Need help with making the preparing Schedule SE Alice J and

Need help with making the preparing Schedule SE

Alice J. and Bruce M. Smith are married taxpayers who file a joint return. Their social security numbers are 123-45-6789 and 111-11-1111, respectively. Alice’s birthday is September 21, 1966, and Bruce’s is June 27, 1965. They live at 473 Revere Avenue, Lowell, MA 01850. Alice is the office manager for Lowell Dental Clinic. Bruce is the self-employed physical therapist.

The following information is shown on Alice’s Wage and Tax Statement (Form W-2) for 2017.

Line

Description

Alice

1.

Wage, tips, other compensation

$58,000

2.

Federal income tax withheld

   6,960

4.

Social security tax withheld

    3,596

6.

Medicare tax withheld

       841

17.

State income tax withheld

    2,610

During 2017, Bruce recorded the following items of his business:

Revenue from patient visits

$270,000

Property tax on the office

      4,500

Mortgage interest on the office

     12,000

Depreciation on the office

       5,500

Malpractice insurance

     37,500

Utilities paid for the office

      13,750

Office staff salaries

      51,000

Rent payments on equipment

      15,000

health insurance premium paid for himself

       2,500

health insurance premium paid for his employees

       5,000

Bruce made the quarterly federal tax payments totaled $40,000  (same as tax withheld and should be reported on line 64)

The Smiths provide over half of the support of their two children, Cynthia (born January 25, 1989, Social security number 123-45-6788) and John (born February 7, 1995, Social Security number 123-45-6786). Both children are full-time students and live with the Smiths except when they are away at college. Cynthia earned $4,200 from a summer internship in 2017, and John earned $3,800 from a part-time job.

During 2017, The Smiths furnished 60% of the total support of Bruce’s widower father, Sam Smith (born March 6, 1937, social security number 123-45-6777). Sam died in November, and Bruce, the beneficiary of a policy on Sam’s life, received life insurance proceeds of $800, 000 on December 28.

The Smiths also made some investment activities during 2017. The following information is shown their investment income / (loss) for 2017.

Dividend income (qualified dividend) from investing in Apple Inc.

$200

A gain from selling Netflix stock (hold for 7 months)

5,000

A loss from selling Bank of America stock (hold for 15 months)

(1,500)

An non-business bad debt  (hint: tax treatment as short-term capital loss)

(2,000)

Determine self-employment tax (use schedule SE)

The Smiths had the following expenses relating to their personal residence during 2017

Property Taxes

$5,000

Qualified interest on home mortgage

$8,800

Medical expense for 2017:

         Medical insurance premium paid for two children

         Doctor bill for Sam

         Operation for Sam

         Hospital expense for Sam

$4,500

  7,600

  8,500

  3,500

Utilities

  4,100

Union dues paid by Alice

     600

Alice’s work uniform expenses

     450

Line	Description	Alice
1.	Wage, tips, other compensation	$58,000
2.	Federal income tax withheld	6,960
4.	Social security tax withheld	3,596
6.	Medicare tax withheld	841
17.	State income tax withheld	2,610

Solution

heir investment income / (loss) for 2017.

Dividend income (qualified dividend) from investing in Apple Inc.

$200

A gain from selling Netflix stock (hold for 7 months)

5,000

A loss from selling Bank of America stock (hold for 15 months)

(1,500)

An non-business bad debt  (hint: tax treatment as short-term capital loss)

(2,000)

Determine self-employment tax (use schedule SE)

The Smiths had the following expenses relating to their personal residence during 2017

Property Taxes

$5,000

Qualified interest on home mortgage

$8,800

Medical expense for 2017:

         Medical insurance premium paid for two children

         Doctor bill for Sam

         Operation for Sam

         Hospital expense for Sam

$4,500

  7,600

  8,500

  3,500

Utilities

  4,100

Union dues paid by Alice

     600

Alice’s work uniform expenses

     450

Dividend income (qualified dividend) from investing in Apple Inc.	$200
A gain from selling Netflix stock (hold for 7 months)	5,000
A loss from selling Bank of America stock (hold for 15 months)	(1,500)
An non-business bad debt  (hint: tax treatment as short-term capital loss)	(2,000)