ACT 3070 Lecture Notes - Lecture 4: Adjusted Gross Income, Gross Income, Profit Sharing

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yellowcattle191

21 Jul 2017

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Document Summary

Tax liability the total amount of taxes owed. Federal tax collected on the value of a person"s property at the time of his/ her death. Inheritance tax state tax collected on the property left by a person to his or her heir(s) in a will. Tax on wages, salaries, and self employed earnings. Income tax return is a form, such as a 1040 or 1040 ez on which taxpayer reports how much money ghe or she received from work and other sources and the exact taxes that are owed. Exculsion also known as tax exempt, or income that"s not subject to taxes. Adjusted gross income gross income after calculating certain reductions or adjustments to income. Taxable income your adjusted gross income less any allowable tax deductions and exemptions. Your income tax is calculated based on the amount of your taxable income. Tax deductions an expense that you can subtract from your adjusted gross income to figure your taxable income.

Related Questions

A- Fill in blanks and choose the correct answer from theparentheses:
Steps to determine tax
-Eight basic steps are used in calculating federal incometaxes:
1- Determine your total income
2. Determine and report yourâ¦â¦â¦â¦â¦â¦â¦â¦â¦ income after subtractingexclusions (net, adjusted gross, taxable, gross)
3. Subtract adjustments to income.
4. Substract either theâ¦â¦â¦â¦â¦â¦â¦â¦â¦..the amount of tax status or youritemize deductions. (adjusted gross income, personal exemptions,IRSâs standard deduction, adjustments to income)
5. Subtract the value of personal â¦â¦â¦â¦â¦â¦â¦.(deductions, exemptions,tax credits, standard deduction)
6. Determine your preliminary tax liability.
7. Subtract theâ¦â¦â¦â¦â¦â¦â¦ for which you qualify. (personal exemptions,itemized deductions, tax credits, adjustments to income)
8. Calculate the balance due the IRS or the amount of yourreturn.

B- Select which term describes each of the following items or partsof the tax return.(please choose the correct answer from theparentheses)

Item Term
1- Carpool money received (Tax-exempt income, Personal exemption, tax credit, deduction)

2- Capital gains (part of total income, part of adjustments togross income included in tax credits, include in deductions

3- Contributions to qualified personal retirements account (IRAs)(Adjustments to gr gross income, included in tax credits, personalexemptions, Included in tax deductions)

4- An amount that changes if you are over 65 years of age (standarddeduction, itemized deductions, tax credits, adjustments to grossincome)

5- State and local taxes( Included in itemized deductions, includedin personal exemptions, included in tax credits, used to calculateadjusted gross income)
6- An amount based on the number of people a taxpayersupports(personal emptions, itemized deductions, standarddeductions, adjusted gross income)

violetwalrus240

Jeremy earned $140,000 in salary and $1,000 in interest income during the year. Jeremy has two qualifying dependent children who live with him. He qualifies to file as head of household and has $14,500 in itemized deductions. Neither of his dependents qualifies for the child tax credit. (use the tax rate schedules.). (Do not round intermediate calculations. Round "Income tax liability" to 2 decimal places.)

Tax Rate Schedule: https://ezto-cf-media.mheducation.com/Media/Connect_Production/bne/accounting/spilker_9e/taxrateschedulea.jpg

a:. Use the 2017 tax rate schedules to determine Jeremyâs taxes due.

	Description	Amount
(1)	Gross income
(2)	For AGI deductions	0
(3)	Adjusted gross income
(4)	Standard deduction
(5)	Itemized deductions
(6)	Greater of standard deductions or itemized deductions
(7)	Personal and dependency exemptions
(8)	Taxable income
	Income tax liability

b. Assume that in addition to the original facts, Jeremy has a long-term capital gain of $6,500. What is Jeremyâs tax liability including the tax on the capital gain?

	Description	Amount
(1)	Gross income	$147,500
(2)	For AGI deductions
(3)	Adjusted gross income	$147,500
(4)	Standard deduction
(5)	Itemized deductions
(6)
(7)	Personal and dependency exemptions
(8)	Taxable income	$147,500
	Income tax liability