Question

Marc and Michelle are married and earned salaries this year of $64,000 and $12,000 respectively. In addition to their salaries, they received interest of $350 from municipal bonds and $500 from corporate bonds. Marc contributed $2,500 to an individual retirement account that he also paid alimony to a prior spouse in the amount of $1,500. Marc and Michelle have a 10-year old son, Matthew, who lived with them throughout the entire year. Thus, Marc and Michelle are allowed to claim a $2,000 child tax credit for Matthew. Marc and Michelle paid $6,000 of expenditures that qualify as itemized deductions and they had a total of $5,500 in federal income taxes withheld from their paychecks during the course of the year.

Fill our the attached 1040 and schedule 1 and answers these questions:

1) What is Marc and Michelle's gross income?

2) What is MArc and Michelle's adjusted gross income?

3) What is the total amount of Marc and Michelle's deductions from AGI?

4) What is Marc and Michelle's taxable income?

5) What is MArc and Michelle's taxes payable or refund de for the year (use the tax rate schedules)?

Answer 1

1. Calculation of Marc and Michelle's gross income
Marc Salary	$                 64,000.00
Michelle Salary	$                 12,000.00
Interest from corporate bonds	$                       500.00
Gross Income	$                 76,500.00

2. Calculation of Marc and Michelle’s adjusted gross income
Gross Income	$                                 76,500.00
less-Qualifying Moving Expenses	$                                 (2,500.00)
Less-Alimony Paid	$                                 (1,500.00)
Adjusted gross income	$                                 72,500.00

3.Calculation of total amount of Marc and Michelle's deductions from AGI
Standard Deduction	$                                                         24,000.00
Itemized deductions	$                                                           6,000.00
Greater of above will be considered will be for exemption i.e $24,000
There will be no personal exemption amounts for 2018.
As per the 2018 Standard deduction table for Married Filling Jointly

4. Calculation of Marc and Michelle’s taxable income
Adjusted gross income	$                                                         72,500.00
Standard Deduction	$                                                       (24,000.00)
Taxable Income	$                                                         48,500.00

5. Calculation of Marc and Michelle’s taxes payable or refund due for the year
Taxable Income	$                                                         48,500.00
Tax Laibility	$1905+(48,500-19050)*12% = $ 5,439
Credits	$                                                         (2,000.00)
Prepayments	$                                                         (5,500.00)
Tax Refund	$                                                           2,061.00