Federal Taxation

Tax Return for Individual

Instructions: Please complete the 2018 federal income tax return for Maria Gonzalez. Ignore the requirement to attach the form(s) W-2 to the front page of the Form 1040. If any required information is missing, use reasonable assumptions to fill in the gaps.

You are in charge to complete the 2018 federal income tax return for Maria Gonzalez. She has adequate written documentation to substantiate all transactions.

Maria Gonzalez is divorced. She was born on May 22, 1970, and lives at 1502 Elm Terrace, Baton Rouge, LA 70465. Her Social Security Number is 385-22-7844.

Maria has a child, Juan Gomez, who resides with Maria. Juan’s social security number is 285-33-8999. Juan was born on June 3, 2010. Maria receives alimony of $3,000 per year and child support of $4,000 per year from her ex-husband, Rigoberto Gomez. Maria’s home phone number is 605-833-2222. She does not want to contribute $3 to the Presidential Election Campaign Fund.

Maria’s mother, Juanita Hernandez, lived with Maria until her death on January 2, 2018. Juanita’s only income was $4,000 from Social Security. Maria paid more than 50% of Juanita’s support. Juantia’s Social Security number was 123-55-5555. Juanita’s birthday is May 15, 1945. Juanita had minimum essential health insurance coverage because she had Medicare coverage. Maria received Form 1095-B for her mother which indicated that her mother had coverage for 12 months.

Maria is employed by the Highway Department of the State of Louisiana in an executive position. The employer’s federal identification number is 33-6666666. The employer’s address is 800 First Street, Baton Rouge, LA 70464. The following information is shown on her Wage and Tax Statement (Form W-2) for 2018,

Line Description Maria
1 Wages, tips, other compensation $70,000
2 Federal income tax withheld 8,000
3 Social Security wages 70,000
4 Social Security tax withheld 4,340
5 Medicare wages and tips 70,000
6 Medicare tax withheld 1,015
12a DD 8,500
16 State wages, tips, etc. 70,000
17 State income tax withheld 3,000

In addition to her salary, Maria’s employer provides her with the following fringe benefits:
a. Group term life insurance with a face value of $30,000. The cost of the premiums for the employer was $600. The Highway Department provides term life insurance policies for all full-time employees.

b. Group health insurance plan. Maria’s employer paid premiums of $8,500 for her and her son’s medical insurance coverage. The plan paid $7,000 in medical expenses for her and her son during the year. The coverage on her employer’s medical insurance plan meets the minimum essential coverage requirement under the Affordable Care Act for her and her son. She received Form 1095-B from her employer that shows that she and her son had coverage for 12 months.

Besides her normal job, Maria runs a sole proprietor business in computer systems design service. Maria earned $5,000 from a consulting assignment in this year. The amount was reported to her on a 1099-MISC form in Box 7. The principal business code is 541510. Her basis for accounting is cash. The payer was ABC Corporation whose payor’s federal identification number is 22-8888888. It is located at 333 Main Street, Baton Rouge, LA 70465.

In order to for Maria to maintain her full-time job, she sends her son Juan to a day care program after school five days a week. During the year, Maria paid the day care operator $4,250 for child care. The day care details are as follows:
Horizon Day Care
452 Patriot Road
Baton Rouge, LA 70465
EIN: 43-6598324

On June 15, 2018, Maria sold 200 shares of XYZ common stock for its market value of $56,000. Maria had purchased the shares for $50,000 on December 2, 2016. Her brokerage firm provided her with IRS Form 1099-B that properly reported the nature of her gain and its correct basis.

On July 20, 2014, Maria purchased a stamp collection for $2,400 as an investment. On December 8, 2018, Maria sold the stamp collection for $4,800. She did not receive a Form 1099-B for this transaction.

Maria has a long-term carryforward capital loss of $2,000 from the sale of common stock in 2016.

Other sources of income for Maria were as follows:

Ordinary Dividend income – XYZ Corporation $9,000
(only $8,000 qualified dividends out of the $9,000 total dividends)
Interest income
Forest Bank 4,000
City of Lafayette, LA water bonds 1,000

Forest Bank reported the interest income on a Form 1099-INT in Box 1. The interest from the City of Lafayette water bonds is only reported in Box 8 on Form 1099-INT since it is from municipal bond interest. This interest is also exempt from State of Louisiana income taxes, so Maria reports it as in-state municipal bond interest. Maria also received a Form 1099-DIV from XYZ Corporation. The ordinary dividends of $9,000 are reported in Box 1a, and the qualified dividends of $8,000 are reported in Box 1b. Maria has no foreign bank accounts or trusts.

Potential itemized deductions for Maria, in addition to items already mentioned, were as follows:
Property taxes paid on her residence – Short Mortgage Co. – Form 1098 $4,000
Charitable contributions – cash to United Church 2,000
Mortgage interest on her residence – Short Mortgage Co. – Form 1098 3,500
State income tax payment sent with 2017 state return in April 2018 800
Doctor expenses for Maria and her son (not covered by insurance) 4,500
Doctor expenses for Juanita 8,000
Interest paid on personal use automobile loan 1,000

Maria put $4,000 in a traditional IRA in 2018. Her employer does not provide a pension to its employees. (Chapter 19)

Maria made four estimated federal income tax payments of $500 each on April 15, 2018; June 15, 2018; September 15, 2018; and January 15, 2019.

Compute Maria’s net federal tax payable or refund due for 2018. If she incurs a penalty, she wants to pay it with her tax return. If she is to receive a tax refund, she wants to receive a check. Turn in Form 1040, Form 2441, Form 8949, Schedule 1, Schedule 3, Schedule 4, Schedule 5, Schedule A, Schedule B, Schedule C, Schedule D, and Schedule SE.