Case Narrative<br/><br/><br/>Maud and Miles Miller, both age 43, have
the following information for their taxes. Maud earns $60,000 as manager of a local business; she contributes 5% of her salary to her 401(k) and her employer matches dollar for dollar up to 3%. Miles is a high school principal earning $75,000; he is covered by the school's pension plan where he contributes 5% and it is matched dollar for dollar by the school district. They earned $600 in interest and $800 in ordinary dividends. Maud and Miles have two children-Merry, age 7 and Mathias, age 14.
Note: Salaries are quoted before salary reductions for 401(k) and pension plan.
· They each contributed $5,000 to their IRA.
· They contributed $5,000 to their church.
· They contributed $800 to the United Way.
· They had unreimbursed medical expenses of $10,000.
· That had $6,700 withheld for state income taxes.
· They had $13,500 withheld for federal income taxes.
· They paid $4,000 in real estate taxes.
· They paid $12,000 in mortgage interest.
· They received $1,500 in a state income tax refund in April. They itemized deductions last year.
· Maud received a bonus of $17,000 from her employer this year. No contribution to the 401(k) was withheld on the bonus.
· They spent $6,000 for child care for Merry.
· Mathias has a paper route. He earned $700 delivering papers and $400 in interest.
using the 2020 tax rates
-What is Maud and Miles's total income (line 7b on Form 1040)?
-How much can Maud and Miles deduct for their IRA contributions?
-If their AGI was $145,000, what is the total amount of itemized deductions?
-If the Millers' taxable income was $109,650, what is their initial tax liability (before considering any tax credits)? Please use the tax schedules in Appendix A in the text to calculate the taxes.
-For what child and dependent care tax credit do the Millers qualify?
-What is the child tax credit for which the Millers qualify if their MAGI is $145,000?
-Miles and Maud's son, Mathias, earned $700 delivering papers and $350 in interest this year. How much will Mathias owe in federal income taxes this year?