Mr. and Mrs. Z, both in their late 30s, file a joint tax return. They have...

Mr. and Mrs. Z, both in their late 30s, file a joint tax return. They have one dependent child who is age 5. Mr. Z is an employee with wages = $100,000. Federal tax withholding from his paycheck = $16,000. Their itemized deductions = $30,000. Any preferential tax rate = 0%. Allowable adjustment for retirement account = $5,000. Mrs. Z runs a part-time business that she operates as a sole proprietor. This year’s information is as follows:

Revenue $30,000, Cost of Goods Sold, $16,000, Other Expenses = $4,500 (including cost recovery = $800 and entertainment of clients = $500). She sold some business assets, one for a gain of $1,000, all of which is subject to depreciation recapture, and the others for a net loss of $1,500.

Mr. and Mrs. Z have some investments. This year they received $3,000 from an investment in bonds issued by the state of Alabama. They also sold two stocks they had held for several years, one for a gain of $6,000 and one for a loss of $4,000.

Calculate Mr. and Mrs. Z’s adjusted gross income (AGI), taxable income, total tax liability, and amount due or refund

can you include the QBI and self employment too

Solutions

Expert Solution

WORKING NOTES :

1)Adjusted gross total income = Gross total Income - specific deductions

2) Assuming spouse file returns jointly

3) QBI (Qualified business income) deduction can be claimed as mrs.z has sole proprietor business which is considered as "pass-through" business and thus 20% of business income is eligible for deduction.

4)slab rates for married filing joint returns states (other than capital gain)

$0-$19400 = 10%

$19401-$78950 = 12%

as income of Mr & Mrs Z is $ 75200

upto $19400 = 19400*10% = 1940

remaining $55800 = 55800*12% = 6696

total tax = 1940+6696 = 8636

5) Tax Rate for long term capital gain for married filing jointly is

for gain upto $78750 = 0 %

6) sole proprietor tax is not included in this as no amount is mentioned in the question as paid by mrs.z for her business as a sole proprietor

7) Federal tax is deducted by the employer at the source of income and is deposited with the government so it is deducted form tax and the excess amount of federal tax deducted will be refunded

8) business expenses will be eligible for deduction from business income

9)Itemized deductions and retirement account deposits will be eligible as a deduction from income

ekkarill92 answered 1 year ago

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