Question

THX!!

Kendra Thayer: Waitress or Tax Expert? Kendra Thayer, who is single, goes to graduate school part-time and works as a waitress at the Backwater Grill in New York. During the past year (2014), her gross income was $18,600 in wages and tips. She has decided to prepare her own tax return because she cannot afford the services of a tax expert. After preparing her retum, she comes to you for advice. Here's a summary of the figures she has prepared thus far: Gross income: Wages Tips Adjusted gross income (AGI) Less: itemized deductions $10,500 +8,100 $18,600 -2,000 $16,600 -6,200 Less: Standard deduction Taxable income $10,400 Kendra believes that if an individual's income falls below $20,350, the federal government considers him or her "poor" and allows both itemized deductions and a standard deduction. 1. Calculate Kendra Thayer's taxable income, being sure to consider her exemption. Assume that the standard deduction for a single taxpayer is $6,200 and that each exemption claimed is worth $3,950. 2. Discuss Kendra's errors in interpreting the tax laws, and explain the difference between itemized deductions and the standard deduction. 3. Kendra has been dating Joe Keating for nearly four years, and they are seriously thinking about getting married. Joe has income and itemized deductions that are identical to Kendra's. How much tax would they pay as a married couple (using the filing status of married filing jointly and a standard deduction of $12,400) versus the total amount the two would pay as single persons (each using the filing status of single)? Round the answer to 1 decimal place. (Use Exhibit 3.3.) 4. Strictly from a tax perspective, does it make any difference whether Kendra and Joe stay single or get married? Explain. No

Answer 1

	Kendra Thayer, Who is single, goes to graduate School
	part time worker
	During the past Year 2014, Gross Income $ 18600
	As per tax detaiils
	Gross Income	Amnt ($)
	Wages	10,500
	Tips	8,100
	adjusted gross	18,600
	Income ( AGI)
	Less - Itemized Deduction	-2,000
		16,600
	Less - Standard Deduction	-6,200
	Taxable Income	10,400
	Kendra believes that , If an individual income less than $ 20350
	then she will come uder POOR and both deduction can be allowed
	As per Question 1
	Assume Standard deduction $ 6200
Answer 1	Each exemption claimed $ 3950
	Gross Income	Amnt ($)
	Wages	10,500
	Tips	8,100
	adjusted gross	18,600
	Income ( AGI)
	Less - Itemized Deduction	-6,200
		12,400
	Less - Standard Deduction	-3,950
	Taxable Income	8,450
Answer 2	Discuss and explain difference between Itemized and Standard deduction
	Standard deduction is fixed dollar amount deduction
	Individual either to chose any one deduction - Individual can not
	claim both deduction in same time . Like They can not claim same Expenses
	Under both deduction system
	In General - itemized deduction represents State and local
	Income Tax, reimbursed of medical expenses

Answer 3- Nothing will change in Tax structure , It will be same like 10% . No change in Personal exemption per person - will be same like $ 3950 . Also No change in Standard deduction , same like $ 6200

No change in Tax per person , It would be 10% on Taxable income =10% *$8450= $ 845

No tax rate difference in case of Single or Married file separately or married file Jointly