In: Finance
1. Cassandra is 19 years old. Her parents claim her as a dependent on their tax form, and her earned income this year was $13,000. Does she need to file a tax return?
A) Yes, because her income exceeded the limit for not having to file.
B) No, because her income was under $13,200.
C) Yes, because she is over age 18.
D) No, because her parents claim her as a dependent.
2. Your employer offers dental insurance for $590 per year
pretax through your employee benefit plan. However, your employer
does not contribute toward the cost, and your marginal tax rate
will be 22 %. Buying the dental insurance through payroll
deduction
A) does not offer any financial advantage to you.
B) will cost you 22% of $590, so the net cost is $720.
C) will save you $130 in taxes, so the net cost is $460.
D) will cost you 22 % of $590, so you will save $460.
Answer :
Problem 1. Cassandra is 19 years old. Her parents claim her as a dependent on their tax form, and her earned income this year was $13,000. Does she need to file a tax return?
A) Yes, because her income exceeded the limit for not having to file.
B) No, because her income was under $13,200.
C) Yes, because she is over age 18.
D) No, because her parents claim her as a dependent.
Solution : A) Yes, because her income exceeded the limit for not having to file.
Explanation to the answer :
To qualify as your dependent, your child must:
When Your Child Must File
Four tests determine whether a dependent child must file a federal income tax return. A child who meets any one of these tests in 2019, must file:
Additional rules apply for children who are blind, who owe Social Security and Medicare taxes on tips or wages not reported to or withheld by the employer, or those who receive wages from churches exempt from employer Social Security and Medicare taxes.
Problem
2. Your employer offers dental insurance for $590
per year pretax through your employee benefit plan. However, your
employer does not contribute toward the cost, and your marginal tax
rate will be 22 %. Buying the dental insurance through payroll
deduction
A) does not offer any financial advantage to you.
B) will cost you 22% of $590, so the net cost is $720.
C) will save you $130 in taxes, so the net cost is $460.
D) will cost you 22 % of $590, so you will save $460.
Solution : C) will save you $130 in taxes, so the net cost is $460.
Explanation to the answer :
For most taxpayers the cost of medical and dental insurance premiums paid during the tax year are deductible on form 1040 Schedule A as a medical and dental expense. Only the total of all qualifying medical and dental expenses, including insurance premiums, that when combined exceed 10% of the taxpayer’s adjusted gross income (AGI) in 2020 (7.5% in 2019), will actually be included in the total of all itemized deductions.