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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. | ||||||||||||||||||||||||||||||||||||||||||||
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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
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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