Problem:
Rosemary is single and works for Big B Corporation. Her only income consists of her Big B salary and interest on a saving account. During the year, she has $400 withheld from her salary for state income taxes and $7800 for federal income taxes. Her brother provides her with the following calculation of her taxable income and income tax liability:
Salary $36,000
Interest income $3,100
Les: State tax withheld (400)
Equals: Gross Income $38,700
Less: Deduction for adjusted Gross income
Standard deduction (5,450)
Equals: Taxable income $33,250
Income tax liability ($33,250 × 25%) $8,313
Less: federal withholding (7,800)
Equals: Tax due $513
Explain the errors that Rosemary's brother has made in calculation het taxable income and/or her income liability.
Use the calculation by:
A. Tax tables 2012
B. Tax rate schedules 2012
Additional Information:
This question is from Finance and it is about computing the taxable gross income of a person working for a company and gets interest from a savings account. The calculations have been given in the solution in detail.