Question

(2022 Tax Forms) Ashley Panda lives at 1310 Meadow Lane, Wayne, OH 43466, and her Social Security number is 123-45-6777. Ashley is single and has a 20-year-old son, Bill. His Social Security number is 111-11-1112. Karl lives with Ashley, and she fully supports him. Bill spent 2021 traveling in Europe and was not a college student. He had gross income of $4,655 in 2020. Bill paid $4,000 of lodging expenses that Ashley reimbursed after they were fully documented. Ashley paid the $4,000 to Bill using a check from her sole proprietorship. That amount is not included in the items listed below. Ashley had substantial health problems during 2021, and many of her expenses were not reimbursed by her health insurance. Ashley owns Panda Enterprises LLC (98-7654321), a data processing service that she reports as a sole proprietorship. Her business is located at 456 Hill Street, Wayne, OH 43466. The business activity code is 514210. Her 2021 Form 1040, Schedule C for Panda Enterprises shows revenues of $315,000, office expenses of $66,759, employee salary of $63,000, employee payroll taxes of $4,820, business meal expenses of $11,000 (all at restaurants), and rent expense of $34,000. The rent expense includes payments related to renting an office ($30,000) and payments related to renting various equipment ($4,000). There is no depreciation because all depreciable equipment owned has been fully depreciated in previous years. No fringe benefits are provided to the employee. Ashley personally purchases health insurance on herself and Bill. The premiums are $23,000 per year. Ashley has an extensive stock portfolio and has prepared the following analysis: Stock Number of Shares Date Purchased Date Sold Per-Share Cost Per-Share Selling Price Total Dividends Beige 10 10/18/20 10/11/21 $80 $74 $30 Garland 30 10/11/14 10/11/21 43 157 70 Peach 15 3/10/21 8/11/21 62 33 45 *Note: Ashley received a Form 1099–B from her stockbroker that included the adjusted basis and sales proceeds for each of her stock transactions. The per-share cost includes commissions, and the per-share selling price is net of commissions. Also, the dividends are the actual dividends received in 2021, and these are both ordinary dividends and qualified dividends. Ashley had $800 of interest income from State of Ohio bonds and $600 of interest income on her Wayne Savings Bank account. She paid $25,000 of alimony to her former husband (divorce finalized in June 2017). His Social Security number is 123-45-6788. Ashley itemizes her deductions and provides the following information, which may be relevant to her return: Item Amount Comment Unreimbursed medical expenses for Ashley $9,748 Does not include health insurance premiums. State income taxes paid 1,830 Real property taxes on personal residence 3,230 Interest paid on home mortgage (Form 1098) 8,137 The loan is secured by the residence and was incurred when the home was purchased. Charitable contributions 1,399 $940 cash payments to Ashley’s church and $459 cash payments made to homeless persons for whom she felt sorry. She can document all the expenditures. Sales taxes 619 Amount per sales tax table. Ashley paid $27,000 in estimated Federal income taxes, did not engage in any virtual currency transactions during the year, does not want any of her taxes to finance presidential elections, has no foreign bank accounts or trusts, and wants any refund to be applied against her 2022 taxes. Ashley received the appropriate coronavirus recovery rebates (economic impact payments); related questions in ProConnect Tax should be ignored. Compute Ashley’s net tax payable or refund due for 2021 and complete her 2021 Federal tax return using appropriate forms and schedules. Ashley qualifies for the § 199A deduction for qualified business income. Be sure to include that in your calculations. Suggested software: ProConnect Tax.

Answer 1

To complete her 2021 Federal tax return, Ashley should use Form 1040 and consider her income, deductions, and tax credits. She qualifies for the §199A deduction for qualified business income. By reporting her business income, interest income, alimony paid, and itemizing her deductions, she can calculate her taxable income and determine her net tax payable or refund due.

Step-by-step explanation:

Ashley should use Form 1040 to complete her 2021 Federal tax return. She qualifies for the §199A deduction for qualified business income. To calculate her net tax payable or refund due for 2021, she needs to consider her income, deductions, and tax credits.

First, she should report her business income from Panda Enterprises LLC on Schedule C of Form 1040. Her revenue, office expenses, employee salary, employee payroll taxes, business meal expenses, and rent expense should all be included. She should also report the health insurance premiums she personally paid.

Next, Ashley should report her interest income from State of Ohio bonds and Wayne Savings Bank on Schedule B of Form 1040. She should also report the alimony paid on Schedule 1 of Form 1040.

Ashley can itemize her deductions on Schedule A of Form 1040. She should include the unreimbursed medical expenses, state income taxes paid, real property taxes on her personal residence, interest paid on her home mortgage, charitable contributions, and sales taxes paid.

Ashley can calculate her taxable income by subtracting her deductions from her total income. She can then use the tax tables or tax calculation worksheet to determine her tax liability.

Lastly, Ashley should consider any tax credits that she may be eligible for. She should review the available tax credits and fill out the appropriate forms if applicable.

Based on these calculations, she can determine whether she owes a net tax payable or is eligible for a refund.

Answer 2

Ashley's 2021 tax calculation involves her business income, stock transactions, interest and dividends, alimony payments, and personal deductions. A qualified business income deduction should be applied, along with deductions for medical expenses, state and local taxes, property taxes, and mortgage interest. A comprehensive tax return would include these details to determine Ashley's tax obligations for the year.

Step-by-step explanation:

The question is asking for a computation of Ashley’s net tax payable or refund due for the 2021 fiscal year, including filling out the 2021 Federal tax return using appropriate forms and schedules. This task requires a detailed understanding of tax laws, including income from sole proprietorships, qualified business income deduction, capital gains and losses from stock sales, interest and dividend income, as well as personal deductions such as medical expenses, state and local taxes, property taxes, and mortgage interest.

Ashley operates Panda Enterprises LLC, with significant revenues and expenses related to her data processing service business. She also has personal finances that include paying alimony, holding a stock portfolio with various transactions, and receiving interest and dividends. Medical expenses, taxes, charitable contributions, and other applicable deductions should be considered in her tax calculations.

Given the complexity of her financial situation, an accountant or tax professional would need to consider all aspects of her finances, including her sole proprietorship earnings and expenses, stock transactions, interest and dividend income, payment of alimony, and all personal deductions. The calculation of her qualified business income deduction would also be necessary to accurately determine her taxable income and resulting tax obligation.

This tax scenario illustrates real-life applications of tax law knowledge, emphasizing the importance of meticulous record-keeping and a thorough understanding of tax deductions and income requirements. For Ashley, it is critical to navigate the tax implications of her international team engagements and her domestic business operations carefully.