Kendra Thayer, who is single, goes to graduate school part-time and works as a waitress at the Backwater Grill in New York. During the past year (2014), her gross income was $18,900 in wages and tips. She has decided to prepare her own tax return because she cannot afford the services of a tax expert. After preparing her return, she comes to you for advice. Here's a summary of the figures she has prepared thus far:
|
Gross income:
|
|
|
Wages
|
$10,600
|
|
Tips
|
+8,300
|
|
Adjusted gross income (AGI)
|
$18,900
|
|
Less: Itemized deductions
|
-2,500
|
|
$16,400
|
|
|
Less: Standard deduction
|
-6,200
|
|
Taxable income
|
$10,200
|
Kendra believes that if an individual's income falls below $20,350, the federal government considers him or her "poor" and allows both itemized deductions and a standard deduction.
1. Calculate Kendra Thayer's taxable income, being sure to consider her exemption. Assume that the standard deduction for a single taxpayer is $6,200 and that each exemption claimed is worth $3,950. $
2. Discuss Kendra's errors in interpreting the tax laws, and explain the difference between itemized deductions and the standard deduction.
3. Kendra has been dating Joe Keating for nearly four years, and they are seriously thinking about getting married. John has income and itemized deductions that are identical to Kendra's. How much tax would they pay as a married couple (using the filing status of married filing jointly and a standard deduction of $12,400) versus the total amount the two would pay as single persons (each using the filing status of single)? Round the answer to 1 decimal place. (Use Exhibit 3.3.)$
Strictly from a tax perspective, does it make any difference whether Kendra and Joe stay single or get married? Explain. -Select-YesNoItem 4