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Posted: April 12th, 2023

TAXATION I CASE #1 – Part 3 Instructions

TAXATION I CASE #1 – Part 3 Instructions
2022 Tax Forms
Welcome to Part 3 of your first Taxation I case! These instructions are meant to help you complete the
case, so read them VERY carefully. If you have questions, always post them to the discussion forum (or
F2F classes can bring questions to class). We’ll all jump on the discussion board and help each other.
Again, be sure to review the general comments in the Part 1 instructions.

Before you start this section, be sure you have reviewed instructor comments posted for both Parts I and II
and that you have the correct amounts on the lines of 1040 that were computed/transferred already.
If you have filled in everything given at this point, your 1040 is completed through line 11, AGI = $89,254. If
you do NOT have this AGI, stop and go back through parts 1 and 2, my comments, my instructions, and see
where you went wrong.
Accounting trick, subtract $89,254 from the amount you have to get the difference, how much you are off.
Is that difference evenly divisible by 9? Could be a transposition error, you turned digits around. Take 50%
of the difference to see if maybe you added instead of subtracted something? Did you have the correct
amount of capital loss from line 21 of Schedule D in part 1?
Schedule A – Itemized Deductions
Medical Expenses – total on line 1 = $8,000. Compute amounts for lines 2, 3 and 4.
Personal Residence Expenses
State and local income taxes (see State & City withholding amounts from W-2 in Part 1) (Line 5a)
Real Estate Taxes $4,705 (Line 5b)
Complete lines 5d, 5e and 7 very carefully.
Part III – Required to Submit (18 points):
• 2022 Schedule A
• 2022 Form 8863 (both pages)
• 2022 Form 8995
• 2022 Schedule 3 (only required to submit Page 1)
• 2022 Form 1040 (both pages)
• Note: Forms are provided in the Blackboard folder where you found these instructions. If final
form 8995 is not available for 2022, you MUST use the draft 2022 form, no other year.
Mortgage Interest 9,565 (Line 8a, compute lines 8e and 10)
Charitable Contributions
Cash $8,000 (Line 11)
Other 400 (Line 12)
Compute line 14
Compute Line 17. If you do this form correctly, your total Itemized Deductions should total $29,271.
Total from Schedule A carries to 1040, line 12, unless you believe Standard Deduction would be more
beneficial. YOU decide!
Back to Form 1040:
Form 8995 – Qualified Business Income Deduction Simplified Computation
• Lines 1i and 2, fill in business name and the net business income from Schedule C, less one-half of
self-employment tax from Schedule SE and/or Schedule 1. This amount also carries down to line 4.
• Compute line 5.
• Lines 6-7 blank, lines 8 and 9 = 0. Compute line 10.
• Compute line 11 and read it carefully. Take AGI less the amount you have on line 12. It’s not
asking for AGI, it’s asking for TI BEFORE this last piece, the QBI deduction, is subtracted.
• Line 12 would be subtracted IF we had net capital gain on Schedule D, but since we had net capital
loss on Schedule D, we ignore. Enter N/A.
• Compute lines 13, 14 and 15. Lines 16-17 are zero.
• Total from Line 15 of Form 8995 carries to 1040 line 13.
Back to 1040, you can now compute lines 14 and 15. If you have done this correctly to this point, Taxable
income = $58,775. You don’t get full credit for filling these check figures in if your return does not
compute to them. There will be point deductions! Use the techniques shown at the beginning of these
instructions to see how much you are off and what it could be.
Let’s compute the Federal income tax. That’s what this is all about after all, right? Paying the IRS!
• Find the Form 1040 instructions at the IRS website
• Instead, you can use the 2021 Tax tables posted in Blackboard Forms sub-folder with the Case
• Be clear, we are not talking about the tax rate schedules like we’ve used in class on Page A-3. I’m
talking about the actual TAX TABLES, example begins on Page A-4 in textbook (but in your textbook
are for 2021, you need 2022!!).
• So, once you have the 2022 tax TABLES open in front of you, find the amount of Federal income
tax for Married Filing Jointly for your amount of taxable income per above.
• If you do not use Tax Tables, your tax will not have the correct Federal income tax amount!!
• Fill in the tax on line 16, compute lines 17 and 18.
Child Tax Credit and Dependent Tax Credit
Schedule 8812 including some worksheets are normally used to compute the nonrefundable child tax
credit, nonrefundable dependent tax credit, and any refundable child tax credit. I’m omitting the form
and worksheets from your requirements, but let’s figure out how much tax credit they are entitled to. We
learned this in Chapters 3 and 12.
• Taxpayer has income under $200,000 and under $400,000 and they are MFJ, so credits are not
limited under normal rules.
• The birth dates of the children are included in Part 1 of the instructions. Use their ages to
determine how much credit they are entitled to.
• Compute the amount of credit based on their ages (2,000 or 500 per child or none).
These are explained in Chapter 3 lecture notes AND Chapter 12 lecture notes.
• Fill in the total amount allowed for Mike and Grace on Form 1040, Line 19.
• Occasionally, we’d have some on line 19 and some on line 28, but this year, all line 19 since the
child tax credits are less than our tax liability.
Form 8863 – Education Credits (American Opportunity & Lifetime Learning)
• Start with Part III on Page 2. Hunter is in his first year of college.
• Fill in his name and SS number in Part III, Lines 20 and 21 respectively.
• Skip Line 22 (but would normally have to fill this in!).
• Check NO on line 23, YES on line 24, NO for lines 25 and 26. We are claiming the American
Opportunity Credit.
• Tuition paid in 2022 was $3,900 which goes on Line 27. Compute lines 28, 29 and 30. Enter 0 on
line 31. Amount on line 30 carries to Line 1 of this form 8863. We are NOT claiming Lifetime
Learning credit.
• Read the form carefully and complete/compute lines 2, 3, 4, 5, 6, 7, and 8.
• Then compute Line 9.
• Skip the credit limit worksheet mentioned on the form. Line 10 is 0 (no LLC),
• Follow Line 10 instructions regarding Lines 11-18.
• Line 19 is same amount from Line 9 (this is also how it would come out if you had completed the
• Be sure when you add lines 8 plus line 19 your total equals line 1. Total credit should total to 2,475.
• Total amount on line 8 of 8863 goes to 1040 line 29.
• Total amount on line 19 of 8863 goes to Schedule 3 line 3 and carry total down to line 8 also.
• Amount from Line 8 of Schedule 3 will carry to Form 1040 Line 20.
• Note: This is all that goes on Schedule 3 other than both names and his SS #. You will have nothing
in Part 2, page 2. You only need to submit page 1 of the form.
Let’s wrap up the Form 1040 and finish the case!
• Compute Lines 21 & 22.
• Line 23 should already be filled in from part 2 of this case from Schedule SE and Schedule 2.
• Compute Line 24.
• Line 25a should already be filled in from part 1 of the case when we entered Mike’s wages and tax
withheld. Compute line 25d.
• Lines 26 and 27 are blank.
• Lines 28 is 0 and 29 should already be filled in from above.
• Lines 30/31 are blank.
• Compute lines 32 and 33. Read the form carefully what totals go on which lines.
• Line 34, tax overpayment (total payments and credits line 33 should exceed total tax line 24).
• Line 35a, enter your overpayment from Line 34 because you want the money refunded to you,
NOT applied to 2023 tax (so line 36=0).
• If correct, should have overpayment being refunded of $2,315 on line 34 and 35a.
• Lines 37 and 38 are blank, you do not owe any tax.
Third Party Designee: Check YES and enter PREPARER in Designee’s name.
Mike’s occupation: Teacher; Grace’s occupation: Self-employed
Paid Preparer Use Only: Type or write your name in Preparer’s name.
You are now finished with Part III. You are ready to upload these last six required forms (see list at the
beginning of part 3 of these instructions.
Go back and review that you have both names and one SS# on top of the forms. Refer back to Part 1 and
Part 2 instructions and my comments on your submissions if not getting the right check figures. If you
don’t have a grade for Part 2, refer to the solution posted to make sure yours matches. Get in touch with
me if you have any questions AT ALL.
If you submit late, you will forfeit the points for Part 3 of the case. If you don’t submit at all, you fail this
course regardless of any other grades earned.
Congratulations! You have completed a Form 1040!

These are instructions for completing Part 3 of a tax case. The case consists of three parts, and completing all three parts and another case (Case #2) is necessary to receive credit for the course. Students must complete the previous parts before starting Part 3 and ensure that their AGI on line 11 of Form 1040 is $89,254. If not, they should go back through Parts 1 and 2 and check for errors. Students should subtract their AGI from the total amount they have to check for errors and ensure that the difference is divisible by 9. The instructions provide details on filling out Schedule A and Form 8995, and computing federal income tax using tax tables for 2022. Completing all parts of the case is necessary for receiving credit for the course.

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