Question

In: Accounting

Mario, 35, is single and lives with his girlfriend, Huyen, also 35. Mario has a 6-year-old...

Mario, 35, is single and lives with his girlfriend, Huyen, also 35. Mario has a 6-year-old son, Manpreet, who lived with him for all of 2018. Mario provided more than 50% of the support for both Manpreet and Huyen in 2018.

In 2018, Mario earned a salary of $76,000. In addition to his salary, Mario also received alimony of $1,000 per month and child support payments of $500 per month from his ex-spouse. Mario contributed $2,500 to an individual retirement account in 2018. Mario paid $13,000 of expenditures that qualify as itemized deductions and childcare costs of $6,000 to allow Mario to work. Mario had a total of $6,500 in federal income taxes withheld from his paychecks during 2018.

Huyen worked on and off in 2018 and earned wages of $4,000. Huyen paid no expenses that qualify as deductions. Huyen had a total of $400 in federal income taxes withheld from her paychecks during 2018.

What is Mario’s federal gross income for 2018?

What is Mario’s federal adjusted gross income for 2018?

What is the total amount of Mario’s deductions from AGI for 2018?

What is Mario’s federal taxable income for 2018?

What is Mario’s federal taxes payable or refund due for 2018?

Mario is upset because he received a large federal income tax refund last year (tax year 2017). Mario thinks that the tax reform enacted at the end of 2017 resulted in higher taxes for him this year. Briefly explain to Mario why that is not necessarily the case just because he did not receive a large refund again this year.

Expert Solution

A. Mario's Federal Gross Income for 2018

Salary - $76000*12 = $912000

Amout received from Ex Spouse in 2018

Alimony - $1000*12 = $12000

Child Support Payments = $500*12 = $6000

Total Federal Gross Income during 2018 :- 912000+12000+6000 = $930000

B. Mario's Adjsuted Federal Gross Income for 2018

Adjusted gross Income (AGI) = Gross Income minus specified deductions

Gross Income = $930000

Specified Deductions = Contribution to Individual retirement account i.e. $2500T

Therefore AGI = $930000 - $2500 = $927500

C.Mario’s deductions from AGI for 2018

Expenditure of itemized deductions = $13000

Allowances for personal exemptions i.e. childcare costs = $6000

Total dedcutions = $13000+$6000 = $19000

D.Mario’s federal taxable income for 2018

Federal Taxable income is adjusted gross income minus allowances for personal exemptions and itemized deductions

AGI = $927500

Deductions from AGI = $19000

Therefore Federal Taxable Income = $927500 - $19000 = $908500

E. Mario’s federal taxes payable for 2018

According to 2018 federal income tax brackets

$150,689.50 plus 37% of the amount over $500,000 = 301834.50

F.Mario is upset because he did not receive large amount of tax refund this year due to high Income tax rate.

ekkarill92 answered 2 years ago

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