Reference no: EM131923694

Sam Colley (age 52) is a member of the Financial Accounting Standards Board who earned a salary of $323,000 in 2016. Sam had $113,100 in federal taxes, $14,300 in state taxes, and $24,000 in FICA withheld from his compensation. Assume the FICA contribution is the correct total and that Sam has no underpayment penalties, if in fact he underpaid his taxes for 2016.

Sam lives at 407 Beechnut Drive in Norwalk, Connecticut with his wife (Holly – age 50) and three children (Parker – 5, Sabrina – 7, and Kendra – 10). Sam and Holly own a home that recently appraised at $2,850,000, and cost them $64,000 in 2016 property taxes. The couple also paid $73,000 of interest on a $1,000,000 mortgage on their home, and $8,000 in interest on a $90,000 home equity line in which their home is the collateral.

Holly runs a small business out of the couple’s home in which she sells holiday ornaments. She orders finished product from a firm in Taiwan. In 2016, Holly had sales of $82,000 and cost of goods sold of $36,000. The only other cost that Holly incurs is some monthly advertising on Facebook at a cost of $250 per month. Holly does have a small home office, but it is not used exclusively for her business, so the home office deduction is not an option. Holly paid no estimated taxes during the year.

The Alternative Minimum tax may be an issue for the Colley’s, so make sure you do that calculation in advance of presenting the completed return to them. There is no need to do a Connecticut state income tax return.