Question

. Kevin is single. In 2020, he earned $65,000 in salary this year from his employer and received $10,000 in alimony from his ex-wife. They divorced on July 1, 2017. His employer withheld $9,000 in tax from his salary this year. In addition to the above, the following occurred this year:

• He decided he did not like his nose. So he paid $2,000 in cosmetic surgery to make it larger and more defined.
• He paid $2,500 in union dues and for subscriptions to publications related to his work that were not reimbursed by his employer.
• He paid $15,000 in rent his apartment for the year.

1. Determine Kevin’s AGI for 2020. (6 points)

2. Ignore your answer in a). Assume that Kevin’s AGI for the year is $78,650. Determine the amount of itemized deduction Kevin has available this year. (7 points)

3. Ignore your answer in b). Assume that the amount of itemized deduction available is $2,780. Using the 2020 standard deduction amounts (assuming no additional amounts for age or blindness) from Appendix D in your book, first determine whether Kevin will itemize or take the standard deduction. If you determine he itemizes, write in the itemized deduction dollar amount given ($2,780). Alternatively, if you determine he will take the standard deduction, write in the standard deduction amount for which he qualifies (tied to the appropriate filing status). (6 points)

4. Ignore your answer in a) - c). Assume that Kevin’s taxable income is $42,720 and his employer withheld $9,000 in tax from his wages. Using the tax rate schedule from Appendix D in your book, determine the amount of taxes due or the amount of refund. Remember to clearly mark the answer as either the amount of tax due or a refund due (e.g. refunds are negative amounts as represented with parentheses or a negative sign). Assume AMT does not apply, and there are no tax credits available. (6 points)

Answer 1

OATE Solutions (a) Calculation of Kevin's AGI for 2020 Income from Salary 65.000 Allemany Creuenne secolat) 10,000 Gooss become (less) Deductions: Tax with held by employer (9000) deduction of do 99 (7500) CAdfusted grous income) AGI 58,500 75.000 NOTE: . for tax taxpayers 2018 through 2025, union dues- employce expenses are no no largou deductfale. In medical and dental expenses, you cannot Prelude medecal expenses fose cosmetic plastic fungery procedures especifically procedures undergese worth the potention to merely enhance your appearance. (Therefore , deductible) Calculation of deduction under section dogga = (stone want pared for afatment) Leart of the following will be deducted 60,000 por year (Rent paid - 10% of total frueme) (15,000 7500) $7500 dsy of fenome of employee = $18.750 Therefore, deductible amount = {2,500

(6) Calculation el Premized deductan? . Itemized deductions are various tax-deductible expensex hurred throughout the year. such as a Medical Expenses Papperty, hate and local to come taxes Chautable contopbuttons Investment interest Porterent expense Miscellaneous deductions . . e $ Amount of Kevin's itemized deduction Max wolthheld by employeu Corredet) Deduction under section 2094 Total 9.000 7500 16,500 Assume, itemized deduction = $2780 In 2020, standard tax deduction $12,400 single

PAGE NO DATE basically expenses temized deductions are allowed from income that can decrease your taxable income. while, In standard decluction, even 3 you have no Shell qualluing dederaternal ter credit. you can take standard deduction. Therefore, Kevin will take standard deduction her because it higher in amount and will reduction en taxable Porcome. give more Assume, Kevin's taxable income $ 42,720 tolthheld by employer astax = $9,000 an a taxable income of $42,720 total tee-Labbisty = $ 6.736 : fox withheld by employer= $9,000 "Therefore Yax 9.000 - 6,736 $2264