Estimating taxable income tax liability and potential


Estimating taxable income, tax liability, and potential refund Sophia Johnson is 24 years old and single, lives in an apartment, and has no dependents. Last year she earned $43,700 as a sales assistant for Office Furniture Rentals; $3,933 of her wages was withheld for federal income taxes. In addition, she had interest income of $85. 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. Estimate her taxable income. $ b. Estimate 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. Estimate her tax refund or tax owed. Enter tax owed, if any, as negative amount. Round the answer to the nearest cent. $

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Financial Management: Estimating taxable income tax liability and potential
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