Linda and Kyle Smith are married taxpayers who file a joint return. Their social security numbers are 123-45-6789 and 11

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Linda and Kyle Smith are married taxpayers who file a jointreturn. Their social security numbers are 123-45-6789 and111-11-1111, respectively. Linda’s birthday is September 21, 1977,and Kyle’s is June 27, 1967. They live at 473 Revere Avenue,Lowell, MA 01850. Linda is the office manager for Lowell DentalClinic. Kyle is the self-employed physical therapist.
The following information is shown on Linda’s Wage and TaxStatement (Form W-2) for the tax year
Line
Description
Linda
1.
Wage, tips, other compensation
$58,000
2.
Federal income tax withheld
6,960
4.
Social security tax withheld
3,596
6.
Medicare tax withheld
841
17.
State income tax withheld
2,610
During the year, Kyle recorded the following items of hisbusiness:
Revenue from patient visits
$270,000
Property tax on the office
4,500
Mortgage interest on the office
12,000
Depreciation on the office
5,500
Malpractice insurance
37,500
Utilities paid for the office
13,750
Office staff salaries
51,000
Rent payments on equipment
15,000
health insurance premium paid for himself and his dependents
2,500
health insurance premium paid for his employees
5,000
Kyle made the estimate Federal income tax payment totaled$28,000. He also made the estimate state income tax payment of$3,500 during the tax year.
The Smiths provide over half of the support of their twochildren, Abby (born January 25, 1995, Social security number123-45-6788) and Michael (born February 7, 2001, Social Securitynumber 123-45-6786). Both children are full-time students and livewith the Smiths except when they are away at college. Abby earned$4,500 from a summer internship, and Michael earned $3,800 from apart-time job.
The Smiths furnished 60% of the total support of Kyle’s widowerfather, Paul Smith (born March 6, 1939, social security number123-45-6777). Paul died in November 2020, and Kyle, the beneficiaryof a policy on Paul’s life, received life insurance proceeds of$800,000 on January 28, 2021.
The Smiths also made some investment activities. The followinginformation is shown their investment income / (loss):
Interest income from saving account
$200
A gain from selling Netflix stock (hold for 7 months)
5,000
A loss from selling Bank of America stock (hold for 15months)
(1,500)
An non-business bad debt (hint: tax treatment asshort-term capital loss)
(2,000)
The Smiths had the following expenses relating to their personalresidence during the tax year
Property Taxes
$5,000
Qualified interest on home mortgage
$8,800
Unreimbursed Medical expenses paid:
Medicalexpenses
Doctor bill
Operation
Hospitalexpenses
$4,500
7,600
8,500
3,500
Interest payment on car loan
1,500
Utilities
4,100
Union dues paid by Linda
600
Linda’s work uniform expenses
450
Prepare the Federal income tax return of 2021 for the Smiths.You will include Form 1040, Schedule 1, Schedule C-only page 1, andSchedule A, Schedule SE-only page 1
Check your figures:
Note: Line 7, you report $1500 short-term capital gain (5000gain -1500 loss -2000 loss)
Kyle’s net business income (Sch. C) $125750
Schedule SE: Self-employment tax is 17768 (remember: 50% ofself-employment tax $8884 is deductible that is reported onSchedule 1 line 15.
On Schedule 1, line 15 is 8884 and line 13 is 2500 (medicalinsurance premium for self-employed taxpayer reported as For-AGIdeduction)
Adjusted Gross income is $174066
Itemized deductions: 29845 (use Schedule A)
Qualified business income deduction: 22873 reported online 13
Taxable income: 121348
Tax is $18193
Tax withhold by Linda is $6960 (line 25a)
Estimated tax payment made by Kyle is $28000 (line26)
Add line 25a and 26 is their total tax payment $34960 (line33)
They owe $501 (you may have a few dollars difference due totherounding)