Question

V Sophia Johnson is 24 years old and single, lives in an apartment, and has no...

V

Sophia Johnson is 24 years old and single, lives in an apartment, and has no dependents. Last year she earned $38,700 as a sales assistant for Office Furniture Rentals, $3,096 of her wages were withheld for federal income taxes. In addition, she had interest income of $152.

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

Homework Answers

Answer #1

a) computation of taxable income

Salary - $38700

Interest - $152

Total income - $38,852

Less :- standard deduction - $6200

Less:- total exemption - $3950

Taxable income - $28,702

B) computation of tax payable

As per tax rates schedules income will fall under tax bracket over $9075 but not over $36,900 so

Tax payable = $907.50+ ($28,702-$9075)*15%

= $907.50+$19,672*15%

= $907.50+$2,944.05

So tax liability = $3,851.55

C) Computation of (tax refund)/tax payable= tax liability- tax withheld

=$3,851.55 -$3,096

So tax payable = $755.55

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