Question

Estimating taxable income, tax liability, and potential refund. Kara Hooks is 24 years old and single, lives in an apartment, and has no dependents. Last year she earned $55,000 as a sales assistant for Business Solutions: $3,910 of her wages was withheald for federal income taxes. In addition, she had interest income of $142. She takes the standard deduction. Calculate her taxable income, tax liability, and tax refund or owed. For your calculations, use a standard deduction of $6,100 and an exemption of $3,950.

Answer 1

Solution: Computation of taxable income:

Wages	$55,000
Interest income	142
AGI	$55,142
Less: Standard deduction	6,100
Exemption	3,950
Taxable income	$45,092

Tax liability = $4,453.50 + 22% of (45,092 - 38,700) = $5,859.74

Tax owed = Tax liability - Fed. income taxes withholdings

= $5,859.74 - 3,910 = $1,949.74