1. Melvin and Sylvia are married with no children, and they're filing their federal income tax return. Melvin had a gross income of $44,500 last year, while Sylvia had a gross income of $51,200, and they plan to use the standard deduction. They're trying to decide whether to file their return jointly or separately, so they want to calculate how much less they would pay in federal income taxes if they filed jointly rather than separately. (8 points: Part I - 2 points; Part II - 3 points; Part III - 1 point; Part IV - 1 point; Part V - 1 point)Part I: When filing separately, both Melvin and Sylvia have a standard deduction of $5700, and each can claim him/herself as an exemption for $3650. Neither has any additional adjustments to income. What is Melvin's taxable income? How about Sylvia's taxable income?
Part II: According to the tax tables below, how much would Melvin pay in federal income taxes if filing separately? How much would Sylvia pay if filing separately? How much would Melvin and Sylvia pay combined if filing separately?
Part III: When filing jointly, Melvin and Sylvia have a standard deduction of $11,400, they can claim one exemption for each of them for $3650 each, and they don't have any additional adjustments to income. What is their taxable income?
Part IV: According to the tax table below, how much would Melvin and Sylvia pay in federal income taxes if filing jointly?
Part V: How much less would Melvin and Sylvia pay in federal income taxes if they filed jointly rather than separately?
2. The W-2 form for Sid Finch is shown below.
Sid had no optional deductions withheld from his pay, but he did have some required deductions taken out. Sid is examining his W2 form to figure out what those required deductions were, how much they were, and how they affected his take-home pay. (5 points: Part I - 2 points; Part II - 2 points; Part III - 1 point)Part I: According to the W2 form, what required deductions were taken out of Sid's pay and what were their amounts?
Part II: What is the sum of the required deductions taken out of Sid's pay, and what percent of Sid's gross income is the sum of those required deductions? Give the percent to two decimal places.
Part III: What was Sid's take-home pay?
3. A part-time bookkeeper received two W-2 forms for the work she did last year, and she is trying to figure out her taxable income so that she can file her federal income tax return. On the first W-2 form, the figure in box 1 was $2612.98, while on the second W-2 form, the figure in box 1 was $6587.63, and the bookkeeper had no other income last year. She will claim herself as an exemption for $3650 and file with the Single filing status, using the standard deduction of $5700. (3 points: Part I - 1 point; Part II - 1 point; Part III - 1 point)Part I: What was the bookkeeper's gross income last year?
Part II: What is the sum of the amounts of the bookkeeper's standard deduction and exemption?
Part III: What was the bookkeeper's taxable income last year?4. Marsha is filing her federal income tax return with the Single filing status. She had an adjusted gross income of $56,800 last year and is trying to decide whether to take the standard deduction of $5700 or to itemize deductions. Last year she had $4900 in medical expenses, $3100 in state and local income taxes paid, $1940 in mortgage interest paid, $530 in charitable contributions, and $1200 in non-reimbursed work expenses. (7 points: Part I - 1 point; Part II - 2 points; Part III - 1 point; Part IV - 1 point; Part V - 2 points)Part I: If medical expenses are deductible to the extent that they exceed 7.5% of a taxpayer's AGI, how much will Marsha be able to deduct for medical expenses if she itemizes deductions?
Part II: If Marsha itemizes deductions, how much will she be able to deduct for state and local income taxes paid? How about for mortgage interest paid?
Part III: If charitable contributions are deductible up to 50% of a taxpayer's AGI, how much will Marsha be able to deduct for charitable contributions if she itemizes deductions?
Part IV: If non-reimbursed work expenses are deductible to the extent that they exceed 2% of a taxpayer's AGI, how much will Marsha be able to deduct for non-reimbursed work expenses if she itemizes deductions?
Part V: What is the sum of Marsha's itemized deductions? Should Marsha itemize deductions or use the standard deduction?
5. Zach had a salary of $75,000 last year. He also received $4,500 in interest income from a CD he opened a few years ago. He contributed $4,000 to an IRA, and had to move to another state for his new job. His moving expenses were $5,000. He is an unmarried man, with no dependents, and claims himself as an exemption. Standard deduction is $5700 for Single, and exemption rate is $3,650 per exemption.(3 points: Part I - 1 point; Part II - 1 point; Part III - 1 point)Part I: What was Zach's gross income?
Part II: What is Zach's Adjusted Gross Income (AGI)?
Part III: What is Zach's taxable income?6. Last year, a school principal had a gross income of $88,000. She is filing her federal income tax return with the Single filing status, and after taking into account her standard deduction of $5700 and a $3650 exemption for herself, her taxable income came out to be $78,650. Using the table below, she wants to calculate how much of the $88,000 she'll have left over after paying federal income tax. (4 points: Part I - 1 point; Part II - 1 point; Part III - 1 point; Part IV - 1 point)
Single |
|---|
Taxable income is over |
But not over |
The tax is |
Plus |
Of the amount over |
|---|
$0 |
$8,350 |
$0.00 |
10% |
$0 |
$8,350 |
$33,950 |
$835.00 |
15% |
$8,350 |
$33,950 |
$82,250 |
$4,675.00 |
25% |
$33,950 |
$82,250 |
$171,550 |
$16,750.00 |
28% |
$82,250 |
$171,550 |
$372,950 |
$41,754.00 |
33% |
$171,550 |
$372,950 |
|
$108,216.00 |
35% |
$372,950 |
Part I: Subtract the appropriate amount in the rightmost column of the table from the school principal's taxable income. What do you get?
Part II: Multiply the result from Part I by the appropriate percentage from the table. Now what do you have?Part III: Add the appropriate amount from the middle column of the table to the result from Part II. How much does the school principal owe in federal income tax?
Part IV: How much of the school principal's gross income of $88,000 will she have left over after paying federal income tax?
7. Jillian has two job offers. Job A pays an annual salary of $41,900, while job B pays $44,700. Jillian files her federal income tax return with a standard deduction of $5700, only herself as an exemption for $3650, and no additional adjustments to income. She wants to know the difference in pay between the two jobs after taxes. (7 points: Part I - 1 point; Part II - 2 points; Part III - 1 point; Part IV - 2 points; Part V - 1 point)
Single |
|---|
Taxable income is over |
But not over |
The tax is |
Plus |
Of the amount over |
|---|
$0 |
$8,350 |
$0.00 |
10% |
$0 |
$8,350 |
$33,950 |
$835.00 |
15% |
$8,350 |
$33,950 |
$82,250 |
$4,675.00 |
25% |
$33,950 |
$82,250 |
$171,550 |
$16,750.00 |
28% |
$82,250 |
$171,550 |
$372,950 |
$41,754.00 |
33% |
$171,550 |
$372,950 |
|
$108,216.00 |
35% |
$372,950 |
Part I: What would Jillian's annual taxable income be if she took job A?
Part II: How much would Jillian have to pay in federal income taxes if she took job A? How much would job A pay after taxes?
Part III: What would Jillian's annual taxable income be if she took job B?Part IV: How much would Jillian have to pay in federal income taxes if she took job B? How much would job B pay after taxes?
Part V: What is the difference in pay between the two jobs after taxes?
8. Travis is a tax advisor, and his three clients today are Cassidy, Max, and Karen. Cassidy is single with no dependents, her income last year was $121,000, and she had moving expenses in amount of $2,000. Max is single with one dependent who he wants to claim, the income from his job last year was $87,000, and he had $800 in taxable interest. Karen is single with no dependents, the income from her job last year was $72,000, and she had $1600 in taxable interest.Standard deduction is $5700 for single taxpayers, and $3650 per exemption. Based solely on the information provided answer the following questions. (3 points: Part I - 1 point; Part II - 1 point; Part III - 1 point)Part I: What is Cassidy's AGI?
Part II: What is Max's total exemption amount?
Part III: What is Karen's taxable income?
9. Imagine that you are a tax advisor and are filling out the 1040EZ federal income tax form for Levi Dalton, who has only one job, is filing with the Single filing status, and has no dependents. Assume that nobody can claim Levi as a dependent and that he had $211 in taxable interest last year. Use the following W-2 form.
Fill in lines 1, 2, 4, 5, and 6 for Levi in the Income section of the 1040EZ form below. Line 3 has already been filled in. (5 points: each line - 1 point)
10. Imagine that you are a tax advisor and are continuing to fill out the 1040EZ federal income tax form for Levi Dalton that you began in the previous problem. Assume that Levi is eligible for a Making Work Pay credit of $400. Use the following tax table, as well as the W-2 form and your answers from the previous problem.
Fill in lines 7, 8, 10, and 11 for Levi in the Payments, Credits, and Tax section of the 1040EZ form below. Line 9 has already been filled in. Then fill in either line 12a or line 13 (but not both) in the Refund/Amount You Owe section. (5 points: each line - 1 point)
