Question

Jayden calculates his 2018 income tax by using both the Tax Tables and the Tax Rate...

Jayden calculates his 2018 income tax by using both the Tax Tables and the Tax Rate Schedules. Because the Tax Rate Schedules yield a slightly lower tax liability, he plans to pay this amount.

A) why is there a difference?

B) Is Jayden's approach permissible? Why or Why not?

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Answer #1

"A. The values which are in Tax tables are calculated by taking its basis from Tax rate schedules. Even after this, the use of these two methods is slightly different. This variation ocuurs for a simple reason, when a person wants to compute the tax for a particular income Range by using Tax tables, it. will be calculated on basis of average tax rate for that range

The average tax rate :- Tax liability/ Taxable Income

B. Jayden's approach is permissible as tax liability can be computed by using either tax tables method or tax rate schedules.

Jayden's canmot use the tax tables if ;-

~ he files short period return.

~ His taxable income is more than the prescribed amount allowable in tax tables method.

~ He is an estate or a trust."

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