Question

8. Jane files as a single individual in 2018. She has wage income of $150,000; long-term capital gains of $20,000; short-term capital losses of $2,000; ordinary cash dividends of $3,000; qualifying cash dividends of $6,000; stock dividends worth $5,000; deductions for AGI(Adjusted Gross Income) of $10,000; itemized deductions of $10,000; credits of $500; and estimated tax payments and withholding of $30,000. Jane's applicable standard deduction is $12,000. Using the appropriate tax schedule, compute hertax due or refund. [Note-for credit, you must show and label all calculations, including the AGI, Taxable income, and Tax Liability amounts.] TAXABLE INCOME CALCULATION HERE: TAX LIABILITY & NET TAX DUE (REFUND) CALCULATION HERE:

Answer 1

Jane is single individual who file Form 1040 for calculation of her federal tax liabilty.

statement showing taxable income and federal tax liability for year 2018

Tax slab bracket is assumed to be taken of 2018 individual single tax slab

Income from wages	$150000	wages as given
less short Term Loss	- $ 2000	short term gain/loss will be calculated as per the slab rate in which income falls as per federral tax laws
ordinary cash dividend	$ 3000	taxable as more than $ 1500
stock dividend	$ 5000	taxable
Income Before exemption and deduction	$ 156000	add (wages-short tem loss +ordinary dividend+stock dividend)
Less deduction for AGI	-$ 10000
Less standard deduction	- $12000	standard deduction is greater than itemized deduction so as per new tax laws only one deduction is allowed either standard or itemized ( in this case standard is greater than itemized which is $ 10000)
Taxable Income Before Long term Gain and qualified dividend	$134000
Tax on taxable income Before Lt Gain And qualified dividend :
Tax liability on base bracket	14089.5	10% upto 9525=952.5 12% of (38700-9525)=3501 22% of (82500-38700)=9636 total = 952.5+3477+9636
Tax Liability on excess over base	$12360	$134000-$82500= 51500 51500*24%= 12360
Tax on taxable income Before Lt Gain And qualified dividend :	$ 26449.5	12360+14089.5
Taxes on Lt gain And dividends :
Lt gain	$ 20000	Long term gain as per federal tax lawas will be calculated @ 15% flat rate
Qualified dividend	$ 6000	qualified dividend as per federal tax lawas will be calculated @ 15% flat rate
	26000
Tax on taxable income Lt Gain And qualified dividend @ 15%	3900	26000*15%
Total federal tax liability	30349.5	Tax on taxable income Lt Gain And qualified dividend +Tax on taxable income before Lt Gain And qualified dividend =3900+26449.5
Less withholding TAx	$30000
Tax Liability	349.5	(30349.5-30000)
Less credit	-500	it is assumed these are refundable credits so from $500 , $349.5 is adjusted and remaining $150.5 amount is refund created
Refund	$ 150.5	$ 150.5 is refund (500-349.5)