Question

5. Sally and Biffy are working on their 2019 taxes. Sally had taxable income of $125,909 while Biffy had taxable income of $65,000.

a. Determine each person’s NORTH CAROLINA tax liability.

b. Determine each person’s FEDERAL tax liability.

Answer 1

Answer- 5.a.

For tax year 2019 North Carolina's individual income tax is a flat 5.25%. The rate applies to taxable income, whichis income minus all qualifying deductions and exemptions as well as any contribution to retirement plan. Hence following are the tax liability of Sally and Biffy on their 2019 taxes.

Sally = $125,909 * 0.0525 = $6610.22

Biffy = $65,000 * 0.0525 = $3412.50

Answer - 5.b

There are seven federal tax brackets for the 2019 tax year, i.e 10%,12%,22%,24%,32%,35% and 37%.The bracket depends on the taxable income and filing status of individual. Followings are the tax liabilityconsidering Sally and Biffy are single individuals.

Sally = ($9,700*10%)+($39475-9700)*12%+($84200-39475)*22%+($1,25,909 -84200)*24%=$24,393

Biffy= ($9700*10%)+($39475-9700)*12%+($65000-39475)*22= $10,159