INDIVIDUAL TAX RETURN PROBLEM 2
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INDIVIDUAL TAX RETURN PROBLEM 2
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Required:
∙ Use the following information to complete Johnelle and Latoya Henry’s 2017
federal income tax return. If any information is missing, use reasonable
assumptions to fill in the gaps.
∙ You may need the following forms to complete the project: Form 1040 and
Schedule A. The forms, schedules, and instructions can be found at the IRS
website (www.irs.gov). The instructions can be helpful in completing the forms.
Facts:
1. Johnelle Henry is employed as a human resources manager for Toys Unlimited,
Inc., and Latoya is a financial planner for her mother’s company, Long-term
Investments, Inc., a full-service wealth-planning firm. They provide the following information:
∙ They both want to contribute to the presidential election campaign.
∙ They live at 9876 Old Waverly, Charleston, South Carolina 29401.
Appendix C C-3
∙ Johnelle’s birthday is 7/17/1965 and his Social Security number is 555-12-6789.
∙ Latoya’s birthday is 9/11/1967 and her Social Security number is 987-65-4321.
∙ Johnelle and Latoya do not have any foreign bank accounts or trusts.
2. Johnelle received a Form W-2 from Toys Unlimited, Inc. that contained the following information:
∙ Line 1 Wages, tips, other compensation $45,000
INDIVIDUAL TAX RETURN PROBLEM 2
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∙ Line 2 Federal income tax withheld 7,500
∙ Line 3 Social Security wages 45,000
∙ Line 4 Social Security tax withheld 2,790
∙ Line 5 Medicare wages and tips 45,000
∙ Line 6 Medicare tax withheld 653
∙ Line 17 State income tax 2,200
3. Latoya received a Form W-2 from Long-term Investments, Inc., that contained the
following information:
∙ Line 1 Wages, tips, other compensation $85,000
∙ Line 2 Federal income tax withheld 12,500
∙ Line 3 Social Security wages 85,000
∙ Line 4 Social Security tax withheld 5,270
∙ Line 5 Medicare wages and tips 85,000
∙ Line 6 Medicare tax withheld 1,233
∙ Line 17 State income tax 4,200
4. Johnelle and Latoya incurred the following medical expenses for the year:
∙ Transportation to Chicago for Johnelle’s cancer 2,000 miles
treatment
∙ Unreimbursed hospital charges for Johnelle $6,500
∙ Unreimbursed prescription drug charges for 1,750
Johnelle and Latoya
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∙ Unreimbursed physician charges for Johnelle and Latoya 2,200
∙ Unreimbursed prescription glasses for Latoya 150
∙ Laser hair treatment for Latoya (so that she will no longer 2,000
need to shave her legs)
5. Johnelle and Latoya paid $12,000 of interest payments on their primary residence
(acquisition debt of $225,000). They also paid $1,750 of interest expense on
Latoya’s car loan and $500 of interest on their Visa card.
6. Johnelle and Latoya paid $4,000 of real estate taxes on their home and $1,000 of
real estate tax on a vacant lot they purchased with the hope of building their dream
home in the future. They also paid $3,000 in sales tax on Latoya’s car and other
purchases and $1,000 of ad valorem tax on their cars.
7. Johnelle and Latoya made the following contributions this year:
∙ American Red Cross $ 200
∙ United Way 150
∙ St. Joseph’s Catholic Church 8,000
∙ Food for the family of Hannah Barbara (a neighbor 225
who suffered a tragic car accident this past year)
∙ Stock transfer to the University of South Carolina 750
(originally purchased for $1,000 in 2005)
C-4 Appendix C
8. Johnelle won $5,000 in the state lottery. He has been playing the lottery for years
[$10 in lottery tickets every week ($520 in total) that he saves to keep track of the
numbers he plays].
9. Johnelle and Latoya have qualifying insurance for purposes of the Affordable Care
Act (ACA
INDIVIDUAL TAX RETURN PROBLEM 2
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