Question

Required information Problem 4-29 (LO 4-1) (Algo) [The following information applies to the questions displayed below.) Jeremy earned $101,500 in salary and $7,500 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 $29,700 in itemized deductions. (Use the tax rate schedules.) Problem 4-29 Part-a (Algo) a. Determine Jeremy's tax refund or taxes due. Amount $ 0 Description (1) Gross income (2) For AGI deductions (3) Adjusted gross income (4) Standard deduction (5) Itemized deductions (6) Greater of standard deduction or itemized deductions (7) Taxable income (8) Income tax liability (9) Child tax credit (10) Tax withholding Tax (refund) $ 0

Answer 1

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Solution: a) 1 2 3 4 As per Tax year 2020 limit, answer will be different for different year: Answer are highlighted in yellow: Description Amount Gross Income (101500+7500) 1090001 For AGI Deduction 0 Adjusted Gross Income 109000 Standard Deduction (per 2020 rule) $ 18,650 Itemized Deduction $ 29,700 Greater of Standard or itemized deduction $ 29,700 Taxable income (109000-29700) $ 79,300 Income tax liablity (6162)+(79300-53700)*22% $ 11,794 Childs (Child tax credit, per 2020 rule) $ 2,000 Tax Withholding $ 11,000 Tax Refund (Amount sign can be negative) $ -1,206 5 Less: 6 7 8 Less: 9 Less: 10 As per 2020, Child tax credit rule, Maximum credit per child is $2000. Will be phaseout by $50 per $1000 or proportion Increase in Modified income of $200000, in case of single and Head of household. Therefore, $ 2,000

b) 1 2 3 4 5 Description Year 2020 Gross Income (101500+7500) +11050 120050 For AGI Deduction ol Adjusted Gross Income 120050 Standard Deduction (per 2020 rule) $ 18,650 Itemized Deduction $ 29,700 Greater of Standard or itemized deduction $ 29,700 Taxable income (120050-29700) $ 90,350 Income tax liablity [(6162)+(79300-53700)*22%] + (11050*15%) $ 13,452 Child tax credit (per 2020 rule) $ 2,000 Tax Withholding $ 11,000 Tax Due (Amount sign can be negative) $ 452 Less: 6 7 8 Less: 9 10 Less: c) Amount 1 109000 2 0 3 109000 4 5 Description Gross Income (101500+7500) For AGI Deduction Adjusted Gross Income Standard Deduction (per 2020 rule) Itemized Deduction Greater of Standard or itemized deduction Taxable Income (109000-18650) Income tax liablity (13158)+(90350-85500)*24% Child tax credit (per 2020 rule) Tax Withholding Tax Due (Amount sign can be negative) 6 7 $ 18,650 $ 7,000 $ 18,650 $ 90,350 $ 14,322 $ 2,000 $ 11,000 $ 1,322 8 9 10