Tax Return Project #4
Instructions:
Please complete the 2020 federal income tax return for Joanne Peters along with its supporting
schedules if applicable (Schedule 1, Schedule 2, Schedule 3, Schedule A, Schedule B, Schedule C,
Schedule SE, Form 2441, Form 8812, Form 8863, Form XXXXXXXXXXIf required information is missing, use
easonable assumptions to fill in the gaps.
Joanne Peters has undergone some major changes in her life recently. In 2019, at the age of 46, her
husband, John, passed away. Joanne has not rema
ied as of the end of 2020. She cu
ently lives in
Bedford, Pennsylvania. She was living in Pittsburgh when her husband passed away but she moved back
to her childhood home so she could get help from her family raising her children. Joanne was employed
in Pittsburgh early in the year but left that job and relocated 150 miles away to pursue a new life and
start her new job. Joanne has three children (ages as of the end of the year): Sarah (23), Thomas (16),
and Jake (9). Joanne would like to determine her federal income tax under the filing status that is most
advantageous for her.
Joanne reported the following information:
• Joanne’s social security number is XXXXXXXXXX
• Sarah’s social security number is XXXXXXXXXX
• Thomas’ social security number is XXXXXXXXXX
• Jake’s social security number is XXXXXXXXXX
• Joanne’s mailing address is 620 N. Liberty Parkway Bedford, Pennsylvania 15522
Sarah is unma
ied and a full-time graduate student at Pennsylvania State University (PSU) (EIN 33-
XXXXXXXXXXPSU’s address is 1250 Happy Valley, State College, PA XXXXXXXXXXShe received her bachelor’s
degree the year her father passed away. This year represents her fourth year of full-time higher
education schooling. Sarah works part-time in State College to help with some of her living expenses.
Sarah earned $2,800 in gross income during the year and had her income tax return prepared on
campus by Volunteer Income Tax Assistance (VITA) volunteers. Joanne provided support for Sarah
including paying for rent, books, tuition, food, clothes, medicine, and other support items. In total,
Joanne provided $14,500 of support for the year. PSU provided Sarah with a Form 1098-T at year end.
Sarah’s higher education expenses for her university studies were as follows:
Tuition $6,800
Books $1,800
In order to for Joanne to maintain a full-time job, she sends Jake to a day care program after school five
days a week. During the year, Joanne paid the day care operator $4,250 for Jake’s care.
The day care details are as follows:
Lighthouse Day Care
751 Sunrise Road
Bedford, PA 15522
EIN: XXXXXXXXXX
Joanne’s W-2s for the
year reported the
following: Employer
Gross Wages Federal Income Tax
Withholding
State Income Tax
Withholding
Sunshine Development
Corporation
$68,400 $2,200 $800
Pittsburgh Real Estate $2,350 $300 $1250
Joanne’s employers withheld all applicable and appropriate payroll taxes. She is not eligible for the
Recovery Rebate Credit.
On January 1, 2019 (the prior year), Joanne started a photography business in which she takes
idal and
wedding photographs. She does not do any of the professional printing. However, she provides all the
digital files to her clients on a password-protected web site as part of her service. This unique service,
along with her skill and reputation, has allowed her to earn additional money on the weekends,
primarily in the summer, to help support her daughter in college. Joanne rents all the camera equipment
and does not cu
ently own any equipment herself. The photography business uses the cash method of
accounting. The business did not have any obligation to file a Form 1099 to any payee during the year.
Joanne reported the following revenue and expenses for her business this year:
Revenue $6,500
Photographic supplies $ 430
Camera rental $1,050
Web site hosting fee $ 200
Joanne also received the following amounts in 2020:
Life Insurance Payment-Mutual Life (Mother’s passing) $150,000
Cash gift from her father $ 5,000
Interest income-First Bank of Bedford $ 310
Interest income-General Electric Bond $ 3,200
Interest income-Bedford School District Municipal Bond $ 2,500
Interest income-Johnstown Rural Improvement District Bond $ 1,300
PA state income tax refund* $ 325
*Refund was from state tax she paid in 2019. Joanne deducted all her state taxes as itemized
deductions, and received full tax benefit for the deductions, on her 2019 federal tax return.
Joanne did not own, control or manage any foreign bank accounts, nor was she a grantor or beneficiary
of a foreign trust during the tax year. She also did not acquire or dispose of any virtual cu
ency in 2020.
Joanne made the following payments during 2020:
Dentist (unreimbursed by insurance) $1,500
Doctors (unreimbursed by insurance) $ 475
Prescriptions (unreimbursed by insurance) $ 255
Real property taxes on residence $ 950
Vehicle registration fee based upon age of vehicle $ 175
Mortgage interest on principal residence (Form 1098 received) $6,845
Contribution to the American Lung Association $ 600
Contribution to the Habitat for Humanity $1,000
Contribution to Methodist Church of PA $3,000
Contribution to Penn State University $ 400
Joanne wants to contribute to the Presidential Election Campaign Fund. She would like to receive a
efund (if any) of any tax she may have overpaid for the year. Her prefe
ed method of receiving the
efund is by check.