Problem 5-1Health Savings Accounts (LO 5.1)Evan participates in an HSA carrying family coverage for himself, his spouse, and two children. In 2021, Evan has $200 per month deducted from his paycheck and contributed to theHSA. In addition, Evan makes a one-time contribution of $2,000 on April 15, 2022 when he files his tax return. Evan also receives a 2021 Form 1099-SA that reports distributions to Evanof $3,200 which Evan used for medical expenses.Compute the effect of the HSA transactions on Evan's adjusted gross income.These transactions decrease✔Evan's AGI by5,200 XFeedbackCheck My WHealth Savings Accounts (HSAs) are a type of savings account which may be established for the purpose of paying unreimbursed medical expenses by taxpayers who carryqualifying high-deductible medical insurance. Contributions to HSAs are a deduction for AGI and are limited to certain dollar amounts depending on age and whether thehigh-deductible insurance covers an individual or a family.

The analysis of the problem has a misconception. Here's the breakdown of the impact of HSA…

Answered: Problem 5-1 Health Savings Accounts (LO…

SWFT Individual Income Taxes

43rd Edition

ISBN:9780357391365

Author:YOUNG

Publisher:YOUNG

Chapter10: Deductions And Losses: Certain Itemized Deductions

Section: Chapter Questions

Problem 35P

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Interview Notes • Luther, age 54, and Lexi, age 56, are married and file a joint return. Lexi has family coverage through her High Deductible Health Plan (HDHP) at work. In 2023, Lexi contributed $2,350 to her Health Savings Account (HSA). Luther made contributions totaling $3,000 to his HSA in 2023. Luther's Form 1099-SA shows a distribution from his HSA of $3,000. They have receipts showing they paid: o $300 for new eyeglasses for Lexi, o $2,200 in copays for doctor visits and tests, o $400 for over the counter medication, and ● o $100 for Personal Protective Equipment (PPE) to prevent the spread of COVID-19 and home COVID-19 tests • In April 2023, Luther was diagnosed by his physician with a terminal illness. In May, Luther and Lexi decided to take a luxury vacation before his health deteriorated. They used a distribution from Luther's IRA to pay for it. They received a Form 1099-R showing $15,000 in Box 1, and code 1 in Box 7. Lexi sold a used handbag on an online marketplace. She…
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Self-Study Problem 2.13 A taxpayer (payor ex-spouse) is required to pay an ex-spouse (recipient ex-spouse) alimony of $12,000 per year. Determine how much alimony is deductible by the payor ex-spouse and how much alimony is recognized as income by the recipient ex-spouse based on the following information: If an answer is zero, enter "0". Details a. The payments are made in 2021 as part of a divorce decree executed in 2018. The divorce decree is modified in 2021 to explicitly apply the provisions of the TCJA. b. The payments are made in 2021 as part of a divorce decree executed in 2016. c. The payments are made in 2021 as part of a divorce decree executed in 2021. Deductible by payor Includable by recipient 00 00
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During 2019, Carl (a single taxpayer) has a salary of $91,500 and interest income of $11,000. Calculate the maximum contribution Carl is allowed for an educational savings account. $0 $400 $1,000 $2,000 Some other amount
Virginia and Richard are married taxpayers with adjusted gross income of $28,000 in 2019 If Virginia is able to make a $1,500 contribution to her IRA and Richard makes a $1,500 contribution to his IRA, what is the Saver's Credit Virginia and Richard will be eligible for? $0 $1,500 $2,000 $3,000 $4,000
Marlene, a cash basis taxpayer, invests in Series EE U.S. government savings bonds and bank certificates of deposit (CDs). Determine the tax consequences of the following on her 2019 gross income: a. On September 30, 2019, she cashed in Series EE bonds for 10,000. She purchased the bonds in 2009 for 7,090. The yield to maturity on the bonds was 3.5%. b. On July 1, 2018, she purchased a CD for 10,000. The CD matures on June 30, 2020, and will pay 10,816, thus yielding a 4% annual return. c. On July 1, 2019, she purchased a CD for 10,000. The maturity date on the CD was June 30, 2020, when Marlene would receive 10,300.
Darrell is an employee of Whitneys. During the current year, Darrells salary is 136,000. Whitneys net self-employment income is also 136,000. Calculate the Social Security and self-employment taxes paid by Darrell and Whitney. Write a letter to Whitney in which you state how much she will have to pay in Social Security and self-employment taxes and why she owes those amounts.
Addison Parker (Social Security number 123-45-6785), single and age 32, lives at 3218 Columbia Drive, Spokane, WA 99210. She is employed as regional sales manager by VITA Corporation, a manufacturer and distributor of vitamins and food supplements. Addison is paid an annual salary of 83,000 and a separate travel allowance of 28,000. In order to access the travel allowance, VITA requires adequate accounting by Addison. Addison participates in VITAs contributor) health and 401(k) plans. During 2019, she paid 4,500 for her share of the medical insurance and contributed 11,000 to the 401(k) retirement plan. Addison uses her automobile 70% for business and 30% for personal. The automobile, a Toyota Avalon, was purchased new on June 30, 2017, for 37,000 (no trade-in was involved). Depreciation has been claimed using the MACRS 200% declining-balance method, and no 179 election was made in the year of purchase. (For depreciation information, see the IRS Instructions for Form 4562, Part V.) During 2019, Addison drove 15,000 miles and incurred and paid the following expenses relating to the automobile: Because VITA does not have an office in Spokane, the company expects Addison to maintain one in her home. Out of 1.500 square feet of living space in her apartment, Addison has set aside 300 square feet as an office. Expenses for 2019 relating to the office are listed below. Addisons employment-related expenses (except for the trip to Korea) for 2019 are summarized below. Most of Addisons business trips involve visits to retail outlets in her region. Store managers and their key employees, as well as some suppliers, were the parties entertained. The business gifts were boxes of candy costing 30 (25 each plus 5 for wrapping and shipping) sent to 18 store managers at Christmas. The continuing education was a noncredit course dealing with improving management skills that Addison took online. In July 2019, Addison traveled to Korea to investigate a new process that is being developed to convert fish parts to a solid consumable tablet form. She spent one week checking out the process and then took a one-week vacation tour of the country. The round-trip airfare was 3,600, and her expenses relating to business were 2,100 for lodging (300 each night), 1,470 for meals, and 350 for transportation. Upon returning to the United States, Addison sent her findings about the process to her employer. VITA was so pleased with her report that it gave her an employee achievement award of 10,000. The award was sent to Addison in January 2020. Besides the items already mentioned, Addison had the following receipts in 2019: Regarding the city lot (located in Vancouver), Addison purchased the property in 2004 for 16,000 and held it as an investment. Unfortunately, the neighborhood where the lot was located deteriorated, and property values declined. In 2019, Addison decided to cut her losses and sold the property for 13,000. The sailboat was used for pleasure and was purchased in 2015 for 16,500. Addison sold the boat because she purchased a new and larger model (see below). While at the Spokane airport, Addison found an unmarked envelope containing 55,000 in 50 bills. Because no mention of any lost funds was noted in the media, Addison kept the money. Addisons expenditures for 2019 (not previously noted) are summarized below. Addison keeps careful records regarding sales taxes. In 2019, the sales tax total was unusually high due to the purchase of a new sailboat. In 2019, Addison decided to pay her church pledge for both 2019 and 2020. The insurance premium was on a policy covering her fathers life. (Addison is the designated beneficiary under the policy.) Addisons employer withheld 8,600 for Federal income tax purposes, and she applied her 800 overpayment for 2018 toward the 2019 tax liability. Compute Addisons Federal income tax payable (or refund) for 2019. In making the calculation, use the Fax Rate Schedule and disregard the application of the alternative minimum tax (AMI), which is not discussed until Chapter 12.

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