Question

Problem 3-37 (Algorithmic) (LO. 3,7) Taylor, age 15, is claimed as a dependent by her parents. For 2020, she has the following income: $5,200 wages from a summer job, $1,820 interest from a money market account, and $2,100 interest from City of Chicago bonds. If required, round your answers to the nearest dollar. If required, round your answers to the nearest dollar. If an amount is zero, enter "o". Click here to access the 2020 tax rate schedule. a. Taylor's standard deduction for 2020 is $ Taylor's taxable income for 2020 is $ b. Compute Taylor's "net unearned income" for the purpose of the kiddie tax. $ Compute Taylor's tax liability. [Her parents file a joint return and have taxable income of $135,000 (no dividends or capital gains).]

Answer 1

A) Standard deduction for Year 2020 is greater of $ 1050 Or Earned income + $ 350.

Earned income + 350 = 5200 (Wages) + 350 = $ 5550

Thus, 1050 Or 5550 Whichever is greater.

Accordingly, Standard deduction for Year 2020 for Taylor = $ 550

Taxable income = (5200 + 1820 + 2100) - 5550

= 9120 - 5550

= $ 3570

Conclusion:- taxable income for Year 2016 = $ 3570

B). Net unearned income for the purpose of kiddie tax is $1820.

c.) The net unearned income is not more than $2100 so his parents cannot include his income, and we cannot use form 8615 to find childs tax.