2. Determine whether each of the following taxpayers must file a return for 2016

Question

2. Determine whether each of the following taxpayers must file a return for 2016:

a. Jamie is a dependent who has wages of $4,050.

b. Joel is a dependent who has interest income of $1,200.

c. Martin is self-employed. His gross business receipts are $24,000, and business expenses are $24,300. His only other income is $2,600 in dividends from stock he owns

d. Valerie is 68 and unmarried. Her income consists of $6,500 in Social Security benefits and $11,500 from a qualified employer-provided pension plan.

e. Raul and Yvonne are married and have 2 dependent children. Their only income is Raul's $21,000 salary.

3. Determine the amount of the child-and-dependent care credit to which each of the following taxpayers is entitled:

c. Leanne and Ross are married and have 3 children, ages 6, 4, and 1. Their adjusted gross income is $78,000, and they pay $6,500 in qualified child-care expenses during the year. Leanne earns $48,000, and Philip earns $30,000 in salary.

d. Malcolm and Mirella are married and have 2 children. Mirella earns $55,000, and Malcolm has a part-time job from which he earns $4,000 during the year. They pay $4,800 in qualified child-care expenses during the year.

e. Andrew is a single parent with a 14-year-old son. Because he does not arrive home from work until 7 p.m., Andrew has hired someone to take care of his son after school and cook him supper. Andrew's adjusted gross income is $59,000, and he pays $3,400 in child-care expenses.

f. Assume the same facts as in part e, except that Andrew's son is 12 years old.

Explanation / Answer

2. Determine whether each of the following taxpayers must file a return for 2016:

a. Jamie is a dependent who has wages of $4,050.

Jamie’s standard deduction for 2016 (4050) is equal to her wages, so she is not required to file a return.

b. Joel is a dependent who has interest income of $1,200.

Joel’s unearned income for 2016 is greater than 1050, so he has t file his return.

c. Martin is self-employed. His gross business receipts are $24,000, and business expenses are $24,300. His only other income is $2,600 in dividends from stock he owns

Although Martin's net income from self-employment is less than $400, his total gross income is $26,600, which is greater than $10,350 ($6,300 + $4,050). He must file a return.

d. Valerie is 68 and unmarried. Her income consists of $6,500 in Social Security benefits and $11,500 from a qualified employer-provided pension plan.

Valerie's gross income is $11,500 which is less than $11,900 ($6,300 + $4,050 + $1,550 exemption for age) and so she is not required to file a return.

e. Raul and Yvonne are married and have 2 dependent children. Their only income is Raul's $21,000 salary.

Raul and Yvonne's gross income of $21,000 is more than $20,700 [$12,600 + (2 x $4,050)], so they must file a tax return. Note: The dependency exemptions are not included in determining whether Raul and Yvonne have to file a return. Therefore, even though their taxable income will be zero [$21,000 - $20,700 - $8,100 ($4,050 x 2)], they still must file a tax return. In fact, they should receive a refund because of his tax withholdings, the child tax credit, and the earned income tax credit.

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