Question

2. The Tanner family live in San Francisco, California in 2020. Danny lost his wife just over three years ago. Working as talk show host, Danny earns $150,000 per year. He continues to support his three young daughters, D.J., Stephanie, and Michelle, who all live with him throughout the year. Their ages are 18, 16, and 6. None of them earned income throughout the year.

a. What filing status does Danny have? (4 points)
           

b. How many qualifying children does Danny have? (3 points)

c. Regardless of your answer in a., assume that Tanner used Head of Household as his filing status. Use the individual tax formula and the appropriate Federal Tax Schedule and other values from Appendix D to calculate Danny’s tax due for 2020. Assume that he does not have any itemized deductions, other taxes, credits, or prepayments. (5 points)

(United States Tax Laws)

Answer 1

(A) The filing status Danny have is Head of household

(B) Danny have 3 qualifying children

(C) Calculation of Danny's Tax due for 2020

Gross Income = $150,000

For Adjusted Gross Income deduction= 0

Adjusted Gross Income = -$18,000 (Stdded Appendix D)

Taxable Income = $ 132,000

Tax Liability = $13,158 + 0.24 x ($132,000 - $85,500) = $ 24,318

Other Taxes, credits, prepayments = $0

So Taxes due = Tax liability, which is $ 24,318

As the Tax Rates are not given question, it is searched online. The rates available online are:-

Head of household

If taxable income is over but not over the tax is

$ 0 $ 14,100 10% of amount over $0

$ 14,100 $53,700 $1,410 plus 12% of amount over $14,100

$53,700 $ 85,500 $6,162 plus 22% of amount over $53,700

$ 85,500 $ 163,300 $13,158 plus 24% of amount over $ 85,500