Reference no: EM132670912
Chris and Stefani Watanabe live with their two boys at 1400 Victoria Lane, Riverside, CA 92501. Chris is an accountant who has his own accounting practice. Stefani is an elementary school teacher. Their sons, Justin and Jordan, are ages 13 and 10, respectively. The following is additional information regarding the Watanabes.
Social security numbers for the Watanabe family:
Chris 412-34-5670
Stefani 412-34-5671
Justin 412-34-5672
Jordan 412-34-5673
They paid $4,500 to Friendly Hills Child Care center for after-school care for both Justin and Jordan, allocated equally. The address is 2 River Dr, Riverside, CA 92501 and their ID number is 22-1234567.
Stefani's W-2 from the Riverside school district showed the following:
Wages =$56,925.04
Federal W/H =$7,085.90
Social Security wages =$56,925.04
Social Security W/H =$3,529.35
Medicare Wages =$56,925.04
Medicare W/H =$825.41
California W/H =$2,105.75
Chris's accounting business is located in downtown Riverside and his business code is 541211. His business had the following income and expense information (Cash basis) for the year:
Gross revenues $165,000
Expenses: Advertising $2,100
Insurance 1,200
Legal fees 10,500
Office supplies 800
Rent 24,000
Travel 6,945
Meals 2,400
Utilities 2,800 Wages 34,000
Dues 650
Additionally, Chris and Stefani paid the following expenses during the year:
Medical and dental expenses $4,500
Property tax (home on Victoria Lane) 3,750
State income taxes with the 2018 return 3,900
Donations to the church (cash) 3,500
Mortgage interest (home on Victoria Lane) 16,900
Stefani paid $950 in classroom expenses for her class
- Chris and Stefani also earned $975 of interest income from California Bank during the year.
- Lastly, Chris and Stefani own a three-bedroom cabin in Big Bear Lake (they bought it in January of 2007 for $300,000). The address is 3105 Stonehedge Road, Big Bear Lake, CA 92315. They did not use the property for personal use at any time during the year. The revenue and expenses for the Big Bear Lake rental property are as follows:
Rental income $18,000
Expenses: Insurance $1,200
Property taxes 2,500
Auto (standard mileage) 267
Management fees 1,600
Repairs and maintenance 1,100
Mortgage interest 9,000
Depreciation Calculate Utilities 450
The Watanabes also made $13,000 and $9,000 in federal and California estimated income tax payments, respectively, on 12/31/19.
Required:
Problem 1: Prepare the Watanabes' federal tax return for 2019.