Matt Weiss Mrs. Snyder GBUS 160 9:05 - 9:55 Chapter 3 Problems #2,4,6,8 2- Lola Harper had the following itemized deductions, should she use Schedule A or the standard deduction? The standard deduction for her tax situation is $6,050. Donations to church and charities = $1,980 Medical and dental exceeding 7.5 percent of adjusted gross income = $430 State income tax = $690 Job related expenses exceeding 2 percent of adjusted gross income = $1,610 1,980 + 430 + 690 + 1,610 = $4,710 Itemized deduction $6,050 Standard deduction $6,050 > $4,710 TAKE THE STANDARD DEDUCTION 4- Based on the following data, would Ann and Carl Wilton receive a refund or owe additional taxes? Adjusted gross income, $43,190 Itemized deductions, $11,420 Child care tax credit, $80 Federal income tax withheld, $6,784 Amount for personal exemptions, $7,950 Tax rate on taxable income, 15 percent The taxable income after all the exemptions calculated would be $23,820 Based on that and the tax rate at 15%, the tax owed will be $3,573. After taking $80 off that for Child Care tax credit, it is $3,493. When Federal income tax withheld is $6,784, this is your total payment. Because your total payment is more than your total tax, you will receive a refund. 6,784 ? 3,493 = 3,291 Ann and Carl overpaid by $3,291, therefore they will receive a refund of $3,291. 6- If 400,000 people each receive an average refund of $1,900, based on an interest rate of 4 percent, what would be the lost annual income from savings on those refunds? 1900 x .04 = 76 76 x 400,000 = 30,400,000 lost annual income 8- Elaine Romberg prepares her own income tax return each year. A tax preparer would charge her $60 for this service. Over a period of 10 years, how much does Elaine gain from preparing her own tax return? Assume she can earn 3 percent on her savings. 60 x 10 = 600 600 x .03 = 18 600 + 18 = $618 gained from doing her own tax return
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