Question

Jeremy earned $100,800 in salary and $6,800 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 $26,200 in itemized deductions. (Use the tax rate schedules.) CARES Problem 4-29 Part-c (Algo) c. Assume the original facts except that Jeremy has only $7,000 in itemized deductions. What is Jeremy's tax refund or tax due? Description Amount $ 0 (1) Gross income (2) For AGI deductions (3) Adjusted gross income (4) Standard deduction (5) Itemized deductions (6) (7) Taxable income (8) Income tax liability (9) Credits $ 0 (10) Tax withholding
Please bold answer in explanation

Answer 1

(a) Jeremy's Taxable Income for 2020:-

Description	Amount in $
Salary Income	100,800
Interest Income	6,800
GROSS INCOME	107600
For AGI Deductions	0
(a) Standard Deductions (For Head of Household) 18650
(b) Itemized deductions (given) 26200
Higher of (a) or (b)	26200
TAXABLE INCOME	81400
Income Tax Liability:- From 0 to 19750 @10% 1975.00 From 19750 to 80250 @ 12@ 7260.00 From 80250 to 81400 @22%     253.00	9488
Credits :- (a) Child Tax Credit 2000 (b) Tax Witholding 11000	13000
Tax Refund (13000- 9488)	3512

(c) Cares Problem 4-29 Part (c) (Algo):

Description	Amount in $
Salary Income	100,800
Interest Income	6,800
GROSS INCOME	107600
For AGI Deductions	0
(a) Standard Deductions (For Head of Household) 18650
(b) Itemized deductions (given) 7000
Higher of (a) or (b)	18650
TAXABLE INCOME	88950
Income Tax Liability:- From 0 to 19750 @10% 1975.00 From 19750 to 80250 @ 12@ 7260.00 From 80250 to 88950 @22% 1914.00	11149
Credits :- (a) Child Tax Credit 2000 (b) Tax Witholding 11000	13000
Tax Refund (13000- 11149)	1851

Calculation of Tax Refund for David & Lilly Fernandez for year 2020:-

Description	Amount in $
Total Tax (A)	1245
(B) Less:- Prepayments	1915
Child Tax Credit (Refer Note 1)	2000
Recovery Rebate Credit (Refer Note 2)	2900
TAX REFUND (A-B)	5570

Note 1 :- The Child Tax Credit offers upto 2000 per Qualifying Dependent Child

Note 2 :- Since David & Lilly are filing Joint return and the amount of tax determined is 1245 it means they will get full credit of $2400 + dependent child $500. Total $2900