How much life insurance proceeds did Bruce M. Byrd receive after his father’s death in 2021?

  

Note: This problem is for the 2021 tax year.

Alice J. and Bruce M. Byrd are married taxpayers who file a joint return. Their Social Security numbers are 123-45-6784 and 111-11-

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How much life insurance proceeds did Bruce M. Byrd receive after his father’s death in 2021?
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1113, respectively. Alice’s birthday is September 21, 1974, and Bruce’s is June 27, 1973. They live at 473 Revere Avenue, Lowell, MA

01850. Alice is the office manager for Lowell Dental Clinic, 433 Broad Street, Lowell, MA 01850 (Employer Identification Number 98-

7654321). Bruce is the manager of a Super Burgers fast-food outlet owned and operated by Plymouth Corporation, 1247 Central

Avenue, Hauppauge, NY 11788 (Employer Identification Number 11-1111111).

The following information is shown on their Wage and Tax Statements (Form W2) for 2021.

Line Description Alice Bruce

1 Wages, tips, other compensation $58,000 $62,100

2 Federal income tax withheld 4,500 5,300

3 Social Security wages 58,000 62,100

4 Social Security tax withheld 3,596 3,850

5 Medicare wages and tips 58,000 62,100

6 Medicare tax withheld 841 900

15 State Massachusetts Massachusetts

16 State wages, tips, etc. 58,000 62,100

17 State income tax withheld 2,950 3,100

The Byrds provide over half of the support of their two children, Cynthia (born January 25, 1997, Social Security number 123-45-6788)

and John (born February 7, 2001, Social Security number 123-45-6780). Both children are full-time students and live with the Byrds

except when they are away at college. Cynthia earned $6,200 from a summer internship in 2021, and John earned $3,800 from a part-

time job. Both children received scholarships covering tuition and materials.

During 2021, the Byrds provided 60% of the total support of Bruce’s widower father, Sam Byrd (born March 6, 1945, Social Security

number 123-45-6787). Sam lived alone and covered the rest of his support with his Social Security benefits. Sam died in November, and

Bruce, the beneficiary of a policy on Sam’s life, received life insurance proceeds of $1,600,000 on December 28.

The Byrds had the following expenses relating to their personal residence during 2021:

Real estate property taxes $5,000

Qualified interest on home mortgage (acquistion indebtedness) 8,700

Repairs to roof 5,750

Utilities 4,100

Fire and theft insurance 1,900

The Byrds had the following medical expenses for 2021:

Medical insurance premiums $4,500

Doctor bill for Sam incurred in 2020 and not paid until 2021 7,600

Operation for Sam 8,500

Prescription medicines for Sam 900

Hospital expenses for Sam 3,500

Reimbursement from insurance company, received in 2021 3,600

The medical expenses for Sam represent most of the 60% that Bruce contributed toward his father’s support.

Other relevant information follows:

When they filed their 2020 state return in 2021, the Byrds paid additional state income tax of $900.
During 2021, Alice and Bruce attended a dinner dance sponsored by the Lowell Police Disability Association (a qualified charitable
organization). The Byrds paid $300 for the tickets. The cost of comparable entertainment would normally be $50.
The Byrds contributed $5,000 to Lowell Presbyterian Church and gave used clothing (cost of $1,200 and fair market value of
$350) to the Salvation Army. All donations are supported by receipts, and the clothing is in very good condition.
Via a crowdfunding site (gofundme.com), Alice and Bruce made a gift to a needy family who lost their home in a fire ($400). In
addition, they made several cash gifts to homeless individuals downtown (estimated to be $65).

Instructions

In 2021, the Byrds received interest income of $2,750, which was reported on a Form 1099INT from Second National Bank, 125
Oak Street, Lowell, MA 01850 (Employer Identification Number 98-7654322).
The home mortgage interest was reported on Form 1098 by Lowell Commercial Bank, P.O. Box 1000, Lowell, MA 01850 (Employer
Identification Number 98-7654323). The mortgage (outstanding balance of $425,000 as of January 1, 2021) was taken out by the
Byrds on May 1, 2017.
Alice’s employer requires that all employees wear uniforms to work. During 2021, Alice spent $850 on new uniforms and $566 on
laundry charges.
Bruce paid $400 for an annual subscription to the Journal of Franchise Management and $741 for annual membership dues to his
professional association.
Neither Alice’s nor Bruce’s employer reimburses for employee expenses.
The Byrds do not keep the receipts for the sales taxes they paid and had no major purchases subject to sales tax.
This year the Byrds gave each of their children $2,000, which was then deposited into their Roth IRAs.
Alice and Bruce paid no estimated Federal income tax, and they did not engage in any virtual currency transactions during the
year. Neither Alice nor Bruce wants to designate $3 to the Presidential Election Campaign Fund. The Byrds received the
appropriate recovery rebates (economic impact payments); related questions in ProConnect Tax should be ignored.

Required:

Compute net tax payable or refund due for Alice and Bruce Byrd for 2021. If they have overpaid, they want the amount to be refunded

to them.

Make realistic assumptions about any missing data.
If an amount box does not require an entry or the answer is zero, enter “0”.
Enter all amounts as positive numbers.
It may be necessary to complete the tax schedules before completing Form 1040.
When computing the tax liability, do not round your immediate calculations. If required, round your final answers to
the nearest dollar.
Use the Tax Rate Schedule provided. Do not use the Tax Tables. Note: for the Tax Planning section only, use the
2022 Tax Rate Schedule found in Appendix A of the textbook.

Form 1040

Complete the Byrd’s Form 1040 for 2021.

1040 U.S. Individual Income Tax Return 2021 OMB No. 1545-0074 IRS Use Only

Filing Status

Your first name and middle initial

Bruce M. Byrd

Last name Your social security number

111-11-1113

If joint return, spouse’s first name

and middle initial

Alice J. Byrd

Last name Spouse’s social security number

123-45-6784

Home address (number and street). If you have a P.O. box,

see instructions.

473 Revere Avenue

Apt. no. Presidential Election Campaign

Do you, or your spouse if filing jointly, want $3 to go to this

fund. Selecting an option below will not change your tax or

refund.

City, town, or post office. If you have a

foreign address, also complete spaces

below.

Lowell, MA 01850

State ZIP code

Foreign country name Foreign province/state/county Foreign

postal

code

At any time during 2021, did you receive, sell, exchange, or otherwise dispose of any financial interest in any virtual currency?

Standard Deduction Someone can claim:

Age/Blindness
You:

Spouse:

Form
Department of the Treasury Internal Revenue Service (99)

Married filing jointly

Dependents
If more than four dependents, see

instructions and check here

(see instructions):
(2) Social

security

number

(3)

Relationship

to you

(4) if qualifies for (see

instructions):

(1) First name Last name Child tax credit
Credit for other

dependents

John Byrd 123-45-6780 Child

Sam Byrd 123-45-6787 Parent

Attach

Sch. B if

required.

1
Wages, salaries, tips, etc. Attach Form(s) W-2 . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. .
1

2a Tax-exempt interest . . 2a b
Taxable interest . .

. . . . . . . . 2b

3a Qualified dividends . . . 3a b
Ordinary dividends

. . . . . . . . 3b

4a IRA distributions . . . . . 4a b
Taxable amount . .

. . . . . . . .
4b

5a Pensions and annuities 5a b
Taxable amount . .

. . . . . . . .
5b

Standard Deduction for
Single or Married filing separately,
$12,550
Married filing jointly or Qualifying
widow(er), $25,100
Head of household, $18,800
If you checked any box under
Standard Deduction, see instructions.

6a Social security benefits 6a b
Taxable amount . .

. . . . . . . .
6b

7
Capital gain or (loss). Attach Schedule D if required. If not required, check here . . .

7

8
Other income from Schedule 1, line 10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . 8

9
Add lines 1, 2b, 3b, 4b, 5b, 6b, 7, and 8. This is your total income . . . . . . . . . . . .

. . 9

10
Adjustments to income from Schedule 1, line 26 . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . 10

11
Subtract line 10 from line 9. This is your adjusted gross income . . . . . . . . . . . . .

. 11

12a Standard deduction or itemized deductions (from Schedule

A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12a

b Charitable contributions if you take the standard deduction (see

instructions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12b

c
Add lines 12a and 12b . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . 12c

13
Qualified business income deduction from Form 8995 or Form 8995-A . . . . . . . . . . .

. .
13

14
Add lines 12c and 13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . 14

15
Taxable income. Subtract line 14 from line 11. If zero or less, enter -0- . . . . . . . .

. . . . 15

BAA For Disclosure, Privacy Act, and Paperwork Reduction Act Notice, see separate instructions. Form 1040 (2021)

Form 1040 (2021) Bruce M. and Alice J. Byrd 111-11-1113 Page 2

16 Tax (see instructions). Check if any from Form(s): 1 8814 2 4972 3 . . 16

17 Amount from Schedule 2, line 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

18 Add lines 16 and 17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

19 Nonrefundable child tax credit or credit for other dependents from Schedule 8812 . . . . 19

20 Amount from Schedule 3, line 8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

21 Add lines 19 and 20 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

22 Subtract line 21 from line 18. If zero or less, enter -0- . . . . . . . . . . . . . . . . . . . . . . . . . 22

23 Other taxes, including self-employment tax, from Schedule 2, line 21 . . . . . . . . . . . . . . 23

24 Add lines 22 and 23. This is your total tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

25 Federal income tax withheld from: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

a Form(s) W-2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25a

b Form(s) 1099 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25b

c Other forms (see instructions) . . . . . . . . . . . . . . . . . . . . . . 25c

d Add lines 25a through 25c . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25d

If you have a

qualifying child,

attach Sch. EIC.

26 2021 estimated tax payments and amount applied from 2020 return . . . . . . . . . . . . . . 26

27a Earned income credit (EIC) . . . . . . . . . . . . . . . . . . . . . . . . . 27a

Check here if you were born after January 1, 1998, and before January 2, 2004, and you satisfy

all the other requirements for taxpayers who are at least age 18, to claim the EIC. See

instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

b Nontaxable combat pay election . . 27b

c Prior year (2019) earned income . . 27c

28 Refundable child tax credit or additional child tax credit from Schedule 8812 . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . 28

29 American opportunity credit from Form 8863, line 8 . . . . . . . . 29

30 Recovery rebate credit. See instructions . . . . . . . . . . . . . . . . 30

31 Amount from Schedule 3, line 15 . . . . . . . . . . . . . . . . . . . . . 31

32 Add lines 27a and 28 through 31. These are your total other payments and refundable credits . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

33 Add lines 25d, 26, and 32. These are your total payments . . . . . . . . . . . . . . . . . . . 33

Refund 34 If line 33 is more than line 24, subtract line 24 from line 33. This is the amount you overpaid . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

35a Amount of line 34 you want refunded to you. If Form 8888 is attached, check here 35a

Direct deposit? b Routing number c Type: Checking Savings

See

instructions.
d Account number

36 Amount of line 34 you want applied to your 2022 estimated tax . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . 36

Amount

You

Owe

37
Amount You Owe. Subtract line 33 from line 24. For details on how to pay, see instructions . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
37

38 Estimated tax penalty (see instructions) . . . . . . . . . . . . . . 38

Third Party

Designee

Do you want to allow another person to discuss this return with the IRS? See

instructions.

Yes. Complete

below.

No

Designee’s

name

Phone

no.

Personal identification

number (PIN)

Sign

Here

Joint return? See

instructions. Keep a

copy for your records.

Under penalties of perjury, I declare that I have examined this return and accompanying schedules and

statements, and to the best of my knowledge and belief, they are true, correct, and complete. Declaration of

preparer (other than taxpayer) is based on all information of which preparer has any knowledge.

Your signature Date Your occupation

Manager

If the IRS sent you an Identity Protection

PIN, enter it here

(see inst.)

Spouse’s signature. If a joint

return, both must sign.

Date Spouse’s

occupation

Manager

If the IRS sent your spouse an Identity

Protection PIN, enter it here

(see inst.)

Phone no. Email address

Paid Preparer Use Only

Preparer’s name Preparer’s signature

Self-Prepared

Date PTIN Check if:

Self-employed

Firm’s name Phone no.

Firm’s address Firm’s EIN

Go to www.irs.gov/Form1040 for instructions and the latest information. Form 1040 (2021)

Schedule A

Complete Alice and Bruce Byrd’s Schedule A for 2021.

SCHEDULE A
(Form 1040)

Department of the Treasury Internal

Revenue Service (99)

Itemized Deductions
Go to www.irs.gov/ScheduleA for instructions and the latest

information.

Attach to Form 1040 or 1040-SR.

Caution: If you are claiming a net qualified disaster loss on Form 4684,

see the instructions for line 16.

OMB No. 1545-

0074

2021
Attachment

Sequence No.

07

Name(s) shown on Form 1040 or 1040-SR

Bruce M. and Alice J. Byrd

Your social security number

111-11-1113

Caution: Do not include expenses reimbursed or paid by others.

Medical and Dental

Expenses

1 Medical and dental expenses (see instructions) . . . . . . . . . . 1

2 Enter amount from Form 1040 or 1040-SR, line 11. . . . . . . . . . . . . . . . . . . . . . 2

3 Multiply line 2 by 7.5% (0.075) . . . . . . . . . . . . . . . . . . . . . . 3

4 Subtract line 3 from line 1. If line 3 is more than line 1, enter -0- . . . . . . . . . . . . . . . . . 4

Taxes You Paid 5 State and local taxes.

a State and local income taxes or general sales taxes. You may include either income taxes

or general sales taxes on line 5a, but not both. If you elect to include general sales taxes

instead of income taxes, check this box . . . . . . . . . . . . . . . . . . . 5a

b State and local real estate taxes (see instructions) . . . . . . . . . 5b

c State and local personal property taxes . . . . . . . . . . . . . . . . 5c

d Add lines 5a through 5c . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5d

e Enter the smaller of line 5d or $10,000 ($5,000 if married filing separately) . . . . . . . . . .

. . . . . . . . . . . . . . . . . . 5e

6 Other taxes. List type and amount _ _ _ _ _ _ _ _ _ _ _ _ _ _

_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 6

7 Add lines 5e and 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Interest You Paid

Caution:

Your mortgage interest

deduction may be limited (see

instructions).

8 Home mortgage interest and points. If you didn’t use all of your home mortgage loan(s)

to buy, build, or improve your home, see instructions and check this box . . . . . . . . . . . .

. . . .

a Home mortgage interest and points reported to you on Form 1098. See instructions if

limited . . . . . . . . . . . . . . . . . . . . . . . . . . 8a

b Home mortgage interest not reported to you on Form 1098. See

instructions if limited. If paid to the person from whom you

bought the home, see instructions and show that person’s name,

identifying no., and address _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 8b

c Points not reported to you on Form 1098. See instructions for special rules . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . 8c

d Mortage insurance premiums (see instructions) . . . . . . . . . . . . . . 8d

e Add lines 8a through 8d . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8e

9 Investment interest. Attach Form 4952 if required. See instructions. 9

10 Add lines 8e and 9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

https://www.irs.gov/form1040

http://www.irs.gov/ScheduleA

Gifts to Charity

Caution:

If you made a gift and got a

benefit for it, see instructions.

11 Gifts by cash or check. If you made any gift of $250 or more,

see instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

12 Other than by cash or check. If you made any gift of $250 or more, see instructions. You

must attach Form 8283 if over $500 . . . . 12

13 Carryover from prior year . . . . . . . . . . . . . . . . . . . . . . . . . . 13

14 Add lines 11 through 13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Casualty and Theft Losses
15 Casualty and theft loss(es) from a federally declared disaster (other than net qualified disaster

losses). Attach Form 4684 and enter the amount from line 18 of that form. See instructions. 15

Other Itemized Deductions
16 Otherfrom list in instructions. List type and amount _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

16

Total Itemized

Deductions

17 Add the amounts in the far right column for lines 4 through 16. Also, enter this amount on

Form 1040 or 1040-SR, line 12a . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

18 If you elect to itemize deductions even though they are less than your standard deduction,

check this box . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

BAA For Paperwork Reduction Act Notice, see the Instructions for Forms 1040 and 1040-SR. Schedule A (Form 1040) 2021

Schedule B

Complete Alice and Bruce Byrd’s Schedule B 2021.

SCHEDULE B
(Form 1040)

Department of the Treasury Internal Revenue

Service (99)

Interest and Ordinary Dividends

Go to www.irs.gov/ScheduleB for instructions and the latest

information.

Attach to Form 1040 or 1040-SR.

OMB No. 1545-

0074

2021
Attachment

Sequence No.

08

Name(s) shown on return

Bruce M. and Alice J. Byrd

Your social security number

111-11-1113

Part I

Interest

(See instructions and the instructions for Form 1040,

line 2b.)

Note: If you received a Form 1099-INT, Form 1099-

OID, or substitute statement from a brokerage firm, list

the firm’s name as the payer and enter the total

interest shown on that form.

1 List name of payer. If any interest is from a seller-financed

mortgage and the buyer used the property as a personal residence,

see the instructions and list this interest first. Also, show that

buyer’s social security number and address

Amount

1

2
Add the amounts on line 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . .
2

3 Excludable interest on series EE and I U.S. savings bonds issued

after 1989. Attach Form 8815 . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . .
3

4 Subtract line 3 from line 2. Enter the result here and on Form 1040

or 1040-SR,

line 2b . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . 4

Note: If line 4 is over $1,500, you must complete Part III. Amount

Part II

Ordinary

Dividends

(See instructions and the instructions for Form 1040,

line 3b.)

5 List name of payer _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

_ _ _ _ _

5

IRS

http://www.irs.gov/ScheduleB

Note: If you received a Form 1099-DIV or substitute

statement from a brokerage firm, list the firm’s name

as the payer and enter the ordinary dividends shown on

that form.

6 Add the amounts on line 5. Enter the total here and on Form 1040

or 1040-SR,

line 3b . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . 6

Note: If line 6 is over $1,500, you must complete Part III.

Part III You must complete this part if you (a) had over $1,500 of taxable interest or ordinary

dividends; (b) had a foreign account; or (c) received a distribution from, or were a grantor

of, or a transferor to, a foreign trust.
Yes No

Foreign

Accounts

and Trusts

Caution: If required, failure to file

FinCEN Form 114 may result in

substantial penalties. See

instructions.

7a At any time during 2021, did you have a financial interest in or signature authority over

a financial account (such as a bank account, securities account, or brokerage account)

located in a foreign country? See instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . .

X

If ‘Yes,’ are you required to file FinCEN Form 114, Report of Foreign Bank and Financial

Accounts (FBAR), to report that financial interest or signature authority? See FinCEN

Form 114 and its instructions for filing requirements and exceptions to those

requirements . . . . . . . . . . .

b If you are required to file FinCEN Form 114, enter the name of the foreign country

where the financial account is located _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

_ _ _ _ _ _ _ _ _

8 During 2021, did you receive a distribution from, or were you the grantor of, or

transferor to, a foreign trust? If ‘Yes,’ you may have to file Form 3520. See instructions

. . . . . . . . .

X

BAA For Paperwork Reduction Act Notice, see your tax return instructions. Schedule B (Form 1040) 2021

Schedule 8812

Complete Alice and Bruce Byrd’s Schedule 8812.

SCHEDULE 8812
(Form 1040)

Department of the Treasury Internal Revenue

Service (99)

Credits for Qualifying Children

and Other Dependents
Attach to Form 1040, 1040-SR, or 1040-NR.

Go to www.irs.gov/Schedule8812 for instructions and the

latest information.

OMB No. 1545-

0074

2021
Attachment

Sequence No.

47

Name(s) shown on return

Bruce M. and Alice J. Byrd

Your social security number

111-11-1113

Part I-A Child Tax Credit and Credit for Other Dependents

1 Enter the amount from line 11 of your Form 1040, 1040-SR, or 1040-NR . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

2a

Enter income from Puerto Rico that you excluded . . . . . . . . . . . . . . . . . . . . . . . . 2a

b Enter the amounts from lines 45 and 50 of your Form 2555 . . . . . . . . . . . . . . . . . 2b

c Enter the amount from line 15 of your Form 4563 . . . . . . . . . . . . . . . . . . . . . . . . 2c

d Add lines 2a through 2c . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2d

3 Add lines 1 and 2d . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

4a

Number of qualifying children under age 18 with the required social security number

4a

b Number of children included on line 4a who were under age 6 at the end of 2021 . . 4b

c Subtract line 4b from line 4a . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4c

5 If line 4a is more than zero, enter the amount from the Line 5 Worksheet; otherwise, enter -0- . . . . . . . . . 5

6 Number of other dependents, including any qualifying children who are not under age 18 or

who do not have the required social security number . . . . . . . . . . . . . . 6

http://www.irs.gov/schedule8812

Caution: Do not include yourself, your spouse, or anyone who is not a U.S. citizen, U.S. national, or U.S. resident alien. Also, do

not include anyone you included on line 4a.

7 Multiply line 6 by $500 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

8 Add lines 5 and 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

9 Enter the amount shown below for your filing status.

Married filing jointly$400,000

} All other filing statuses$200,000
. . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . 9

10 Subtract line 9 from line 3.

If zero or less, enter -0-.

} If more than zero and not a multiple of $1,000, enter the next multiple of $1,000. For

example, if the result is $425, enter $1,000; if the result is $1,025, enter $2,000, etc. . . . . . . . . . . . . . . 10

11 Multiply line 10 by 5% (0.05) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

12 Subtract line 11 from line 8. If zero or less, enter -0- . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

13 Check all the boxes that apply to you (or your spouse if married filing jointly).

A Check here if you (or your spouse if married filing jointly) have a principal place of abode in the United States for more than

half of 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
B Check here if you (or your spouse if married filing jointly) are a bona fide resident of Puerto Rico for 2021

Part I-B Filers Who Check a Box on Line 13

Caution: If you did not check a box on line 13, do not complete Part I-B; instead, skip to Part I-C.

14a Enter the smaller of line 7 or line 12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14a

b Subtract line 14a from line 12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14b

c If line 14a is zero, enter -0-; otherwise, enter the amount from the Credit Limit Worksheet A . . . . . . . . . . 14c

d Enter the smaller of line 14a or line 14c . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14d

e Add lines 14b and 14d . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14e

f Enter the aggregate amount of advance child tax credit payments you (and your spouse if filing jointly) received for 2021. See

your Letter(s) 6419 for the amounts to include on this line. If you are missing Letter 6419, see the instructions before entering

an amount on this line . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14f

Caution: If the amount on this line doesnt match the aggregate amounts reported to you (and your spouse if filing jointly) on

your Letter(s) 6419, the processing of your return will be delayed.

g Subtract line 14f from line 14e. If zero or less, enter -0- on lines 14g through 14i and go to Part III . . . . . . . . 14g

h Enter the smaller of line 14d or line 14g. This is your credit for other dependents. Enter this amount on line 19 of your

Form 1040, 1040-SR, or 1040-NR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14h

i Subtract line 14h from line 14g. This is your refundable child tax credit. Enter this amount on line 28 of your Form

1040, 1040-SR, or 1040-NR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14i

For Paperwork Reduction Act Notice, see your tax return instructions. Schedule 8812 (Form 1040) 2021

2021 Tax Rate Schedules

Use the 2021 Tax Rate Schedules to compute the tax. (Note: Because the tax rate schedules are used instead of the tax

tables, the amount of tax computed may vary slightly from the amount listed in the tables.)

2021 Tax Rate Schedules

SingleSchedule X Head of householdSchedule Z

If taxable

income is:

Over

But not

over The tax is:

of the

amount

over

If taxable

income is:

Over

But not

over The tax is:

of the

amount

over

$ 0 $ 9,950 . . . . . . 10% $ 0 $ 0 $ 14,200 . . . . . . 10% $ 0

9,950 40,525 $ 995.00 + 12% 9,950 14,200 54,200 $ 1,420.00 + 12% 14,200

40,525 86,375 4,664.00 + 22% 40,525 54,200 86,350 6,220.00 + 22% 54,200

86,375 164,925 14,751.00 + 24% 86,375 86,350 164,900 13,293.00 + 24% 86,350

164,925 209,425 33,603.00 + 32% 164,925 164,900 209,400 32,145.00 + 32% 164,900

209,425 523,600 47,843.00 + 35% 209,425 209,400 523,600 46,385.00 + 35% 209,400

523,600 . . . . . . 157,804.25 + 37% 523,600 523,600 . . . . . . 156,355.00 + 37% 523,600

Married filing jointly or Qualifying widow(er)Schedule Y-1 Married filing separatelySchedule Y-2

If taxable

income is:

Over

But not

over The tax is:

of the

amount

over

If taxable

income is:

Over

But not

over The tax is:

of the

amount

over

$ 0 $ 19,900 . . . . . . 10% $ 0 $ 0 $ 9,950 . . . . . . 10% $ 0

19,900 81,050 $ 1,990.00 + 12% 19,900 9,950 40,525 $ 995.00 + 12% 9,950

81,050 172,750 9,328.00 + 22% 81,050 40,525 86,375 4,664.00 + 22% 40,525

172,750 329,850 29,502.00 + 24% 172,750 86,375 164,925 14,751.00 + 24% 86,375

329,850 418,850 67,206.00 + 32% 329,850 164,925 209,425 33,603.00 + 32% 164,925

418,850 628,300 95,686.00 + 35% 418,850 209,425 314,150 47,843.00 + 35% 209,425

628,300 . . . . . . 168,993.50 + 37% 628,300 314,150 . . . . . . 84,496.75 + 37% 314,150

Tax Planning for 2022

Alice and Bruce are planning some significant changes for 2022. They have provided you with the following information and asked you

to project their taxable income and tax liability for 2022. Assume that the Byrds will itemize their deductions next year.

The Byrds will invest the $1,600,000 of life insurance proceeds in short-term certificates of deposit (CDs) and use the interest for
living expenses during 2022. They expect to earn interest of $32,000 on the CDs.
Bruce has been promoted to regional manager, and his salary for 2022 will be $88,000. He estimates that state income tax
withheld will increase by $4,000 and the Social Security tax withheld will be $5,456.
Alice, who has been diagnosed with a serious illness, will take a leave of absence from work during 2022, so she will not receive a
salary or incur any work-related expenses during the year. The estimated cost for her medical treatment is $15,400, of which
$6,400 will be reimbursed by their insurance company in 2022. Their medical insurance premiums will increase to $9,769.
Property taxes on their residence are expected to increase to $5,100.
The Byrds’ home mortgage interest expense and charitable contributions are expected to be unchanged from 2021.
John will graduate from college in December 2021 and will take a job in New York City in January 2022. His starting salary will be
$46,000.

In 2022, the medical expenses are reduced by 7.5% of AGI.

Assume that all of the information reported in 2021 will be the same in 2022 unless other information has been presented above. Use

the 2022 Tax Rate Schedule found in Appendix A of the textbook.

Based on this information, the Bryd’s projected itemized deductions for 2022 would be taxable income would be

and the related tax liability for 2022 would be . Note: This problem is for the 2021 tax year.

Alice J. and Bruce M. Byrd are married taxpayers who file a joint return. Their Social Security numbers are 123-45-6784 and 111-11-1113, respectively. Alice’s birthday is September 21, 1974, and Bruce’s is June 27, 1973. They live at 473 Revere Avenue, Lowell, MA 01850. Alice is the office manager for Lowell Dental Clinic, 433 Broad Street, Lowell, MA 01850 (Employer Identification Number 98-7654321). Bruce is the manager of a Super Burgers fast-food outlet owned and operated by Plymouth Corporation, 1247 Central Avenue, Hauppauge, NY 11788 (Employer Identification Number 11-1111111).
The following information is shown on their Wage and Tax Statements (Form W2) for 2021.

Line

Description

Alice

Bruce

1

Wages, tips, other compensation

$58,000

$62,100

2

Federal income tax withheld

4,500

5,300

3

Social Security wages

58,000

62,100

4

Social Security tax withheld

3,596

3,850

5

Medicare wages and tips

58,000

62,100

6

Medicare tax withheld

841

900

15

State

Massachusetts

Massachusetts

16

State wages, tips, etc.

58,000

62,100

17

State income tax withheld

2,950

3,100

The Byrds provide over half of the support of their two children, Cynthia (born January 25, 1997, Social Security number 123-45-6788) and John (born February 7, 2001, Social Security number 123-45-6780). Both children are full-time students and live with the Byrds except when they are away at college. Cynthia earned $6,200 from a summer internship in 2021, and John earned $3,800 from a part-time job. Both children received scholarships covering tuition and materials.
During 2021, the Byrds provided 60% of the total support of Bruce’s widower father, Sam Byrd (born March 6, 1945, Social Security number 123-45-6787). Sam lived alone and covered the rest of his support with his Social Security benefits. Sam died in November, and Bruce, the beneficiary of a policy on Sam’s life, received life insurance proceeds of $1,600,000 on December 28.
The Byrds had the following expenses relating to their personal residence during 2021:

Real estate property taxes

$5,000

Qualified interest on home mortgage (acquistion indebtedness)

8,700

Repairs to roof

5,750

Utilities

4,100

Fire and theft insurance

1,900

The Byrds had the following medical expenses for 2021:

Medical insurance premiums

$4,500

Doctor bill for Sam incurred in 2020 and not paid until 2021

7,600

Operation for Sam

8,500

Prescription medicines for Sam

900

Hospital expenses for Sam

3,500

Reimbursement from insurance company, received in 2021

3,600

The medical expenses for Sam represent most of the 60% that Bruce contributed toward his father’s support.
Other relevant information follows:
When they filed their 2020 state return in 2021, the Byrds paid additional state income tax of $900.
During 2021, Alice and Bruce attended a dinner dance sponsored by the Lowell Police Disability Association (a qualified charitable organization). The Byrds paid $300 for the tickets. The cost of comparable entertainment would normally be $50.
The Byrds contributed $5,000 to Lowell Presbyterian Church and gave used clothing (cost of $1,200 and fair market value of $350) to the Salvation Army. All donations are supported by receipts, and the clothing is in very good condition.
Via a crowdfunding site (gofundme.com), Alice and Bruce made a gift to a needy family who lost their home in a fire ($400). In addition, they made several cash gifts to homeless individuals downtown (estimated to be $65).
In 2021, the Byrds received interest income of $2,750, which was reported on a Form 1099INT from Second National Bank, 125 Oak Street, Lowell, MA 01850 (Employer Identification Number 98-7654322).
The home mortgage interest was reported on Form 1098 by Lowell Commercial Bank, P.O. Box 1000, Lowell, MA 01850 (Employer Identification Number 98-7654323). The mortgage (outstanding balance of $425,000 as of January 1, 2021) was taken out by the Byrds on May 1, 2017.
Alice’s employer requires that all employees wear uniforms to work. During 2021, Alice spent $850 on new uniforms and $566 on laundry charges.
Bruce paid $400 for an annual subscription to the
Journal of Franchise Managementand $741 for annual membership dues to his professional association.

Neither Alice’s nor Bruce’s employer reimburses for employee expenses.
The Byrds do not keep the receipts for the sales taxes they paid and had no major purchases subject to sales tax.
This year the Byrds gave each of their children $2,000, which was then deposited into their Roth IRAs.
Alice and Bruce paid no estimated Federal income tax, and they did not engage in any virtual currency transactions during the year. Neither Alice nor Bruce wants to designate $3 to the Presidential Election Campaign Fund. The Byrds received the appropriate recovery rebates (economic impact payments); related questions in ProConnect Tax should be ignored.

Required:

Compute net tax payable or refund due for Alice and Bruce Byrd for 2021. If they have overpaid, they want the amount to be refunded to them.

Make realistic assumptions about any missing data.

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

Enter all amounts as positive numbers.

It may be necessary to complete the tax schedules before completing Form 1040.

When computing the tax liability, do not round your immediate calculations. If required, round your final answers to the nearest dollar.

Use the Tax Rate Schedule provided. Do not use the Tax Tables. Note: for the Tax Planning section only, use the 2022 Tax Rate Schedule found in Appendix A of the textbook.

Form 1040

Question Content Area

Complete the Byrd’s Form 1040 for 2021.

Form

1040

Department of the Treasury Internal Revenue Service (99)

U.S. Individual Income Tax Return

2021

OMB No. 1545-0074

IRS Use Only

Filing Status

Your first name and middle initial

Bruce M. Byrd

Last name

Your social security number
111-11-1113

If joint return, spouse’s first name and middle initial

Alice J. Byrd

Last name

Spouse’s social security number

123-45-6784

Home address (number and street). If you have a P.O. box, see instructions.

473 Revere Avenue

Apt. no.

Presidential Election Campaign
Doyou, or your spouse if filing jointly, want $3 to go to this fund. Selecting an option below will not change your tax or refund.

City, town, or post office. If you have a foreign address, also complete spaces below.

Lowell, MA 01850

State

ZIP code

Foreign country name

Foreign province/state/county

Foreign postal code

At any time during 2021, did you receive, sell, exchange, or otherwise dispose of any financial interest in any virtual currency?

Standard Deduction

Someone can claim:

Age/Blindness

You:

Spouse:

Dependents
If more than four dependents, see instructions and check here

(see instructions):

(2)Social security
number

(3)Relationship
to you

(4) if qualifies for (see instructions):

(1)First name

Last name

Child tax credit

Credit for other dependents

John Byrd

123-45-6780

Child

Sam Byrd

123-45-6787

Parent

Attach
Sch. B if
required.

1

Wages, salaries, tips, etc. Attach Form(s) W-2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1

fill in the blank b944f30a003cff1_11

2a

Tax-exempt interest . .

2a

b

Taxable interest . . . . . . . . . .

2b

fill in the blank b944f30a003cff1_12

3a

Qualified dividends . . .

3a

b

Ordinary dividends . . . . . . . .

3b

4a

IRA distributions . . . . .

4a

b

Taxable amount . . . . . . . . . .

4b

5a

Pensions and annuities

5a

b

Taxable amount . . . . . . . . . .

5b

Standard Deduction for

Single or Married filing separately, $12,550
Married filing jointly or Qualifying widow(er), $25,100
Head of household, $18,800
If you checked any box under
Standard Deduction, see instructions.

6a

Social security benefits

6a

b

Taxable amount . . . . . . . . . .

6b

7

Capital gain or (loss). Attach Schedule D if required. If not required, check here . . .

7

8

Other income from Schedule 1, line 10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8

9

Add lines 1, 2b, 3b, 4b, 5b, 6b, 7, and 8. This is your
total income. . . . . . . . . . . . . .

9

fill in the blank b944f30a003cff1_13

10

Adjustments to income from Schedule 1, line 26 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10

11

Subtract line 10 from line 9. This is your
adjusted gross income. . . . . . . . . . . . . .

11

fill in the blank b944f30a003cff1_14

12a

Standard deduction or itemized deductions(from Schedule A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

12a

fill in the blank b944f30a003cff1_15

b

Charitable contributions if you take the standard deduction (see instructions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

12b

c

Add lines 12a and 12b . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

12c

fill in the blank b944f30a003cff1_16

13

Qualified business income deduction from Form 8995 or Form 8995-A . . . . . . . . . . . . .

13

14

Add lines 12c and 13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

14

fill in the blank b944f30a003cff1_17

15

Taxable income.Subtract line 14 from line 11. If zero or less, enter -0- . . . . . . . . . . . .

15

fill in the blank b944f30a003cff1_18

BAA For Disclosure, Privacy Act, and Paperwork Reduction Act Notice, see separate instructions.

Form
1040(2021)

Form 1040 (2021)

Bruce M. and Alice J. Byrd

111-11-1113

Page
2

16

Tax(see instructions). Check if any from Form(s):
1 8814
2 4972
3 . .

16

fill in the blank b944f30a003cff1_19

17

Amount from Schedule 2, line 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

17

18

Add lines 16 and 17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

18

fill in the blank b944f30a003cff1_20

19

Nonrefundable child tax credit or credit for other dependents from Schedule 8812 . . . .

19

fill in the blank b944f30a003cff1_21

20

Amount from Schedule 3, line 8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

20

21

Add lines 19 and 20 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

21

fill in the blank b944f30a003cff1_22

22

Subtract line 21 from line 18. If zero or less, enter -0- . . . . . . . . . . . . . . . . . . . . . . . . .

22

fill in the blank b944f30a003cff1_23

23

Other taxes, including self-employment tax, from Schedule 2, line 21 . . . . . . . . . . . . . .

23

24

Add lines 22 and 23. This is your
total tax. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

24

fill in the blank b944f30a003cff1_24

25

Federal income tax withheld from: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

a

Form(s) W-2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

25a

fill in the blank b944f30a003cff1_25

b

Form(s) 1099 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

25b

c

Other forms (see instructions) . . . . . . . . . . . . . . . . . . . . . .

25c

d

Add lines 25a through 25c . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

25d

fill in the blank b944f30a003cff1_26

If you have a qualifying child, attach Sch. EIC.

26

2021 estimated tax payments and amount applied from 2020 return . . . . . . . . . . . . . .

26

27a

Earned income credit (EIC) . . . . . . . . . . . . . . . . . . . . . . . . .

27a

Check here if you were born after January 1, 1998, and before January 2, 2004, and you satisfy all the other requirements for taxpayers who are at least age 18, to claim the EIC. See instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

b

Nontaxable combat pay election . .

27b

c

Prior year (2019) earned income . .

27c

28

Refundable child tax credit or additional child tax credit from Schedule 8812 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

28

29

American opportunity credit from Form 8863, line 8 . . . . . . . .

29

30

Recovery rebate credit. See instructions . . . . . . . . . . . . . . . .

30

31

Amount from Schedule 3, line 15 . . . . . . . . . . . . . . . . . . . . .

31

32

Add lines 27a and 28 through 31. These are your
total other payments and refundable credits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

32

33

Add lines 25d, 26, and 32. These are your
total payments. . . . . . . . . . . . . . . . . . .

33

fill in the blank b944f30a003cff1_27

Refund

34

If line 33 is more than line 24, subtract line 24 from line 33. This is the amount you
overpaid. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

34

fill in the blank b944f30a003cff1_28

35a

Amount of line 34 you want
refunded to you.If Form 8888 is attached, check here

35a

fill in the blank b944f30a003cff1_29

Direct deposit?

b

Routing number

cType: Checking Savings

See instructions.

d

Account number

36

Amount of line 34 you want
applied to your 2022 estimated tax. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

36

Amount
You Owe

37

Amount You Owe.Subtract line 33 from line 24. For details on how to pay, see instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

37

38

Estimated tax penalty (see instructions) . . . . . . . . . . . . . .

38

Third Party Designee

Do you want to allow another person to discuss this return with the IRS? See instructions.

Yes.Complete below.

No

Designee’s
name

Phone
no.

Personal identification
number (PIN)

Sign
Here

Joint return? See instructions. Keep a copy for your records.

Under penalties of perjury, I declare that I have examined this return and accompanying schedules and statements, and to the best of my knowledge and belief, they are true, correct, and complete. Declaration of preparer (other than taxpayer) is based on all information of which preparer has any knowledge.

Your signature

Date

Your occupation

Manager

If the IRS sent you an Identity Protection PIN, enter it here

(see inst.)

Spouse’s signature. If a joint return,
bothmust sign.

Date

Spouse’s occupation

Manager

If the IRS sent your spouse an Identity Protection PIN, enter it here

(see inst.)

Phone no.

Email address

Paid Preparer Use Only

Preparer’s name

Preparer’s signature

Self-Prepared

Date

PTIN

Check if:
Self-employed

Firm’s name

Phone no.

Firm’s address

Firm’s EIN

Go to

www.irs.gov/Form1040

for instructions and the latest information.

Form
1040(2021)

Schedule A

Question Content Area

Complete Alice and Bruce Byrd’s Schedule A for 2021.

SCHEDULE A
(Form 1040)

Department of the Treasury Internal Revenue Service (99)

Itemized Deductions

Go to

www.irs.gov/ScheduleA

for instructions and the latest information.

Attach to Form 1040 or 1040-SR.

Caution:If you are claiming a net qualified disaster loss on Form 4684, see the instructions for line 16.

OMB No. 1545-0074

2021

Attachment
Sequence No.
07

Name(s) shown on Form 1040 or 1040-SR

Bruce M. and Alice J. Byrd

Your social security number

111-11-1113

Caution:Do not include expenses reimbursed or paid by others.

Medical and Dental Expenses

1

Medical and dental expenses (see instructions) . . . . . . . . . .

1

fill in the blank c95ffd002018034_1

2

Enter amount from Form 1040 or 1040-SR, line 11. . . . . . . . . . . . . . . . . . . . . .

2

fill in the blank c95ffd002018034_2

3

Multiply line 2 by 7.5% (0.075) . . . . . . . . . . . . . . . . . . . . . .

3

fill in the blank c95ffd002018034_3

4

Subtract line 3 from line 1. If line 3 is more than line 1, enter -0- . . . . . . . . . . . . . . . . .

4

fill in the blank c95ffd002018034_4

Taxes You Paid

5

State and local taxes.

a

State and local income taxes or general sales taxes. You may include either income taxes or general sales taxes on line 5a, but not both. If you elect to include general sales taxes instead of income taxes, check this box . . . . . . . . . . . . . . . . . . .

5a

fill in the blank c95ffd002018034_5

b

State and local real estate taxes (see instructions) . . . . . . . . .

5b

fill in the blank c95ffd002018034_6

c

State and local personal property taxes . . . . . . . . . . . . . . . .

5c

fill in the blank c95ffd002018034_7

d

Add lines 5a through 5c . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5d

fill in the blank c95ffd002018034_8

e

Enter the smaller of line 5d or $10,000 ($5,000 if married filing separately) . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5e

fill in the blank c95ffd002018034_9

6

Other taxes. List type and amount _ _ _ _ _ _ _ _ _ _ _ _ _ _

_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

6

fill in the blank c95ffd002018034_10

7

Add lines 5e and 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7

fill in the blank c95ffd002018034_11

Interest You Paid
Caution:
Your mortgage interest deduction may be limited (see instructions).

8

Home mortgage interest and points. If you didn’t use all of your home mortgage loan(s) to buy, build, or improve your home, see instructions and check this box . . . . . . . . . . . . . . . .

a

Home mortgage interest and points reported to you on Form 1098. See instructions if limited . . . . . . . . . . . . . . . . . . . . . . . . . .

8a

fill in the blank c95ffd002018034_12

b

Home mortgage interest not reported to you on Form 1098. See
instructions if limited. If paid to the person from whom you
bought the home, see instructions and show that person’s name,
identifying no., and address _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

8b

c

Points not reported to you on Form 1098. See instructions for special rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8c

d

Mortage insurance premiums (see instructions) . . . . . . . . . . . . . .

8d

e

Add lines 8a through 8d . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8e

fill in the blank c95ffd002018034_13

9

Investment interest. Attach Form 4952 if required. See instructions.

9

10

Add lines 8e and 9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10

fill in the blank c95ffd002018034_14

Gifts to Charity
Caution:
If you made a gift and got a benefit for it, see instructions.

11

Gifts by cash or check. If you made any gift of $250 or more,

see instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

11

fill in the blank c95ffd002018034_15

12

Other than by cash or check. If you made any gift of $250 or more, see instructions. You
mustattach Form 8283 if over $500 . . . .

12

fill in the blank c95ffd002018034_16

13

Carryover from prior year . . . . . . . . . . . . . . . . . . . . . . . . . .

13

14

Add lines 11 through 13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

14

fill in the blank c95ffd002018034_17

Casualty and Theft Losses

15

Casualty and theft loss(es) from a federally declared disaster (other than net qualified disaster losses). Attach Form 4684 and enter the amount from line 18 of that form. See instructions.

15

fill in the blank c95ffd002018034_18

Other Itemized Deductions

16

Otherfrom list in instructions. List type and amount _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

16

fill in the blank c95ffd002018034_19

Total Itemized Deductions

17

Add the amounts in the far right column for lines 4 through 16. Also, enter this amount on Form 1040 or 1040-SR, line 12a . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

17

fill in the blank c95ffd002018034_20

18

If you elect to itemize deductions even though they are less than your standard deduction, check this box . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

BAA For Paperwork Reduction Act Notice, see the Instructions for Forms 1040 and 1040-SR.

Schedule A (Form 1040) 2021

Schedule B

Question Content Area

Complete Alice and Bruce Byrd’s Schedule B 2021.

SCHEDULE B
(Form 1040)

Department of the Treasury Internal Revenue Service (99)

Interest and Ordinary Dividends
Go to

www.irs.gov/ScheduleB

for instructions and the latest information.

Attach to Form 1040 or 1040-SR.

OMB No. 1545-0074

2021

Attachment
Sequence No.
08

Name(s) shown on return

Bruce M. and Alice J. Byrd

Your social security number
111-11-1113

Part I

Interest

(See instructions and the instructions for Form 1040, line 2b.)

Note:If you received a Form 1099-INT, Form 1099-OID, or substitute statement from a brokerage firm, list the firm’s name as the payer and enter the total interest shown on that form.

1

List name of payer. If any interest is from a seller-financed mortgage and the buyer used the property as a personal residence, see the instructions and list this interest first. Also, show that buyer’s social security number and address

Amount

fill in the blank 32d186fe2079025_2

1

2

Add the amounts on line 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2

fill in the blank 32d186fe2079025_3

3

Excludable interest on series EE and I U.S. savings bonds issued after 1989. Attach Form 8815 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3

4

Subtract line 3 from line 2. Enter the result here and on Form 1040 or 1040-SR,
line 2b . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4

fill in the blank 32d186fe2079025_4

Note:If line 4 is over $1,500, you must complete Part III.

Amount

Part II

Ordinary
Dividends

(See instructions and the instructions for Form 1040, line 3b.)

Note:If you received a Form 1099-DIV or substitute statement from a brokerage firm, list the firm’s name as the payer and enter the ordinary dividends shown on that form.

5

List name of payer _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

5

6

Add the amounts on line 5. Enter the total here and on Form 1040 or 1040-SR,
line 3b . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6

fill in the blank 32d186fe2079025_5

Note:If line 6 is over $1,500, you must complete Part III.

Part III

You must complete this part if you
(a)had over $1,500 of taxable interest or ordinary dividends;
(b)had a foreign account; or
(c)received a distribution from, or were a grantor of, or a transferor to, a foreign trust.

Yes

No

Foreign
Accounts
and Trusts
Caution:If required, failure to file FinCEN Form 114 may result in substantial penalties. See instructions.

7a

At any time during 2021, did you have a financial interest in or signature authority over a financial account (such as a bank account, securities account, or brokerage account) located in a foreign country? See instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

X

If ‘Yes,’ are you required to file FinCEN Form 114, Report of Foreign Bank and Financial Accounts (FBAR), to report that financial interest or signature authority? See FinCEN Form 114 and its instructions for filing requirements and exceptions to those requirements . . . . . . . . . . .

b

If you are required to file FinCEN Form 114, enter the name of the foreign country where the financial account is located _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

8

During 2021, did you receive a distribution from, or were you the grantor of, or transferor to, a foreign trust? If ‘Yes,’ you may have to file Form 3520. See instructions . . . . . . . . .

X

BAA For Paperwork Reduction Act Notice, see your tax return instructions.

Schedule B (Form 1040) 2021

Schedule 8812

Question Content Area

Complete Alice and Bruce Byrd’s Schedule 8812.

SCHEDULE 8812
(Form 1040)

Department of the Treasury Internal Revenue Service (99)

Credits for Qualifying Children
and Other Dependents

Attach to Form 1040, 1040-SR, or 1040-NR.

Go to

www.irs.gov/Schedule8812

for instructions and the latest information.

OMB No. 1545-0074

2021

Attachment
Sequence No.
47

Name(s) shown on return

Bruce M. and Alice J. Byrd

Your social security number
111-11-1113

Part I-A

Child Tax Credit and Credit for Other Dependents

1

Enter the amount from line 11 of your Form 1040, 1040-SR, or 1040-NR . . . . . . . . . . . . . . . . . . . . . . . . . . .

1

fill in the blank 50955bfe4029052_1

2a

Enter income from Puerto Rico that you excluded . . . . . . . . . . . . . . . . . . . . . . . .

2a

b

Enter the amounts from lines 45 and 50 of your Form 2555 . . . . . . . . . . . . . . . . .

2b

c

Enter the amount from line 15 of your Form 4563 . . . . . . . . . . . . . . . . . . . . . . . .

2c

d

Add lines 2a through 2c . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2d

3

Add lines 1 and 2d . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3

fill in the blank 50955bfe4029052_2

4a

Number of qualifying children under age 18 with the required social security number

4a

b

Number of children included on line 4a who were under age 6 at the end of 2021 . .

4b

c

Subtract line 4b from line 4a . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4c

5

If line 4a is more than zero, enter the amount from the
Line 5 Worksheet;otherwise, enter -0- . . . . . . . . .

5

fill in the blank 50955bfe4029052_3

6

Number of other dependents, including any qualifying children who are not under age 18 or who do not have the required social security number . . . . . . . . . . . . . .

6

fill in the blank 50955bfe4029052_4

Caution:Do not include yourself, your spouse, or anyone who is not a U.S. citizen, U.S. national, or U.S. resident alien. Also, do not include anyone you included on line 4a.

7

Multiply line 6 by $500 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7

fill in the blank 50955bfe4029052_5

8

Add lines 5 and 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8

fill in the blank 50955bfe4029052_6

9

Enter the amount shown below for your filing status.

Married filing jointly$400,000

}

All other filing statuses$200,000

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9

fill in the blank 50955bfe4029052_7

10

Subtract line 9 from line 3.

If zero or less, enter -0-.

}

If more than zero and not a multiple of $1,000, enter the next multiple of $1,000. For example, if the result is $425, enter $1,000; if the result is $1,025, enter $2,000, etc.

. . . . . . . . . . . . . .

10

fill in the blank 50955bfe4029052_8

11

Multiply line 10 by 5% (0.05) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

11

12

Subtract line 11 from line 8. If zero or less, enter -0- . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

12

fill in the blank 50955bfe4029052_9

13

Check all the boxes that apply to you (or your spouse if married filing jointly).

A

Check here if you (or your spouse if married filing jointly) have a principal place of abode in the United States for more than half of 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

B

Check here if you (or your spouse if married filing jointly) are a bona fide resident of Puerto Rico for 2021

Part I-B

Filers Who Check a Box on Line 13

Caution:If you did not check a box on line 13, do not complete Part I-B; instead, skip to Part I-C.

14a

Enter the smaller of line 7 or line 12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

14a

fill in the blank 50955bfe4029052_10

b

Subtract line 14a from line 12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

14b

c

If line 14a is zero, enter -0-; otherwise, enter the amount from the
Credit Limit Worksheet A. . . . . . . . . .

14c

fill in the blank 50955bfe4029052_11

d

Enter the smaller of line 14a or line 14c . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

14d

fill in the blank 50955bfe4029052_12

e

Add lines 14b and 14d . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

14e

fill in the blank 50955bfe4029052_13

f

Enter the aggregate amount of advance child tax credit payments you (and your spouse if filing jointly) received for 2021. See your Letter(s) 6419 for the amounts to include on this line. If you are missing Letter 6419, see the instructions before entering an amount on this line . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

14f

fill in the blank 50955bfe4029052_14

Caution:If the amount on this line doesnt match the aggregate amounts reported to you (and your spouse if filing jointly) on your Letter(s) 6419, the processing of your return will be delayed.

g

Subtract line 14f from line 14e. If zero or less, enter -0- on lines 14g through 14i and go to Part III . . . . . . . .

14g

fill in the blank 50955bfe4029052_15

h

Enter the smaller of line 14d or line 14g.
This is your credit for other dependents. Enter this amount on line 19 of your Form 1040, 1040-SR, or 1040-NR. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

14h

fill in the blank 50955bfe4029052_16

i

Subtract line 14h from line 14g.
This is your refundable child tax credit. Enter this amount on line 28 of your Form 1040, 1040-SR, or 1040-NR. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

14i

fill in the blank 50955bfe4029052_17

For Paperwork Reduction Act Notice, see your tax return instructions.

Schedule 8812 (Form 1040) 2021

2021 Tax Rate Schedules

Question Content Area

Use the 2021 Tax Rate Schedules to compute the tax.
(Note: Because the tax rate schedules are used instead of the tax tables, the amount of tax computed may vary slightly from the amount listed in the tables.)

2021 Tax Rate Schedules

SingleSchedule X

Head of householdSchedule Z

If taxable
income is:
Over

But not
over

The tax is:

of the
amount
over

If taxable
income is:
Over

But not
over

The tax is:

of the
amount
over

$ 0

$ 9,950

. . . . . .

10%

$ 0

$ 0

$ 14,200

. . . . . .

10%

$ 0

9,950

40,525

$ 995.00

+

12%

9,950

14,200

54,200

$ 1,420.00

+

12%

14,200

40,525

86,375

4,664.00

+

22%

40,525

54,200

86,350

6,220.00

+

22%

54,200

86,375

164,925

14,751.00

+

24%

86,375

86,350

164,900

13,293.00

+

24%

86,350

164,925

209,425

33,603.00

+

32%

164,925

164,900

209,400

32,145.00

+

32%

164,900

209,425

523,600

47,843.00

+

35%

209,425

209,400

523,600

46,385.00

+

35%

209,400

523,600

. . . . . .

157,804.25

+

37%

523,600

523,600

. . . . . .

156,355.00

+

37%

523,600

Married filing jointly or Qualifying widow(er)Schedule Y-1

Married filing separatelySchedule Y-2

If taxable
income is:
Over

But not
over

The tax is:

of the
amount
over

If taxable
income is:
Over

But not
over

The tax is:

of the
amount
over

$ 0

$ 19,900

. . . . . .

10%

$ 0

$ 0

$ 9,950

. . . . . .

10%

$ 0

19,900

81,050

$ 1,990.00

+

12%

19,900

9,950

40,525

$ 995.00

+

12%

9,950

81,050

172,750

9,328.00

+

22%

81,050

40,525

86,375

4,664.00

+

22%

40,525

172,750

329,850

29,502.00

+

24%

172,750

86,375

164,925

14,751.00

+

24%

86,375

329,850

418,850

67,206.00

+

32%

329,850

164,925

209,425

33,603.00

+

32%

164,925

418,850

628,300

95,686.00

+

35%

418,850

209,425

314,150

47,843.00

+

35%

209,425

628,300

. . . . . .

168,993.50

+

37%

628,300

314,150

. . . . . .

84,496.75

+

37%

314,150

Tax Planning for 2022

Question Content Area

Alice and Bruce are planning some significant changes for 2022. They have provided you with the following information and asked you to project their taxable income and tax liability for 2022. Assume that the Byrds will itemize their deductions next year.
The Byrds will invest the $1,600,000 of life insurance proceeds in short-term certificates of deposit (CDs) and use the interest for living expenses during 2022. They expect to earn interest of $32,000 on the CDs.
Bruce has been promoted to regional manager, and his salary for 2022 will be $88,000. He estimates that state income tax withheld will increase by $4,000 and the Social Security tax withheld will be $5,456.
Alice, who has been diagnosed with a serious illness, will take a leave of absence from work during 2022, so she will not receive a salary or incur any work-related expenses during the year. The estimated cost for her medical treatment is $15,400, of which $6,400 will be reimbursed by their insurance company in 2022. Their medical insurance premiums will increase to $9,769.
Property taxes on their residence are expected to increase to $5,100.
The Byrds’ home mortgage interest expense and charitable contributions are expected to be unchanged from 2021.
John will graduate from college in December 2021 and will take a job in New York City in January 2022. His starting salary will be $46,000.
In 2022, the medical expenses are reduced by 7.5% of AGI.
Assume that all of the information reported in 2021 will be the same in 2022 unless other information has been presented above. Use the 2022 Tax Rate Schedule found in Appendix A of the textbook.
Based on this information, the Bryd’s projected itemized deductions for 2022 would be

taxable income would be

and the related tax liability for 2022 would be

.

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Introduction:
Preparing and filing tax returns can be a daunting task for many people. With a multitude of tax laws, regulations, and calculations to consider, it’s always important to seek professional advice to ensure accurate tax preparation. This article will provide an in-depth analysis of the tax information for Alice J. and Bruce M. Byrd, a married couple with two children, and a widower father. The article will explore their wages, medical expenses, donations, and other relevant information that are necessary for filing their tax returns for the 2021 tax year.

Description:
Alice J. and Bruce M. Byrd are a married couple who live in Lowell, Massachusetts, and file a joint return. They have two children who are full-time students and a widower father who they provided support for. Alice is the office manager for Lowell Dental Clinic, while Bruce is the manager of a fast-food outlet owned by Plymouth Corporation. The article will delve into the details of their wages and tax statements, their children’s earnings, and scholarships, and their widower father’s expenses. The article will also explore the Byrds’ personal residence expenses and medical expenses incurred during 2021. Besides, it will examine their state income taxes, charitable donations, and other relevant information necessary for tax preparation.

Objectives:
To understand the tax implications for married taxpayers who file a joint return
To learn how to report income and deductions on Form 1040 for the 2021 tax year
To comprehend the importance of keeping track of medical expenses and charitable donations
To familiarize oneself with tax credits and deductions for dependents

Learning Outcomes:
1. Students will be able to identify the Social Security numbers, birthdays, and occupations of Alice and Bruce Byrd.
2. Students will be able to report the wages, federal income tax withheld, Social Security wages and taxes, and Medicare wages and taxes for Alice and Bruce on Form W2 for the 2021 tax year.
3. Students will be able to determine the percentage of support the Byrds provide for their two children and Bruce’s widower father.
4. Students will be able to calculate the medical expenses for Sam Byrd and identify the reimbursed expenses.
5. Students will be able to distinguish between deductible and non-deductible expenses related to the Byrds’ personal residence.
6. Students will be able to identify the additional state income tax paid by Alice and Bruce and the charitable donations they made.

Solution 1: Possible Tax Filing

Alice J. and Bruce M. Byrd, being married and filing jointly, must include all of their income information from their respective employers on their tax return for the 2021 tax year. They must also provide information about their dependents, including their two children and Bruce’s father, Sam, who passed away in November. Based on the information provided, the Byrds can follow the steps mentioned below to file their tax return:

1. Gather all income-related information – Alice’s and Bruce’s Form W2s, Cynthia’s and John’s earnings, and any other income received during the year.

2. Determine the total support provided to dependents – The Byrds must determine the total support provided to their two children and Bruce’s father to determine whether they can claim them as dependents.

3. Calculate itemized deductions – The Byrds have several itemized deductions, including medical expenses, property taxes, mortgage interest, and charitable contributions. They should calculate their total allowable deductions to see if they exceed the standard deduction.

4. Calculate their taxable income – Based on their total income and deductions, the Byrds should calculate their taxable income for the year.

5. Calculate the federal and state income tax owed – The Byrds can determine their tax liability by using the relevant tax tables and tax rates.

6. Calculate their tax credits – The Byrds may be eligible for certain tax credits, such as the Child Tax Credit or the Earned Income Tax Credit. They should calculate their eligible tax credits to reduce their tax liability.

7. Complete and submit their tax return – After completing the above steps, the Byrds can complete their tax return, attach any required schedules or forms, and submit it to the appropriate federal and state tax authorities.

Solution 2: Strategies for Reducing Tax Liability

While filing their tax return, the Byrds can also implement some tax planning strategies to reduce their tax liability for the year. Below are some possible strategies that they can consider:

1. Contribute to a retirement account – If Alice and Bruce have not contributed to a retirement account, they can consider doing so before the tax filing deadline. Contributions made to a traditional IRA or a 401(k) plan can reduce their taxable income and lower their tax liability.

2. Use the standard deduction – The Byrds can choose to use the standard deduction for their federal and state income tax returns if their total itemized deductions do not exceed the standard deduction. For the 2021 tax year, the standard deduction for married filing jointly is $25,100.

3. Take advantage of tax credits – The Byrds can maximize their tax savings by claiming all eligible tax credits, such as the Child Tax Credit, the Earned Income Tax Credit, and the Retirement Savers’ Credit.

4. Plan charitable contributions – The Byrds can plan to make charitable contributions throughout the year and keep track of their donations to maximize their tax savings. They can also consider donating appreciated securities or property to reduce capital gains taxes.

5. Consider timing of income and expenses – The Byrds can consider timing their income and expenses to maximize their tax savings. For example, they can defer income to the following year or prepay expenses, such as property taxes, to reduce their taxable income.

Suggested Resources/Books:

1. “J.K. Lasser’s Your Income Tax 2022: For Preparing Your 2021 Tax Return” by J.K. Lasser Institute
2. “TurboTax Premier 2021 Tax Software” by Intuit
3. “The Ernst & Young Tax Guide 2022” by Ernst & Young LLP
4. “2021 Tax Facts on Investments” by Jeffrey H. Rattiner
5. “Protecting Your Assets From Probate and Long-Term Care: Don’t Let the System Bankrupt You and Your Loved Ones” by Evan H. Farr

Similar asked questions:

1. Can I deduct medical expenses for a family member on my tax return?
2. How do I calculate my mortgage interest deduction on my tax return?
3. What are the rules for claiming dependents on my tax return?
4. Are life insurance proceeds taxable?
5. What is the difference between a tax credit and a tax deduction?

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