Compute the smiths net tax payable

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Reference no: EM132299522

Mike E. Smith and Jean A. Field, each age 42, married on September 7, 2016. Mike and Jean will file a joint return for 2018. Mike’s Social Security number is 111-11- 1112. Jean’s Social Security number is 123-45-6789, and she adopted “Smith” as her married name. They live at 211 Brickstone Drive, Brooklyn, NY 11304.

Mike was divorced from Sarah Smith in March 2016. Under the divorce agreement, Mike is to pay Sarah $1,250 per month for the next 10 years or until Sarah’s death, whichever occurs first. Mike pays Sarah $15,000 in 2018. In addition, in January 2018, Mike pays Sarah $50,000, which is designated as being for her share of the marital property. Also, Mike is responsible for all prior years’ income taxes. Sarah’s Social Security number is 123-45-6788.

Mike’s salary for 2018 is $150,000, and his employer, Cherry, Inc. (Federal I.D. No. 98-7654321), provides him with group term life insurance equal to twice his annual salary. His employer withheld $24,900 for Federal income taxes and $8,000 for state income taxes. The proper amounts were withheld for FICA taxes.

Jean recently graduated from law school and is employed by Legal Aid Society, Inc. (Federal I.D. No. 11-1111111), as a public defender. She receives a salary of $42,000 in 2018. Her employer withheld $7,500 for Federal income taxes and $2,400 for state income taxes. The proper amounts were withheld for FICA taxes.

Mike and Jean had interest income from their bankof $500. They receive a $1,900 refund on their 2017 state income taxes. They itemized deductions on their 2017 Federal income tax return (total of $15,000). Mike and Jean pay $4,500 interest and $1,450 property taxes on their personal residence in 2018. Their charitable contributions total $2,400 (all to their church). They paid sales taxes of $1,400, for which they maintain the receipts. Both spouses had health insurance for all months of 2018 and do not want to contribute to the Presidential Election Campaign.

Compute the Smiths’ net tax payable (or refund due) for 2018. If you use tax forms for your solution, you will need Form 1040 and Schedules A and B (if available).

Reference no: EM132299522

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