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 W–2) 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 1099–INT 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

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 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?