Question

Jeremy earned $100,000 in salary and $6,000 in interest income during the year. Jeremy's employer withheld $11,000 of federal income taxes from Jeremy's paychecks during the year. Jeremy has one qualifying dependent child who lives with him. Jeremy qualifies to file as head of household and has $23,000 in itemized deductions. (Use the tax rate schedules.) a. Determine Jeremy's tax refund or taxes due. Answer is complete and correct. Description Amount Gross income (1) (2) (3) (4) (5) For AGI deductions Adjusted gross income Standard deduction Itemized deductions Greater of standard deduction or itemized deductions $ 106,000 0 $ 106,000 18,650 23,000 23,000 s 83,000 $ 12,608 (6) (7) Taxable income (8) Income tax liability 30 2,000 (9) (10) Child tax credit Tax withholding Tax (refund) 11,000 (392) >$

Please show work.

Answer 1

c)

	Description	Amount($)
1)	Gross Income	$106,000
2)	For AGI deductions	0
3)	Adjusted Gross Income	$106,000
4)	Standard deduction	$18,650
5)	Itemized deductions	$7,000
6)	Greater of standard deduction or itemized deductions	($18,650)
7)	Taxable Income	$87,350
8)	Income Tax Liability (workings i)	$13,602
9)	Child Tax Credit	($2,000)
10)	Tax withholding	($11,000)
	Tax Due	$602

Workings:

i) Income Tax Liability on Taxable income of $87,350

Jeremy is head of household ,so for 2020 his tax rates will be as follows :

Taxable Income Tax Rate

$0 - $14,100 10%

$14,101 - $53,700 12%

$53,701 - $85,500 22%

$85,501 - $163,300 24%

$163,301 - $207,350 32%

$207,351 - $518,400 35%

$518,401 and over 37%

Following the tax rates , Jeremy income tax liability will be:

($14,100 * 10%) + [($53,700 - $14,100) * 12%] + [($85,500 - $53,700) * 22%] + [($87,350 - $85,500) * 24%]

= $1,410 + $4,752 + $6,996 + $444

= $13,602

ii) For head of households the standard deduction in 2020 is $18,650.

iii) The expenses which can be used by the taxpayer to reduce his taxable income on tax return are known as the Itemized deductions.Medical expenses,state and local taxes , charitable donations, interest on home mortgage,theft losses are the major expenses included in itemized deductions.