ACCO 340 Lecture 20: 2015 TAX TABLE
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âLauren, a singleâ taxpayer, had the following income and deductions for the tax year 2017â:
Requirement a. Compute Lauren's taxable income and federal tax liability for 2017.(Calculate the tax using the tax rate schedule. Do not round interim tax calculations. Round the amount entered into the cell to the nearest wholeâdollar.)
Requirement b. Compute Lauren's marginal, average, and effective tax rates. â(Round your answers to two decimalâ places, X.XX%.)
Requirement c. For tax planningâ purposes, which of the three rates in Part b is the mostâ important?
INCOME: | Salary | $90,000 |
Business Income | 24,000 | |
Interest income from bonds | 6,000 | |
Tax-exempt bond interest | 4,400 | |
TOTAL INCOME | $124,400 | |
DEDUCTIONS: | Business expenses | $11,500 |
Itemized deductions | 10,000 | |
Personal exemption | 4,050 | |
TOTAL DEDUCTIONS | $25,550 |
PERSONAL AND DEPENDENCY EXEMPTION AND PHASE-OUTS | ||
Personal and dependency exemption | $4,050 | |
Phase-outs for high income taxpayers: | ||
Personal and dependency exemptions are reduced by 2% for each $2,500 increment (or part of increment) | ||
for AGI above the threshold amount. | ||
Itemized deductions are reduced by 3% for each dollar of AGI above the threshold amounts (taxpayers cannot | ||
lose more than 80% of their allowable itemized deductions). | ||
For both provisions, the AGI threshold amounts are: | ||
Married individuals filing joint returns and surviving spouses | $313,800 | |
Heads of households | 287,650 | |
Unmarried individuals (other than surviving spouses and heads of households) | 261,500 | |
Married individuals filing separate returns | 156,900 |
STANDARD DEDUCTION | |||
Filing Status | |||
Married individuals filing joint returns and surviving spouses | $12,700 | ||
Heads of households | 9,350 | ||
Unmarried individuals (other than surviving spouses and heads of households) | 6,350 | ||
Married individuals filing separate returns | 6,350 | ||
Additional standard deduction for the aged and the blind | |||
Individual who is married and surviving spouses | 1,250 | * | |
Individual who is unmarried and not a surviving spouse | 1,550 | * | |
Taxpayer claimed as dependent on another taxpayerâs return: Greater of (1) earned income plus $350 or (2) $1,050. | |||
* These amounts are $2,500 and $3,100, respectively, for a taxpayer who is both aged and blind. |
Single
If taxable income is: The tax is:
Not over $9,325. . . . . . . . . . . . . . . . . . . .10% of taxable income.
Over $9,325 but not over $37,950. . . . . . . . .$932.50 + 15% of the excess over $9,325.
Over $37,950 but not over $91,900. . . . . . .$5,226.25 + 25% of the excess over $37,950.
Over $91,900 but not over $191,650. . . . . .$18,713.75 + 28% of the excess over $91,900.
Over $191,650 but not over $416,700. . . . .$46,643.75 + 33% of the excess over $191,650.
Over $416,700 but not over $418,400. . . . .$120,910.25 + 35% of the excess over $416,700.
Over $418,400. . . . . . . . . . . . . . . . . . . . .$121,505.25 + 39.6% of the excess over $418,400.
Tax Return Problem Beth R. Jordan lives at 2322 Skyview Road, Mesa, AZ 85201. She is a tax accountant with Mesa Manufacturing Company, 1203 Western Avenue, Mesa, AZ 85201 (employer identification number 11-1111111). She also writes computer software programs for tax practitioners and has a part-time tax practice. Beth is single and has no dependents. Beth was born on July 4, 1972, and her Social Security number is 123-45-6789. She wants to contribute $3 to the Presidential Election Campaign Fund.
The following information is shown on Beth's 2015 Wage and Tax Statement (Form Wâ2).
Line | Description | Amount |
---|---|---|
1 | Wages, tips, other compensation | $65,000.00 |
2 | Federal income tax withheld | 10,500.00 |
3 | Social Security wages | 65,000.00 |
4 | Social Security tax withheld | 4,030.00 |
5 | Medicare wages and tips | 65,000.00 |
6 | Medicare tax withheld | 942.50 |
15 | State | Arizona |
16 | State wages, tips, etc. | 65,000.00 |
17 | State income tax withheld | 1,650.00 |
Other 2015 transactions include the following.
Beth received interest of $1,300 from Arizona Federal Savings and Loan and $400 from Arizona State Bank. Each financial institution reported the interest income on a Form 1099âINT. She received qualified dividends of $800 from Blue Corporation, $750 from Green Corporation, and $650 from Orange Corporation. Each corporation reported Beth's dividend payments on a Form 1099âDIV.
Beth received a $1,100 income tax refund from the state of Arizona on April 29, 2015. On her 2014 Federal income tax return, she reported total itemized deductions of $8,200, which included $2,200 of state income tax withheld by her employer.
Fees earned from her part-time tax practice totaled $3,800. She paid $600 to have the tax returns processed by a computerized tax return service.
On February 8, Beth bought 500 shares of Gray Corporation common stock for $17.60 a share. On September 12, Beth sold the stock for $14 a share.
Beth bought a used sport utility vehicle for $6,000 on June 5. She purchased the vehicle from her brother-in-law, who was unemployed and was in need of cash. On November 2, she sold the vehicle to a friend for $6,500.
On January 2, Beth acquired 100 shares of Blue Corporation common stock for $30 a share. She sold the stock on December 19 for $55 a share.
Beth records revenues of $16,000 from the sale of a software program she developed. Beth incurred the following expenditures in connection with her software development business.
Cost of personal computer (100% business use) | $7,000 |
Cost of printer (100% business use) | 2,000 |
Furniture | 3,000 |
Supplies | 650 |
Fee paid to computer consultant | 3,500 |
Beth elected to deduct the maximum portion of the cost of the computer, printer, and furniture allowed under the provisions of § 179. These items were placed in service on January 15 and used 100 percent in her business.
Although her employer suggested that Beth attend a convention on current developments in corporate taxation, Beth was not reimbursed for the travel expenses of $1,420 she incurred in attending the conference. The $1,420 included $200 for meals.
Beth paid $300 for prescription medicines and $2,875 in physician and hospital bills. Medical insurance premiums were paid by her employer. Beth paid real property taxes of $1,766 on her home. Interest on her home mortgage was $3,845, and interest paid to credit card companies totaled $320.
Beth electronically contributed $30 each week to her church and $10 each week to the United Way. Professional dues and subscriptions totaled $350.
Beth paid $1,000 in estimated Federal income taxes throughout the year. She was covered for the entire year by Mesa Manufacturing's health insurance policy.
Part 1âTax Computation
Compute the 2015 net tax payable or refund due for Beth R. Jordan. If you use tax forms for your solution, you will need Forms Schedules A, B, C, D, and SE. Suggested software: H&R BLOCK Tax Software.