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In: Finance

Charlotte Taylor is 24 years old and single, lives in an apartment, and has no dependents....

Charlotte Taylor is 24 years old and single, lives in an apartment, and has no dependents. Last year (2018) she earned $54,500 as a sales assistant for Office Furniture Rentals; $6,990 of her wages was withheld for federal income taxes. In addition, she had interest income of $101.

The standard deduction in 2018 was $12,000 for single. Note that personal exemptions were suspended for 2018. Refer to Exhibit 3.3 for the appropriate tax rate schedule.

a. Estimate her taxable income.
$  

b. Estimate her tax liability. Round the answer to the nearest cent. Use unrounded values in later calculations. (Hint: Use the tax rate schedules given in Exhibit 3.3 to determine her tax liability.)
$  

c. Estimate her tax refund or tax owed. Enter tax owed, if any, as negative amount. Round the answer to the nearest cent.
$  

Exhibit 3.3:

Single
Taxable Income Tax Rate
$0 - $9,525 10% of taxable income
$9,526-$38,700 $952.50 plus 12% of the amount over $38,700
$38,701 - $82,500 $4,453.50 plus 22% of the amount over $82,500

Solutions

Expert Solution

2018

Earned income = $54,500

withheld for federal income taxes = $6,990

interest income = $101

standard deduction in 2018 = $12,000

personal exemptions were suspended for 2018

a) Taxable Income

Earned income = $54,500

interest income = $101

Total income = $54,601

standard deduction = ($12,000)

Taxable Income = $42,601

b) Tax liability

$0 - $9,525 = 10% ( $9,525 *10% = 952.50)

$9,526 - $38,700 = 12% (29,175*12% = 3501)

$38,701 - $42,601 = 22% ($3,901*22% = 858.22)

Tax liability = 952.50 + 3501 + 858.22

Tax liability = $5,311.72

c) Tax refund or tax owed

Tax refund = $6,990 - $5,311.72

Tax refund = $1,678.28

jeff jeffy answered 2 years ago
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