Question

Kevin is single. In 2017, he earned $65,000 in salary this year from his employer and received $10,000 in alimony from his ex-wife. His employer withheld $9,000 in tax from his salary this year. In addition to the above, the following occurred this year:

- He decided he did not like his nose. So he paid $2,000 in cosmetic surgery to make it larger and more defined.

- He paid $2,500 in union dues and for subscriptions to publications related to his work that were not reimbursed by his employer.

- He paid $15,000 in rent his apartment for the year.

A) Determine the AGI this year for the taxpayer(s).

B) Determine the amount of itemized deductions the taxpayer(s) has (have) available this year.

C) Using the 2017 standard deduction amounts (assuming no additional amounts for age or blindness) from Appendix D in of your book, state whether the taxpayer(s) itemize or take the standard deduction. I am not asking for you to statethe amount of either the standard deduction or the itemized deductions chosen.

D) Use the individual tax formula and a flat 20% tax rate on all types of taxable income to determine the amount of taxes due or refund amount. Remember to clearly marking the answer as either the amount of tax due or a refund due (e.g. refunds are negative amounts as represented with parentheses or a negative sign, alternatively you can just write “refund” next to it). Assume AMT does not apply, and there are no tax credits available.

Answer 1

Worksheet:

Details	Amount
Salary income	$65,000
Alimony received	10,000
Total income	$75,000
Less: Deductions for AGI	0
AGI	$75,000
Less: Standard deduction	(6,350)
Less: exemption	(4,050)
Taxable income	$64,600
Tax liability (tax on taxable income) at 20%	$12,920
Less: Federal tax withheld	(9,000)
Tax due/ (refund)	$3,920

a. AGI = $75,000

b. Itemized deductions the taxpayer(s) has (have) available this year = $1,000

He paid $2,000 in cosmetic surgery	Not eligible for deduction
He paid $2,500 in union dues and for subscriptions to publications related to his work that were not reimbursed by his employer	He can claim the deduction, but only over 2% of AGI. That means = 75,000*2% = 1,500 Over 2% of AGI = Amount paid - 2% of AGI = 2,500 -1,500 =1,000
He paid $15,000 in rent his apartment for the year	Not eligible for deduction

C. taxpayer take's the standard deduction because he will be benefited by reducing his taxable income.

d. Tax due as calculated above = $3,920