Question

tax

. age 30, is single and has two children, ages 2 and 4, which he can claim as dependents (qualifying children). Financial records show the following items in 2020: Gift from a friend $12,000. Salary from employer $35,000 (Box 1 wages), Taxable interest, $10,000. Assume no adjustments to gross income. Lane had $1,000 withheld from his 2020 pay for federal income taxes. How much is Lane’s taxable income (1040 Line 15) for federal income tax for the 2020 tax year, assuming he files as a head of household?

Answer 1

Ans: Computation of taxable Income:

Particulars	Amount ($)	Amount ($)
Wages (Box 1)		$35000
Taxable Interest		$10000
Gifts Received from a friend (See note)		$0
Gross Income		$45000
Less: Deductions		$0
Total Taxable Income		$45000

Box 1 Wages is your taxable wage amount which is made up of your YTD Earnings minus all of your pre-tax deductions.

Box 2 shows how much federal income tax was withheld from your paychecks throughout the year and should match "Federal Withholding Tax" amount on your final paycheck.

Note- The recepient of the gifts is not required to include the gift received in his taxable Income as the giver has to file a gift tax return and pay tax also.