Question

Tiffany is unmarried and has a 15-year-old qualifying child. Tiffany has determined her tax liability to be $4,000, and her employer has withheld $2,040 of federal taxes from her paycheck. Tiffany is allowed to claim a $3,700 child tax credit for her qualifying child. She is also allowed to claim a $1,200 recovery rebate credit for herself and a $500 recovery rebate credit for her child. Assume Tiffany did not receive the rebate credit in advance.

What amount of taxes will Tiffany owe (or what amount will she receive as a refund) when she files her tax return?

(1) Income tax liability ?

(2) Other taxes ?

(3)Total tax ?

(4) Credits ?

(5) Prepayments ?

(6) Tax Refund OR Tax due with return ?

Tax refund

Answer 1

ANSWER

Amount of taxes Tiffany will owe when she files her tax return would be :-

1. Income Tax Liability - $4,000

2. Other Taxes - $0

3. Total Tax - $4,000

4. Credits - $3,700

Child Credit allowed upto $2,000 per child.

Recovery Rebate for self and child $1700 ($1,200 for self and $500 for child)

5. Prepayments - Employer Withheld - $2,040

Tax refund - $4000 - $3,700 -$2,040 = $1,740

Note 1 -  Employer withheld $ 1,500 and he will deposit the same to government so this is eligible as prepayment.

Note 2 - Tifffany is unmarried and only 15 year old so she is eligible for $ 2,000 Child tax credit.

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