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Richard mccarth1

Richard mccarth1

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School

University of Nairobi

Course

Law

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naro

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Richard McCarthy (born 2/14/1966; Social Security number 100-10-9090) and Christine

McCarthy (born 6/1/1968; Social security number 101-21-3434) have a 19-year-old son

Jack, (born 10/2/2001; Social Security number 555-55-1212), who is a full-time student at

the University of Key West. The McCarthys also have a 12-year-old daughter Justine,

(Social Security number 444-23-1212), who lives with them. The McCarthys can claim a

$2,000 child tax credit for Justine and a $500 other dependent credit for Jack. The

McCarthys did not receive an EIP in 2020. Richard is the CEO at a paper company. His

2020 Form W-2 is provided.

Christine is an optometrist and operates her own practice ("The Eyes of March") in town as

a sole proprietor. The shop address is 1030 Morgan Highway, Clarks Summit, PA 18411

and the business code is 621320. Christine keeps her books on the accrual basis and her

bookkeeper provided the following information:

Gross sales $270,500

Returns 9,000

Inventory:

Beginning inventory $25,000

Purchases 120,000

Ending inventory 29,000

Rent 24,000

Insurance 11,000

Professional fees 3,000

Payroll 35,000

Payroll taxes 2,877

Utilities 3,975

Office expenses 1,995

Depreciation 5,000

Christine came into contact with a client that had COVID and was unable to work for 14

days under orders of state health officials. Her employees were unaffected. She also

elected to defer self-employment taxes (but not household taxes) under the COVID

provisions. She allocates 77.5 percent of her income to the March 27 to December 31, 2020

COVID period.

The McCarthys have a nanny/housekeeper whom they paid $12,700 during 2020. They did

not withhold income or FICA taxes. The McCarthys paid Pennsylvania state unemployment

tax of $378 in 2020.

Christine received a 2020 Form 1099-INT from the National Bank of Scranton that listed

interest income of $23,500. Note that McCarthys reasonably allocate $751 to state income

tax expense for purposes of the net investment income tax.

The McCarthys received a Form 1099-G from Pennsylvania that reported a $477 state

income tax refund from 2019. The McCarthys filed a Schedule A in 2019 and had $14,223

of state income tax expense that was limited to a $10,000 deduction.

The McCarthys paid the following in 2020:

Home mortgage interest $15,600

Property taxes 5,450

Estimated state income tax payments 2,400

Estimated Federal income tax payments 4,500

Charitable contributions (all cash) 7,600

Student loan interest 2,690

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Required:

Complete the McCarthys' federal tax return for 2020. Use Form 1040.

• Make realistic assumptions about any missing data.

• The taxpayers had health insurance coverage for the entire year and do not

want to contribute to the presidential election campaign.

• Enter all amounts as positive numbers.

• If an amount box does not require an entry or the answer is zero, enter "0".

• If required, round any dollar amount to the nearest dollar.

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Richard McCarthy (born 2/14/1966; Social Security number 100-10-9090) and Christine McCarthy (born 6/1/1968; Social security number 101-21-3434) have a 19-year-old son Jack, (born 10/2/2001; Social Security number 555-55-1212), who is a full-time student at the University of Key West. The McCarthys also have a 12-year-old daughter Justine, (Social Security number 444-23-1212), who lives with them. The McCarthys can claim a $2,000 child tax credit for Justine and a $500 other dependent credit for Jack. The McCarthys did not receive an EIP in 2020. Richard is the CEO at a paper company. His 2020 Form W-2 is provided. Christine is an optometrist and operates her own practice ("The Eyes of March") in town as a sole proprietor. The shop address is 1030 Morgan Highway, Clarks Summit, PA 18411 and the business code is 621320. Christine keeps her books on the accrual basis and her bookkeeper pro ...
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Tags: tax