In: Accounting
Reba Dixon is a fifth-grade school teacher who earned a salary
of $38,000 in 2020. She is 45 years old and has been divorced for
four years. She receives $1,200 of alimony payments each month from
her former husband (divorced in 2016). Reba also rents out a small
apartment building. This year Reba received $50,000 of rental
payments from tenants and she incurred $19,500 of expenses
associated with the rental.
Reba and her daughter Heather (20 years old at the end of the year)
moved to Georgia in January of this year. Reba provides more than
one-half of Heather’s support. They had been living in Colorado for
the past 15 years, but ever since her divorce, Reba has been
wanting to move back to Georgia to be closer to her family.
Luckily, last December, a teaching position opened up and Reba and
Heather decided to make the move. Reba paid a moving company $2,250
to move their personal belongings, and she and Heather spent two
days driving the 1,600 miles to Georgia.
Reba rented a home in Georgia. Heather decided to continue living
at home with her mom, but she started attending school full time in
January and throughout the rest of the year at a nearby university.
She was awarded a $3,360 partial tuition scholarship this year, and
Reba helped out by paying the remaining $500 tuition cost. If
possible, Reba thought it would be best to claim the education
credit for these expenses.
Reba wasn't sure if she would have enough items to help her benefit
from itemizing on her tax return. However, she kept track of
several expenses this year that she thought might qualify if she
was able to itemize. Reba paid $6,520 in state income taxes and
$14,100 in charitable contributions during the year. She also paid
the following medical-related expenses for herself and Heather:
Insurance premiums | $ | 8,960 |
Medical care expenses | $ | 1,100 |
Prescription medicine | $ | 470 |
Nonprescription medicine | $ | 100 |
New contact lenses for Heather | $ | 200 |
Shortly after the move, Reba got distracted while driving and
she ran into a street sign. The accident caused $1,020 in damage to
the car and gave her whiplash. Because the repairs were less than
her insurance deductible, she paid the entire cost of the repairs.
Reba wasn’t able to work for two months after the accident.
Fortunately, she received $2,000 from her disability insurance. Her
employer, the Central Georgia School District, paid 60 percent of
the premiums on the policy as a nontaxable fringe benefit and Reba
paid the remaining 40 percent portion.
A few years ago, Reba acquired several investments with her portion
of the divorce settlement. This year she reported the following
income from her investments: $2,200 of interest income from
corporate bonds and $1,740 interest income from City of Denver
municipal bonds. Overall, Reba’s stock portfolio appreciated by
$13,510, but she did not sell any of her stocks.
Heather reported $6,400 of interest income from corporate bonds she
received as gifts from her father over the last several years. This
was Heather’s only source of income for the year.
Reba had $11,270 of federal income taxes withheld by her employer.
Heather made $1,120 of estimated tax payments during the year. Reba
did not make any estimated payments. Reba had qualifying insurance
for purposes of the Affordable Care Act (ACA).
a. Determine Reba’s federal income taxes due or taxes payable for the current year. Use Tax Rate Schedule for reference. (Do not round intermediate values. Leave no answer blank. Enter zero if applicable.)
2020 Tax Rate Schedules
Individuals
Schedule X-Single
If taxable income is over: | But not over: | The tax is: |
---|---|---|
$ 0 | $ 9,875 | 10% of taxable income |
$ 9,875 | $ 40,125 | $987.50 plus 12% of the excess over $9,875 |
$ 40,125 | $ 85,525 | $4,617.50 plus 22% of the excess over $40,125 |
$ 85,525 | $163,300 | $14,605.50 plus 24% of the excess over $85,525 |
$163,300 | $207,350 | $33,271.50 plus 32% of the excess over $163,300 |
$207,350 | $518,400 | $47,367.50 plus 35% of the excess over $207,350 |
$518,400 | — | $156,235 plus 37% of the excess over $518,400 |
Schedule Y-1-Married Filing Jointly or Qualifying Widow(er)
If taxable income is over: | But not over: | The tax is: |
---|---|---|
$ 0 | $ 19,750 | 10% of taxable income |
$ 19,750 | $ 80,250 | $1,975 plus 12% of the excess over $19,750 |
$ 80,250 | $171,050 | $9,235 plus 22% of the excess over $80,250 |
$171,050 | $326,600 | $29,211 plus 24% of the excess over $171,050 |
$326,600 | $414,700 | $66,543 plus 32% of the excess over $326,600 |
$414,700 | $622,050 | $94,735 plus 35% of the excess over $414,700 |
$622,050 | — | $167,307.50 plus 37% of the excess over $622,050 |
Schedule Z-Head of Household
If taxable income is over: | But not over: | The tax is: |
---|---|---|
$ 0 | $ 14,100 | 10% of taxable income |
$ 14,100 | $ 53,700 | $1,410 plus 12% of the excess over $14,100 |
$ 53,700 | $ 85,500 | $6,162 plus 22% of the excess over $53,700 |
$ 85,500 | $163,300 | $13,158 plus 24% of the excess over $85,500 |
$163,300 | $207,350 | $31,830 plus 32% of the excess over $163,300 |
$207,350 | $518,400 | $45,926 plus 35% of the excess over $207,350 |
$518,400 | — | $154,793.50 plus 37% of the excess over $518,400 |
Schedule Y-2-Married Filing Separately
If taxable income is over: | But not over: | The tax is: |
---|---|---|
$ 0 | $ 9,875 | 10% of taxable income |
$ 9,875 | $ 40,125 | $987.50 plus 12% of the excess over $9,875 |
$ 40,125 | $ 85,525 | $4,617.50 plus 22% of the excess over $40,125 |
$ 85,525 | $163,300 | $14,605.50 plus 24% of the excess over $85,525 |
$163,300 | $207,350 | $33,271.50 plus 32% of the excess over $163,300 |
$207,350 | $311,025 | $47,367.50 plus 35% of the excess over $207,350 |
$311,025 | — | $83,653.75 plus 37% of the excess over $311,025 |