Discussion:
We analyzed the federal income tax system. In order to determine federal income taxes due for a person or family, we need to know the following information for calculating federal income taxes (assuming no other income or deductions).
1. Gross Income (usually W-2 income)
2. Standard Exemption
3. Personal Exemption
In order to determine taxable income, you would make the following calculation:
Gross Income minus Standard Exemption minus Personal Exemption
Go to the IRS website at https://www.irs.gov/pub/irs-pdf/i1040.pdf
On page 87 of the website, the IRS provides the 2013 tax rate schedules.
For 2013, the standard exemptions are as follows:
1. Single or Married Filing Separately - $6,100
2. Married Filing Jointly - $12,200
3. Head of Household - $8,950
For 2013, the personal exemption is as follows:
1. $3,900 per exemption.
SCENARIO #1
A married couple earns $75,690. They have four children. Determine the following:
1. Federal Income Tax Due
2. Average Tax Rate
3. Marginal Tax Rate
SCENARIO #2
A single person earns $78,250. He/She has three children. Determine the following:
1. Federal Income Tax Due
2. Average Tax Rate
3. Marginal Tax Rate
SCENARIO #3
A person who qualifies to be the Head of Household earns $178,215. The Head of Household has two children. Determine the following:
1. Federal Income Tax Due
2. Average Tax Rate
3. Marginal Tax Rate
SCENARIO #4
A person who qualifies to be the Head of Household earns $69,750. The Head of Household has one child. Determine the following:
1. Federal Income Tax Due
2. Average Tax Rate
3. Marginal Tax Rate
Write a 2-3 page summary report of your calculations. Include your calculations in the report. It must be done on a word processor and may be submitted by hard copy or email on October 28, 2014. No late assignments will be accepted.