Question

Lacy is a single taxpayer. In 2019, her taxable income is $40,000. What is her tax liability in each of the following alternative situations? Use Tax Rate Schedule, Dividends and Capital Gains Tax Rates for reference. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

a. All of her income is salary from her employer.

Tax liability = ?

b. Her $40,000 of taxable income includes $1,000 of qualified dividends.

Tax liability = ?

c. Her $40,000 of taxable income includes $5,000 of qualified dividends.

Tax liability = ?

2019 Tax Rate Schedules Individuals Schedule X-Single If taxable income is over: But not over: The tax is: $ 0 $ 9,700 10% of taxable income $ 9,700 $ 39,475 $970 plus 12% of the excess over $9,700 $ 39,475 $ 84,200 $4,543 plus 22% of the excess over $39,475 $ 84,200 $160,725 $14,382.50 plus 24% of the excess over $84,200 $160,725 $204,100 $32,748.50 plus 32% of the excess over $160,725 $204,100 $510,300 $46,628.50 plus 35% of the excess over $204,100 $510,300 $153,798.50 plus 37% of the excess over $510,300 Schedule Y-1-Married Filing Jointly or Qualifying Widow(er) If taxable income is over: But not over: The tax is: $ 0 $ 19,400 10% of taxable income $ 19,400 $ 78,950 $1,940 plus 12% of the excess over $19,400 $ 78,950 $168,400 $9,086 plus 22% of the excess over $78,950 $168,400 $321,450 $28,765 plus 24% of the excess over $168,400 $321,450 $408.200 $65,497 plus 32% of the excess over $321,450 $408,200 $612,350 $93,257 plus 35% of the excess over $408,200 $612,350 $164,709.50 plus 37% of the excess over $612,350 Schedule Z-Head of Household If taxable income is over: But not over: The tax is: $ 0 $ 13,850 10% of taxable income $ 13,850 $ 52,850 $1,385 plus 12% of the excess over $13,850 $ 52,850 $ 84,200 $6,065 plus 22% of the excess over $52,850 $ 84,200 $160,700 $12,962 plus 24% of the excess over $84,200 $160,700 $204,100 $31,322 plus 32% of the excess over $160,700

Answer 1

Name of Assessee LACY Status of Filing Single (Given) Computation of Tax Liability A. Total Income Received from Employer $ 40,000.00 Tax rates From Shedule X-Single Lacy falls under the Bracket of $ 39,475 - $ 84,200 Hence The Tax rates are = $ 4,543 + 22% of the excess over$39,475 $ 4,543 + 22% ($40,000 - $39,475) $ 4,543 + $ 115.50 Tax Payable $ 4,658.50

$ B. Normal income Qualified Dividends 39,000.00 1,000.00 40,000.00 $ Tax on $39,000 --------------- From Shedule X-Single Lacy falls under the Bracket of $ 9,700 - $ 39,475 Hence The Tax Payable = $ 970 + 12% of the excess over $9,700 $970 + 12% ($39,000 - $9,700) $ 970 + 12% ($29,300) $ 970 + $ 3,516 Tax Payable $ 4,486.00 -------------A Tax on Qualified Dividend of $ 1,000 From Schedule Tax rates for net capital gains and Qualified Dividends Lacy falls under the Bracket of $ 39,375 - $434,550 being Single tax payer Hence The Tax rates are = 15% (Total Income Derived by the individual should be considered for deciding the tax Bracket) Hence The Tax Payable = $ 1,000 X 15% Tax Payable $ 150.00 ------------B Total Tax Payable A+B $ 4,636.00

C. Normal income Qualified Dividends $ $ $ 35,000.00 5,000.00 40,000.00 Tax on $35,000 --------------- From Shedule X-Single Lacy falls under the Bracket of $ 9,700 - $ 39,475 Hence The Tax Payable = $ 970 + 12% of the excess over $9,700 $ 970 + 12% ($35,000 - $9,700) $ 970 + 12% ($25,300) $ 970 + $ 3,036 Tax Payable $ 4,006.00 ------------A Tax on Qualified Dividend of $5,000 From Schedule Tax rates for net capital gains and Qualified Dividends Qualified Dividend $ 5,000.00 Bracket-1 $0-$ 39,375 0% (Since capital Gain Tax upto tatal income of $39,375 is 0%) Bracket -2 $ 39,375 - $434,550 15% (only Capital Gains which are in excess of over total income of $39,375 are taxable at 15%) Hence The Tax Payable = {($39,375 - $35,000) x 0%} + { [$5,000 -($39,375 - $35,000)] X 15% } $ 0+ ($5,000-$4,375] X 15% $ 0+ ($625] X 15%} $ 93.75 -------------B Tax Payable Total Tax Payable A+B $ 4,099.75