Advanced Scenario 7: Matthew and Rebecca Monroe Interview Notes • Matthew is a 6th grade teacher at a public school. Matthew and Rebecca are married and choose to file Married Filing Jointly on their 2023 tax return. • Matthew worked a total of 1,500 hours in 2023. During the school year, he spent $733 on unreimbursed classroom expenses. • Rebecca retired in 2020 and began receiving her pension on November 1st of that year. She explains that this is a joint and survivor annuity. She has already recovered $1,259 of the cost of the plan. • Matthew settled with his credit card company on an outstanding bill and brought the Form 1099-C to the site. They aren’t sure how it will impact their tax return for tax year 2023. The Monroes determined that they were solvent as of the date of the canceled debt. • Rebecca received $200 from Jury duty. • Their daughter, Safari, is in her second year of college pursuing a bachelor’s degree in Biochemistry at a qualified educational institution. She received a scholarship and the terms require that it be used to pay tuition. Box 2 was not filled in and Box 7 was not checked on her Form 1098-T for the previous tax year. The Monroes provided Form 1098-T and an account statement from the college that included additional expenses. The Monroes paid $865 for books and equipment required for Safari's courses. This information is also included on the college statement of account. The Monroes claimed the American Opportunity Credit last year for the first time. • Safari does not have a felony drug conviction. Matthew wages $35,353.00 Rebecca 1099-R Pensions $20,000.00, federal income tax withheld was $2,000.00, employee contributions was $15,000 Rebecca SSA- 1099 was $22,899, federal income tax withheld was $2,290 Matthew cancellation of debit was $850.00 SAFARI 1098-T for college Payments received for tuition $5,522.00, Scholarships or grants $3,102, books $865.00 15. What is the taxable portion of Rebecca's pension from Riverside Enterprises using the simplified method? 17. What is the total amount of other income reported on the Monroe's Form 1040, Schedule 1? a. $200 b. $850 c. $1,050 d. $4,152

15. To calculate the taxable portion of Rebecca's pension using the simplified method, we need to determine the tax-free portion of her pension payments for the year and then subtract that from the total pension received. The tax-free portion is calculated by dividing the cost of the plan (her contributions) by the number of months of expected return. Since Rebecca has already recovered $1,259 of the cost, we subtract this from her total contributions to find the remaining cost to be recovered. Total contributions: $15,000 Already recovered: $1,259 Remaining cost: $15,000 - $1,259 = $13,741 Assuming Rebecca's expected return period is based on the IRS Uniform Lifetime Table, and she started receiving the pension at age 65, the expected return period would be 260 months (from the table). If she started receiving the pension at a different age, the expected return period would be different. Tax-free portion for 2023: $13,741 / 260 months = $52.85 per month Since we don't have the exact age or the start date of the pension, we'll use the provided numbers for an example calculation. If Rebecca received the pension for 12 months in 2023, the tax-free portion for the year would be: $52.85 per month x 12 months = $634.20 Total pension received in 2023: $20,000 Tax-free portion for 202

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