Question

draw a cash flow diagram

1) An unmarried engineer earns a gross income of $120,000 for various projects executed during the year. The engineer claims one $3,000 exemption and estimated itemized deduction of $15,000. If single people are automatically allowed $4,000 of deductions (standard). Use the 201x tax tables to compute the Engineer's federal income tax liability under the following mutually exclusive conditions: i) If the engineer chooses to claims the standard deduction. ii) If the engineer chooses to itemize deductions. Tax Tables (201x) (Approx.) Up to $22,750 of taxable income Tax rate = 15% > $22,750 and less than or equal to $50,000 Tax rate = 28% > $50,000 and less than or equal to $115,000 Tax rate - 318 >$115,000 and less than or equal to $200,000 Tax rate - 398

Answer 1

Here's the calculation of federal tax liablitiy

Description	Option (i)	Option (ii)
Gross Income	120,000.00	120,000.00
Less: Exemption	3,000.00	3,000.00
	117,000.00	117,000.00
Less: Standard Deduction	4,000.00	-
	113,000.00	117,000.00
Less: Itemized Deduction	-	15,000.00
Taxable income	113,000.00	102,000.00

Tax Liability as per Tax Table provided in the question
Tax Slab	Option (i)	Option (ii)	Explanation
22,750.00	3,412.50	3,412.50	15% up to 22750
27,250.00	7,630.00	7,630.00	28% > 22750 < 50000
63,000.00	19,530.00		31% >50000<115000
52,000.00		16,120.00	31% >50000<115000
	30,572.50	27,162.50