BUS FPX 4065 Assessment 3 Inclusions, Exclusions and AGI

Student Name

Capella University

BUS-FPX4065 Income Tax Concepts and Strategies

Prof. Name:

Date

Completing the 2021 Joint Tax Return for Mr. & Mrs. Weaver

To accurately complete the 2021 joint tax return for Mr. and Mrs. Weaver, multiple forms and schedules are necessary. Key considerations include Jacob Weaver’s contracting business ownership, Taylor Weaver’s part-time employment while pursuing her education, and their three children. Despite their son John filing his own 1040 for his 2021 earnings, he qualifies as a dependent. Schedules C and SE are used to calculate Mr. Weaver’s profit or loss and self-employment tax, which are critical in determining his taxable income.

The Weavers rely on a completed Schedule A to evaluate whether itemized deductions or the standard deduction method is more advantageous for their joint filing. Schedule 1 details any additional income or adjustments, including John’s net profits and Mr. Weaver’s self-employment tax of $11,103, entered on line 10 of the 1040. Their adjusted gross income (AGI) is determined by summing total wages and taxable interest from Schedule B while subtracting adjustments calculated from Schedule 1.

Deductions for mortgage interest and property taxes amount to $10,000, making itemized deductions more beneficial than the standard deduction in their case. Using the simplified method for deductions, they claimed $1,200 for Mr. Weaver’s home office expenses. This method compares the home’s total square footage to the office space used for business, yielding a deduction that reduces their taxable income and tax liability.

Tax Computations and Allowable Deductions

The allowable home office deduction of $1,096, calculated using Form 8829, is less beneficial than the $1,200 deduction derived from the simplified method. Additionally, Mr. Weaver qualifies for deductions using Form 8995 for his contracting business. This form calculates the Qualified Business Income (QBI) deduction by comparing 20% of business income to 20% of taxable income before any deductions, with the lesser amount entered on line 12 of the 1040.

Child tax credits and dependent care expenses are accounted for using Schedule 8812 and other relevant forms. The Weavers qualify for a $6,000 child tax credit but not additional credits. They also receive a childcare expense credit determined by Schedule 3 and Form 2241. Accurate calculations are critical, especially for self-employment tax. These taxes are calculated by multiplying net profits by 92.35% and applying social security and Medicare tax rates. Half of the resulting tax is then entered on Schedule 1.

Schedule B captures taxable income from bank interest, adding to Mr. Weaver’s taxable income. These forms ensure the Weavers maximize tax credits and deductions, reducing their overall tax burden. The step-by-step computations culminate in calculating the self-employment tax, adjusting the AGI, and preparing the final 1040 form.

Determining Final Tax Liability and Refund Eligibility

According to the tax table for the 1040 instructions, the Weavers’ joint income exceeding $100,000 places them in the $172,750–$329,850 tax bracket. The final calculation involves multiplying the taxable income by 24%, subtracting $11,958 (a combination of child tax credits and self-employment tax), and further reducing the amount by federal tax withheld, estimated tax payments, and other applicable credits.

The 2021 joint tax return indicates that Mr. and Mrs. Weaver qualify for a tax refund. This outcome is achieved by diligently leveraging deductions, credits, and other tax benefits, ensuring compliance with IRS regulations while minimizing their financial obligations.

BUS FPX 4065 Assessment 3 Inclusions, Exclusions and AGI

Table Representation

Section	Details	Key Forms/Schedules
Income and Adjustments	AGI calculated from wages, taxable interest, and adjustments.	Schedule A, Schedule B, Schedule 1
Deductions and Credits	Itemized deductions for mortgage interest and property taxes; child tax credit and childcare expenses.	Schedule A, Schedule 8812, Schedule 3
Tax Computation and Refund	Tax liability calculated using self-employment tax, QBI deductions, and tax table guidelines.	Schedule SE, Form 8995, 1040

References

Internal Revenue Service. (n.d.). Form 8829: Expenses for business use of your home. Retrieved from https://www.irs.gov/pub/irs-pdf/f8829.pdf

Internal Revenue Service. (n.d.). Instructions for Form 8829: Expenses for business use of your home. Retrieved from https://www.irs.gov/pub/irs-pdf/i8829.pdf

Internal Revenue Service. (n.d.). Qualified business income deduction simplified computation (Form 8995). Retrieved from https://www.irs.gov/pub/irs-pdf/f8995.pdf