rate Schedule provided. Do not use the Tax Tables.
Need help with 2,3,4a,4c,5b,6,7,8a,8d,9,10,11,12,13,14
| SCHEDULE SE (Form 1040) Department of the Treasury Internal Revenue Service (99)Self-Employment Tax ▶ Go to www.irs.gov/ScheduleSE for instructions and the latest information. ▶ Attach to Form 1040, 1040-SR, or 1040-NR.OMB No. 1545-00742021Attachment Sequence No. 17Name of person with self-employment income (as shown on Form 1040, 1040-SR, or 1040-NR) Beth R. JordanSocial security number of person with self-employment income ▶123-45-6785Part ISelf-Employment TaxNote: If your only income subject to self-employment tax is church employee income, see instructions for how to report your income and the definition of church employee income.AIf you are a minister, member of a religious order, or Christian Science practitioner and you filed Form 4361, but you had $400 or more of other net earnings from self-employment, check here and continue with Part I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ▶☐Skip lines 1a and 1b if you use the farm optional method in Part II. See instructions.1aNet farm profit or (loss) from Schedule F, line 34, and farm partnerships, Schedule K-1 (Form 1065), box 14, code A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1a bIf you received social security retirement or disability benefits, enter the amount of Conservation Reserve Program payments included on Schedule F, line 4b, or listed on Schedule K-1 (Form 1065), box 20, code AH1b Skip line 2 if you use the nonfarm optional method in Part II. See instructions. 2Net profit or (loss) from Schedule C, line 31; and Schedule K-1 (Form 1065), box 14, code A (other than farming). See instructions for other income to report or if you are a minister or member of a religious order2 3Combine lines 1a, 1b, and 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 4aIf line 3 is more than zero, multiply line 3 by 92.35% (0.9235). Otherwise, enter amount from line 3 . . . . . .4a Note: If line 4a is less than $400 due to Conservation Reserve Program payments on line 1b, see instructions. bIf you elect one or both of the optional methods, enter the total of lines 15 and 17 here . . . . . . . . . . . . . . .4b cCombine lines 4a and 4b. If less than $400, stop; you don’t owe self-employment tax. Exception: If less than $400 and you had church employee income, enter -0- and continue . . . . . . . . . ▶4c 5aEnter your church employee income from Form W-2. See instructions for definition of church employee income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5a bMultiply line 5a by 92.35% (0.9235). If less than $100, enter -0- . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5b 6Add lines 4c and 5b . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6 7Maximum amount of combined wages and self-employment earnings subject to social security tax or the 6.2% portion of the 7.65% railroad retirement (tier 1) tax for 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7 8aTotal social security wages and tips (total of boxes 3 and 7 on Form(s) W-2) and railroad retirement (tier 1) compensation. If $142,800 or more, skip lines 8b through 10, and go to line 11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8a bUnreported tips subject to social security tax from Form 4137, line 10 . . . . . . . .8b cWages subject to social security tax from Form 8919, line 10 . . . . . . . . . . . . . .8c dAdd lines 8a, 8b, and 8c . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8d 9Subtract line 8d from line 7. If zero or less, enter -0- here and on line 10 and go to line 11 . . . . . . . . . ▶9 10Multiply the smaller of line 6 or line 9 by 12.4% (0.124) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10 11Multiply line 6 by 2.9% (0.029) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11 12Self-employment tax. Add lines 10 and 11. Enter here and on Schedule 2 (Form 1040), line 4 . . . . . .12 13Deduction for one-half of self-employment tax. Multiply line 12 by 50% (0.50). Enter here and on Schedule 1 (Form 1040), line 15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13 Part IIOptional Methods To Figure Net Earnings (see instructions)Farm Optional Method. You may use this method only if (a) your gross farm income(1) wasn’t more than $8,820, or (b) your net farm profits(2) were less than $6,367. 14Maximum income for optional methods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14 15Enter the smaller of: two-thirds (2/3) of gross farm income(1) (not less than zero) or $5,880. Also, include this amount on line 4b above . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15 Nonfarm Optional Method. You may use this method only if (a) your net nonfarm profits(3) were less than $6,367 and also less than 72.189% of your gross nonfarm income,(4)and (b) you had net earnings from self-employment of at least $400 in 2 of the prior 3 years. Caution: You may use this method no more than five times. 16Subtract line 15 from line 14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16 17Enter the smaller of: two-thirds (2/3) of gross nonfarm income(4) (not less than zero) or the amount on line 16. Also, include this amount on line 4b above . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17 (1)From Sch. F, line 9; and Sch. K-1 (Form 1065), box 14, code B.(3)From Sch. C, line 31; and Sch. K-1 (Form 1065), box 14, code A.(2)From Sch. F, line 34; and Sch. K-1 (Form 1065), box 14, code A —minus the amount you would have entered on line 1b had you not used the optional method . .(4)From Sch. C, line 7; and Sch. K-1 (Form 1065), box 14, code C.BAA For Paperwork Reduction Act Notice, see your tax return instructions.Schedule SE (Form 1040) 2021 |
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