Reference no: EM132863263
Question - Betty Conwell teaches 7th grade at a local middle school. She earned $38,000 in the most recent prior year. She is in her mid-40s and has been divorced for several years and has been receiving monthly alimony payments of $1,200 from her ex. Betty also receives $2,500 a month for a small apartment building she been renting out for a few years now. In the most recent prior year the expenses for the rental totaled $19,500.
Betty and her 20-year-old daughter Jennifer moved to Mississippi in February of this year. Betty provides more than one half of Jennifer's support. They had been living in Colorado for the past 15 years, but ever since her divorce, Betty has been wanting to move back to Mississippi to be closer to her family. Luckily, last December, a teaching position opened up and Betty and Jennifer decided to make the move. Betty paid a moving company $2,010 to move their personal belongings, and she and Jennifer spent two days driving the 1,426 miles to Mississippi. During the trip, Betty paid $200 for lodging and $85 for meals. Betty's mother was so excited to have her daughter and granddaughter move back to Mississippi that she gave Betty $3,000 to help out with the moving costs.
Betty rented a home in Mississippi. Jennifer decided to continue living at home with her mom, but she started attending school full-time in January at a nearby university. She was awarded a $3,000 partial tuition scholarship this year, and Betty helped out by paying the remaining $500 tuition cost. If possible, Betty thought it would be best to claim the education credit for these expenses.
Betty wasn't sure if she would have enough items to help her benefit from itemizing on her tax return. However, she kept track of several expenses this year that she thought might qualify if she was able to itemize. Betty paid $2,600 in state taxes and $6,500 in charitable contributions during the year. She also paid the following medical-related expenses for her and Jennifer:
Insurance premiums $4,795
Medical care expenses 1,100
Prescription medicine 350
Nonprescription medicine 100
New contact lenses for Heather 200
Shortly after the move, Betty got distracted while driving and she ran into a street sign. The accident caused $900 in damage to the car and gave her whiplash. Because the repairs were less than her insurance deductible, she paid the entire cost of the repairs. Betty wasn't able to work for two months after the accident. Fortunately, she received $2,000 from her disability insurance. Her employer, the Central Mississippi School District, paid 60% of the premiums on the policy as a nontaxable fringe benefit and Betty paid the remaining 40% portion. A few years ago, Betty acquired several investments with her portion of the divorce settlement. This year she reported the following income from her investments: $2,200 of interest income from corporate bonds and $1,500 interest income from the City of Denver municipal bonds. Overall, Betty's stock portfolio appreciated by $12,000 but she did not sell any of her stocks. Jennifer reported $3,200 of interest income from corporate bonds she received as gifts from her father over the last several years. This was Jennifer's only source of income for the year. Betty had $10,000 of federal income taxes withheld by her employer. Jennifer made $500 of estimated tax payments during the year. Betty did not make any estimated payments. Betty had qualifying insurance for purposes of the Affordable Care Act (ACA).
Required -
1. Determine Betty's federal income taxes due or taxes payable for the current year. Complete pages 1 and 2 of Form 1040 for Betty.
2. Is Betty allowed to file as a head of household or single?
3. Determine the amount of FICA taxes Betty was required to pay on her salary.
4. Determine Jennifer's federal income taxes due or payable.