Estimated Taxes and Marginal Tax Rate

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We have new tax rules for 2018. For this lesson, use the information I've given you in the opening scenario, the new rules will be used for taxes filed in 2019 for the tax year 2018. The difference for actual taxes is the deductions and exemption rules. This lesson is not applying the new rules as taxes this spring for 2017 will use the old rules. See attached file for more details.

1/16/2018 IRS Announces 2017 Tax Rates, Standard Deductions, Exemption Amounts And More Tax Brackets. The big news is, of course, the tax brackets and tax rates for 2017: Individual Taxpayers If Taxable Income Is Between: Th 0 - $9,325 10% of taxable income $9,326- $37.,950 $932.50 + 1 5°/o of t e amount over $9,325 $37,951 - $91 ,900 S5,226.25 + 2 % of the amount over $37,950 $91,901 - $191,650 $18,713.75 + 28% of the amount ver$91,900 $191 ,651 -$416,700 $4 6.643. 75 + 33% of the amount over S 191.650 $416.701 -$418,400 51 2 ,910. 5 + 35% ottheamoun over$416,700 $4 8,4 01 + $121.505.25 + 39.6% of the amount over $418,400 Married Individuals Filing Joint Returns and Surviving Spouses ..------The Tax Due Is: 0 - $18,650 0 Yo o ta xable income $18,651 - $75,900 $1,865 + 15%,of t ea omtove 518,650 $75,901 - $153.100 $10.4 52.50 + 25% of the amount o1er $75.900 $153,101 - $2 3 50 $/ .75/.50 + 28% flho ' $233,351- 5416,700 $52, 222.50 + 33% of the a ount over $233,350 $4 16.701 - $470.700 $1 2.728 + 35% o the rno nt ov r $416.700 $470,701 + $1 1, 28+ 39.6% of heam unt over $470,700 unt ov r $15 ,100 https://www.forbes.com/sites/kellyphillipserb/2016/10/25/irs-announces-2017-tax-rates-standard-deductions-exemption-amounts-and-more/#498a82c2... 1/3 1/16/2018 IRS Announces 2017 Tax Rates, Standard Deductions, Exemption Amounts And More Heads of Household The Tax Due I ·: 10 l'o o ta x ble inco te 0 - 13,3o0 $13,351 $50 800 S50, 80 - $131.2 0 $6.9 2.r.o + 25% of th am unt $131,201 - $212.500 $27 ,052.50 + 28 y; f th· $21 2. 501 - $416.t 0 S4 ,81 .50 + 33% $41 . 701 - $444 .550 $117.202.50 + 35% $444. 551 + f th S1 26.950 + 39.6% f t h fl OUI $50. 00 t OV r $131 200 o nt v r $212. 00 r $416, 700 moun er $444, ,..c;; Married Filing Separately so- $9,325 10 Vo of taxr.ble income $9,326 - $37.950 $932.50 + 15 Vo of the amount over $9.325 $37,951 - $76.550 $5,226.25 + 25% o f t he amount over $37,950 $76.551- $116.675 S 14. 876.25 + 28 Yo of t 1e amount over $76.550 $116.676 - $208,350 $26,111.25 + 33% of the nmount over $116.675 $208,351 - $235, 350 $56.364 + 35 Yo of he amour t over $208,350 $235,351 + $65,81 4 39.6% of the amount over $235,350 You can compare these numbers against the 2016 brackets here. The standard deduction for single taxpayers and married couples filing separately is $6,350 in 2017, up from $6,300 in 2016; for married couples filing jointly, the standard deduction is $12,700, lip $100 from the prior year; and for heads of households, the standard deduction is $9,350 for 2017, up from $9,300. The numbers look like this: https://www. forbes.com/sites/kellyphillipserb/2016/10/25/irs-announces-2017-tax-rates-standard-deductions-exemption-amounts-and-more/#498a82c2... 2/3 1/16/2018 IRS Announces 2017 Tax Rates, Standard Deductions, Exemption Amounts And More Filing Status Standard Deduction Amount Single $6,350 Mr1 ried Filing Jointly & Surviving Spow;e 512,700 tv mried Filing Separa J , $6,350 Head of Household $9,350 https://wwwo forbesocom/sites/kellyphillipserb/2016/10/25/irs-announces-2017-tax-rates-standard-deductions-exemption-amounts-and-more/#498a82c2 0 0 0 3/3
Estimated Taxes and Marginal Tax Rate ~ Required Textbook: Personal Finance by Garman, E. Thomas & Forgue, Raymond E. 13th Edition; Houghton Mifflin Company. We have new tax rules for 2018. For this lesson, use the information I've given you in the opening scenario, the new rules will be used for taxes filed in 2019 for the tax year 2018. The difference for actual taxes is the deductions and exemption rules. This lesson is not applying the new rules as taxes this spring for 2017 will use the old rules. Here is a link to help you calculate tax liability: https://www.calcxml.com/calculators/federal-income-tax-calculator?skn=#results Here is a link to an excerpt from an article in forbes with 2017 tax tables you may find useful: Attached file Here is a link to a Kahn Academy you tube video on taxes that you may find informative and helpful when you do this lesson: https://www.khanacademy.org/economics-finance-domain/core-finance/taxestopic/taxes/v/calculating-federal-taxes-and-take-home-pay This second link talk about tax brackets: https://www.khanacademy.org/economics-finance-domain/core-finance/taxes-topic/taxes/v/taxbrackets-and-progressive-taxation Estimated Base Tax Liability 1. Chapter 4 of your textbook outlines the eight (8) steps in calculating income taxes. Please read the text for what is considered income and what you do not include as income. If you get the total of the reportable gross income wrong, the subsequent answers will also be wrong.This exercise follows these steps to determine the tax liability for this family. page 116 tells you how to determine your marginal tax rate. SHOW ALL CALCULATIONS IN THIS ASSIGNMENT TO RECEIVE CREDIT. Use these numbers for the 2017 standard deductions. $12,700 for Married Couples Filing Joint(our assumption for the Sandler's The value of each personal exemption: $4050 The Sandler family consists of two married adults, and two teenagers. Mr. and Mrs. Sandler will file their IRS return as a joint return. Their financial data is as follows: Gross income: Samuel (father) $42,000; Jerri (mother) $40,000 Life insurance proceeds from a deceased aunt: $10,000 Interest from savings: $140 Alimony from Jerri's ex-husband: $4380 Child-support payments received from Jerrii's ex-husband: $14,200 Cash as a Christmas gift from Samuel's parents: $500 Tuition/books scholarship Jerri received to go to college part time last year: $1600 _____________________________________________ Determine the total reportable gross income: This is the income they earned and received during the year, not just their salaries. Check pages 120-123 and make sure you get the right items to include as income. DO NOT simply add all the amounts given above. READ Chapter 4 to find out what you can include as income and what you do not need to include. What is the total reportable gross income from all sources? -----$ 2. After they put $5600 into qualified retirement plan accounts last year, what is their adjusted gross income? 3. Claiming personal exemptions for the Sandler family. a. How many exemptions can the family claim? (0, 1, 2, 3, 4, 5, 6, more?) b. The value of each personal exemption is included in the financial data for the Sandler family. What is the total value of the exemptions -----$ 4. How much is the allowable standard deduction for the household? 5. Their itemized deductions are $13,100 so should they itemize or take the standard deduction? 6. What is their taxable income for a joint return, and what is their marginal tax rate? (Determine their Adjusted gross income read pages 120-123). The tables in the Forbes article will help or go to the irs website if you want. this tax calculator will also help you: https://www.calcxml.com/calculators/federalincome-tax-calculator?skn=#results For this calculator, you will not fill in investment income or the qualified plan/IRA -(This amount was already deducted to give you the adjusted gross income): You will use some of your answers from questions b., c., e 7. What is their final federal income tax liability? 8. If Jerri and Samuel's employers withheld $18000 for income taxes, yet they owe $6811 in taxes would they get a refund or will they still owe taxes. If they get a refund, how much will it be? 9. Go to the 1040 form IRS tax table www.irs.gov/pub/irs-pdf/i1040tt.pdf (Links to an external site.)Links to an external site.. What is the tax for head-of-household whose income is $28,762? 10. Go to the IRS Publication 17, Your Federal Income Tax for Individuals, at www.irs.gov/pub/irspdf/p17.pdf (Links to an external site.)Links to an external site.. Scroll down through the lengthy publication to Table 21-1, Medical and Dental Expenses Checklist, page 143. List three things that you can include as itemized deductions and three things that you cannot include. 11. Using the same IRS Publication 17 as above, go to Table 24-1, Examples of Charitable Contributions, page 159. List three items that are not deductible as charitable contributions. 12. Identify the following items as part of taxable income or an exclusion, adjustment, or an allowable itemized deduction from taxable income: a. Sam's earnings of $51000 b. Sam's bonus of $3,000 c. Marie's commissions of $48,000 d. Child support received of $3,600 e. Sam's retirement contribution of $2,400 f. Marie and Sam's gift to their church of $2,800 13. Explain the difference between federal marginal tax rate, effective marginal tax rate, and average tax rate. 14. In your own words, explain the progressive nature of the Federal Income Tax. Please do not copy the paragraph directly out of the textbook. What does the Marginal Tax Rate have to do with the progressive nature of the Federal Income Tax? 15. Page 136 of your textbook begins a discussion of strategies to reduce your income taxes. Pick three and give a brief description of each

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Prof.Voigt
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Estimated Taxes and Marginal Tax Rate
1. Total reportable gross income:
Reportable gross income= wages + savings interest+ Alimony from ex-husband+ Childsupport payments
= $(42,000+40,000+140+4380+14200) = $100720
2. Adjusted gross income after putting $5600 into qualified retirement plan accounts
Gross income= wages + savings interest+ Alimony from ex-husband+ Child-support
payments+ Retirement plan distribution
= $100720+$5600
= $106320
3. Personal exemptions claim for Sandler family.
a. The Sandler family will claim 4 exemptions
b.

The total value of the exemptions for Sandler family is ($4050*4) = $16,200

4. The allowable standard deduction for the household i...

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