Herb and Alice are married and file a joint return. Herb is 74 years old. Alice turned 70 on February 3, 2020. Neither are blind. Herb is a retired school teacher, but continues to work part-time as a substitute teacher. Alice is retired.  Herb earned $15,000 in wages. They also receive pension and Social Security income and sold some stock. Their combined AGI is $45,000. 

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Herb and Alice are married and file a joint return. Herb is 74 years old. Alice turned 70 on February 3, 2020. Neither are blind.

  • Herb is a retired school teacher, but continues to work part-time as a substitute teacher. Alice is retired.
  • Herb earned $15,000 in wages. They also receive pension and Social Security income and sold some stock. Their combined AGI is $45,000.
  • Both Herb and Alice are U.S. citizens and have valid Social Security numbers.

1. Herb and Alice cannot make contributions to their traditional IRAs because they are both over 70 1/2

  • Herb and Alice are married and file a joint return. Herb is 74 years old. Alice turned 70 on February 3, 2020. Neither are blind.
  • Herb is a retired school teacher, but continues to work part-time as a substitute teacher. Alice is retired.
  • Herb earned $15,000 in wages. They also receive pension and Social Security income and sold some stock. Their combined AGI is $45,000.
  • Both Herb and Alice are U.S. citizens and have valid Social Security numbers.

2. Alice must take her first required minimum distribution (RMD) by April 1, and her second RMD by December 31, of what year________?

  • Herb and Alice are married and file a joint return. Herb is 74 years old. Alice turned 70 on February 3, 2020. Neither are blind.
  • Herb is a retired school teacher, but continues to work part-time as a substitute teacher. Alice is retired.
  • Herb earned $15,000 in wages. They also receive pension and Social Security income and sold some stock. Their combined AGI is $45,000.
  • Both Herb and Alice are U.S. citizens and have valid Social Security numbers.

3. Herb and Alice’s standard deduction is:

A. $24,800

B. $26,100

C. $27,400

D. $28,100

  • Luther and Lexi are married and file a joint return.
  • Luther was enrolled in employer-sponsored family coverage through a high deductible health plan (HDHP) for all of 2020. His monthly premiums are $300.
  • In 2020, Luther contributed $1,700 to his Health Savings Account (HSA). Of that amount, $1,200 was made pretax through his employer’s cafeteria plan and he made the remaining $500 contribution by electronic deposit into the HSA from his checking account. His employer sent Form W-2 reporting $1,200 in Box 12a, with code W.
  • Luther received a Form 1099-SA showing a distribution from his HSA of $230. Luther did not have any medical expenses for the year. Lexi paid $80 to the dentist for a filling, and $150 for lab work ordered during her physical.
  • Luther and Lexi felt fortunate to have good jobs when so many people in their community were out of work, so they donated $250 by check to their local food bank. The food bank is a qualified organization and provided Luther and Lexi with a written acknowledgment of their donation. They contributed $20 in cash to a fundraiser for a local child’s cancer treatments. They also donated clothing in good condition with fair market value of $100 to Goodwill. They have a receipt for the donation.
  • Luther and Lexi are U.S. citizens with valid Social Security numbers. They do not have enough expenses to itemize their deductions.

6. What amount can Luther take as an HSA deduction? $________.

  • Luther and Lexi are married and file a joint return.
  • In 2020, Luther contributed $1,700 to his Health Savings Account (HSA). Of that amount, $1,200 was made pretax through his employer’s cafeteria plan and he made the remaining $500 contribution by electronic deposit into the HSA from his checking account. His employer sent Form W-2 reporting $1,200 in Box 12a, with code W.
  • Luther was enrolled in employer-sponsored family coverage through a high deductible health plan (HDHP) for all of 2020. His monthly premiums are $300.
  • Luther received a Form 1099-SA showing a distribution from his HSA of $230. Luther did not have any medical expenses for the year. Lexi paid $80 to the dentist for a filling, and $150 for lab work ordered during her physical.
  • Luther and Lexi felt fortunate to have good jobs when so many people in their community were out of work, so they donated $250 by check to their local food bank. The food bank is a qualified organization and provided Luther and Lexi with a written acknowledgment of their donation. They contributed $20 in cash to a fundraiser for a local child’s cancer treatments. They also donated clothing in good condition with fair market value of $100 to Goodwill. They have a receipt for the donation.
  • Luther and Lexi are U.S. citizens with valid Social Security numbers. They do not have enough expenses to itemize their deductions.

7. None of the HSA distribution is taxable because the entire amount was used to pay qualified medical expenses.

a.  True

B  False

  • Luther and Lexi are married and file a joint return.
  • Luther was enrolled in employer-sponsored family coverage through a high deductible health plan (HDHP) for all of 2020. His monthly premiums are $300.
  • In 2020, Luther contributed $1,700 to his Health Savings Account (HSA). Of that amount, $1,200 was made pretax through his employer’s cafeteria plan and he made the remaining $500 contribution by electronic deposit into the HSA from his checking account. His employer sent Form W-2 reporting $1,200 in Box 12a, with code W.
  • Luther received a Form 1099-SA showing a distribution from his HSA of $230. Luther did not have any medical expenses for the year. Lexi paid $80 to the dentist for a filling, and $150 for lab work ordered during her physical.
  • Luther and Lexi felt fortunate to have good jobs when so many people in their community were out of work, so they donated $250 by check to their local food bank. The food bank is a qualified organization and provided Luther and Lexi with a written acknowledgment of their donation. They contributed $20 in cash to a fundraiser for a local child’s cancer treatments. They also donated clothing in good condition with fair market value of $100 to Goodwill. They have a receipt for the donation.
  • Luther and Lexi are U.S. citizens with valid Social Security numbers. They do not have enough expenses to itemize their deductions.

8. How much of Luther and Lexi’s charitable donations are deductible on their federal return? $________.

  • Kendall is single and has no dependents. He is a self-employed rideshare driver for Widget Ride Share.
  • Kendall provided a statement from the ride share company that indicated the amount of mileage driven and fees paid for the year. These fees are considered ordinary and necessary for the ride share business:
    • 42,157 miles driven while transporting customers
    • Ride share fee: $2,000
    • Airport fee: $365
    • GPS device fee: $120
  • His recordkeeping application shows he also drove 4,873 miles between rides and 2,134 miles driven between his home and his first and last customer of the day. Kendall started using his car for business on September 1, 2019. He kept receipts showing he spent $150 on tolls and $2,761 on gasoline.
  • Kendall also provided the Form 1099-NEC and Form 1099-K that he received from Widget. See Form 1099-NEC and Form 1099-K included with this scenario.
  • Kendall tested positive for COVID-19 and was required to self-quarantine from April 6 through April 24. As a result, he could not work during that time.

9. What is Kendall’s total self-employment expense? $________.