Question

Sophia Johnson is 24 years old and single, lives in an apartment, and has no dependents. Last year she earned $42,700 as a sales assistant for Office Furniture Rentals, $3,416 of her wages were withheld for federal income taxes. In addition, she had interest income of $240.

The standard deduction in 2014 was $6,200 for single. The exemption was claimed to be worth $3,950. The appropriate tax rate schedule is shown below:

EXHIBIT 3.3    Sample Tax Rate Schedules

Tax rates levied on personal income vary with the amount of reported taxable income and the taxpayer's filing status.

2014 Tax Rate Schedules

Schedule X-If your filing status is Single

If your taxable income is:		The tax is:
Over-	But not over-		of the amount over-
0	$9,075	_ _ _ _ _10%	$0
9,075	36,900	$907.50 + 15%	9,075
36,900	89,350	5,081.25 + 25%	36,900
89,350	186,350	18,193.75 + 28%	89,350
186,350	405,100	45,353.75 + 33%	186,350
405,100	406,750	117,541.25 + 35%	405,100
406,750	_ _ _ _ _	118,118.75 + 39.6%	406,750

a. Calculate her taxable income.
$  

b. Calculate her tax liability. Round the answer to the nearest cent. Use unrounded values in later calculations. (Hint: Use the tax rate schedules given in Exhibit 3.3 to determine her tax liability.)
$  

c. Calculate her tax refund or tax owed. Enter tax owed, if any, as negative amount. Round the answer to the nearest cent.

Answer 1

(a)	Calculation of Taxable Income
	Particulars	Amount
	Wages Income	42700
	Interst Income	240
	Gross Income	42460
	Less: Standard Deduction	6200
	Net Taxable Income	36260
(b)	Calculation of Tax Liability
	Net Taxable Income	36260
	Tax on 9075	907.5
	Tax on (36260-9075)	4077.75
	Output Tax Liability	4985.25
( c)	Calculation of her tax refund or tax owed
	Output Tax Liability	4985.25
	Less: Wages Witheld for Tax	3416
	Tax Owed	1569.25