Paying Taxes

You have a gross income of $117,151 and are filing your tax return singly. You claim one exemption and can take a deduction of $2,713 for interest on your mortgage, an adjustment of $2,791 for business losses, an adjustment of $1,346 for alimony, a deduction of $2,086 for property taxes, a deduction of $2,376 for contributions to charity, and an adjustment of $1,091 for contributions to your retirement fund. The standard deduction for a single filer is $5,700, and exemptions are each worth $3,650. What is the difference between your adjusted gross income and your taxable income?

$10,825

Ralph's annual income is about $32,000. Based on his expenses illustrated in the graph below, roughly how much should Ralph expect to pay in taxes this year?

$11,200

Kathy makes $66,000 per year, and she pays a net federal income tax rate of 18.85%. How much should Kathy expect to pay in taxes every year?

$12,441

Ken, a single taxpayer, has a gross income of $79,685. He claims one exemption and can take a deduction of $1,257 for medical expenses, a deduction of $2,181 for interest on his mortgage, an adjustment of $800 for alimony, a deduction of $1,419 for property taxes, an adjustment of $1,722 for business expenses, and an adjustment of $2,511 for contributions to his retirement fund. The standard deduction for a single filer is $5,700, and exemptions are worth $3,650 apiece. Using the table below, how much does Ken owe in income tax?

$12,675

If Mary's taxable income is $68,562, how much income tax does she owe, rounded to the nearest dollar?

$13,564

Wendy is calculating her tax deductions. She finds that she can deduct $5,522 from medical expenses, $7,240 from charitable donations, and $2,126 from property taxes. What is Wendy's total deduction?

$14,888

Oscar has elected to have 23% of his federal income tax withheld as state income tax. If $154.00 was withheld as federal income tax on his last paycheck, how much will be withheld from his paycheck for income tax in all?

$189.42

Carol uses this graduated tax schedule to determine how much income tax she owes. If Carol's taxable income is $89,786, how much income tax does she owe, to the nearest dollar?

$19,636

Agnes pays state income tax equal to 3.75% of her federal taxable income. She pays federal income tax equal to 28.4% of her federal taxable income. This year, she paid $15,449.60 in federal income tax. How much did Agnes pay in state income tax?

$2,040.00

You make $443 per week, and have claimed five exemptions. How much money will be withheld from you in a year?

$2,392

You have a home with a market value of $144,700, which has an assessment value of 72% of that amount. Your city has a property tax rate of 0.039. You know that 65% of your property tax dollars go to public schools. To the nearest dollar, how much of your taxes went to funding schools?

$2,641

Determine the total annual FICA tax for an annual salary of $38,480.

$2,943.72

Below is a graph of the Murphys' annual expenses. If the Murphys' gross annual household income is $85,420, how much will they pay in federal taxes?

$20,500.80

If a taxpayer does not have enough taxes withdrawn from her paychecks throughout the year to equal the total tax she is required to pay that year, she will owe the government the remaining balance. On the other hand, if the taxpayer has more money withheld for taxes than she is required to pay that year, she will receive a refund for the difference. Mary has determined that, based on her annual income of $36,000, her federal income tax for the year is $5,424. Mary gets paid on a bi-weekly basis, giving her 26 paychecks throughout the 52 week year. What is the minimum amount Mary must have withheld from each of her 26 bi-weekly paychecks in order to avoid owing the federal government at the end of the year.

$208.62

Bob just turned 66 years old and is considering retirement. His average annual salary over the last 35 years is $50,760. Assuming that he will recieve 42% of his average annual salary, what will be his annual Social Security benefit?

$21,319.20

Say that you pay property taxes of $2458.20 every year. If your state has a property tax rate of 0.082, what is the assessed value of your property?

$29,978

Mauro just won $1,000,000 from the lottery! Despite his excitement in winning a tremendous amount of money, his brother (who is an accountant) warns him not to spend it all at once and hands him this tax rate schedule for single taxpayers. Using this chart, a taxpayer who makes $58,000 annually (line 3) will have to pay $4,386.25 plus 25% of the differene of 58,000 and 31,850 or 4,386.25 + (0.25)(58,000-31,850) = $10,923.75. Before winning the lottery, Mauro's annual income was $34,500. Use the chart to determine Mauro's federal tax before winning the lottery and after winning the lottery. How much extra does he have to pay in federal taxes because he won the lottery?

$336,100.50

You earn $1,166 gross taxable income every week, and have claimed no exemptions. Assuming that you have no other sources of income, what is the amount of income tax withheld each week?

$340

Say you are filing as a single taxpayer. You have a gross income of $61,026 and claim two exemptions. You can make a deduction of $2,871 for interest on your mortgage, a deduction of $2,376 for property tax, an adjustment of $3,206 for business losses, an adjustment of $2,575 for contributions to your retirement plan, a deduction of $2,682 for medical expenses, and an adjustment of $2,440 for business expenses. If exemptions are each worth $3,650 and the standard deduction is $5,700, what is your total taxable income?

$37,576

This year, you owed $6,414.95 in federal income tax. If you are taxed at a net rate of 17%, what was your taxable income for this year?

$37,735

Kevin, while calculating his tax adjustments, notes that he can make adjustments of $3,435 for contributions to his retirement plan, $3,393 for business losses, and $1,128 for business expenses. If Kevin's gross income is $45,942, what is his adjusted gross income?

$37,986

Determine the total annual FICA tax for an annual salary of $63,250.

$4,838.63

Nastasha has a gross income of $66,429. She can make adjustments of $14,490 for business losses, $3,584 for business expenses, and $4,813 for contributions to her retirement plan. What is Nastasha's adjusted gross income?

$43,542

Bianca and Dave are a married couple filing a joint tax return. They have a combined gross income of $81,031 and claim four exemptions. They can make an adjustment of $2,914 for business expenses, an adjustment of $1,939 for business losses, a deduction of $4,140 for medical expenses, an adjustment of $4,825 for contributions to their retirement fund, and a deduction of $2,420 for charitable donations. If exemptions are worth $3,650 apiece and the standard deduction for a joint return is $8,350, what is their total taxable income?

$48,403

Adam makes $632 gross income per week and has claimed four allowances. According to the table below, what is Adam's net income after tax withholding?

$533

If a 6.2% Social Security tax is applied to a maximum wage of $106,800, the maximum amount of Social Security tax that could ever be charged in a single year is:

$6,621.60

Mike has an adjusted gross income of $85,643. He claims two exemptions and can deduct $896 for state income tax, $2,145 for charitable donations, and $3,473 for medical expenses. If the standard deduction is $5,700 and exemptions are each worth $3,650, what is Mike's total taxable income?

$71,829

Determine the total annual FICA tax for an annual salary of $110,330. Use $106,800 for maximum taxable earnings.

$8,221.39

Brian is calculating his tax deductions. He finds that he can deduct $1,225 as a result of money given to charity, $4,391 from interest paid on his mortgage, and $2,821 from what he paid in state and local taxes. What is Brian's total deduction?

$8,437

Below is a graph of the Murphys' annual expenses. How much will the Murphys' pay in state/local taxes if their gross annual household income is $85,420?

$8542.00

Yolanda makes $1,196 gross income per week and has claimed two allowances. According to the table below, what is Yolanda's weekly net income after tax withholding?

$879

Determine the total annual FICA tax for an annual salary of $165,000. Use $106,800 for maximum taxable earnings.

$9,014.10

Jennifer is excited to be retiring after 35 years of service as a high school English teacher. Over the past 35 years, Jennifer's average annual salary was $26,443. How much can Jennifer expect to receive on a monthly basis from Social Security, assuming she will receive 42% of her average annually?

$925.51

You own a house and land with an assessed value of $55,580. Every year, you pay a total of $2,834.58 in property taxes. What is your local property tax rate?

0.051

According to the graph below, what percent of the Simpsons' annual expenses is state taxes?

10%

On your property tax bill, you see the following table. What percentage of your taxes went to funding public safety?

10.49%

Craig is single and lives alone. He earns a respectable salary, but the bulk of his income comes from his property holdings and stock market investments. Craig is well versed in tax law and has many deductions to claim, hoping to pay the smallest amount possible. Recommend the appropriate 1040 form for Craig.

1040

Sandy and Alex are married, with no dependents. They wish to file a joint tax return. Both of them work, but their combined salaries only put them at a slightly above-average income. They would also like to deduct interest paid on their student loans. Recommend an appropriate 1040 form for Sandy and Alex to fill out.

1040-A

A major concern with Social Security is the possibility that funds will not be available when today's tax-payers retire to become beneficiaries. According to the Social Security Trustee's report, an increase of 1.89% in the Social Security payroll tax would keep the account full for the next 75 years. To achieve similar results, benefits would have to be decreased from the current 42% of the ending salary to 29% of the salary. Cindy is relatively new to the workforce. She has 32 years until she can retire. Her current annual salary is $45,000. 1a) Calculate how much Cindy will have to pay in Social Security tax (6.2%) based on this salary. 1b) Calculate how much Cindy will have to pay in Social Security tax if the tax was increased by 1.89%. 2a) Calculate Cindy's annual Social Security benefit (about 42%) if her salary remains unchanged until she retires (annual average is $45,000). 2b) Calculate Cindy's annual Social Security benefit if her salary remains unchanged but benefits (based on her annual salary of $45,000) were cut from 42% to 29%. 3) If Cindy were given a choice between the increase in Social Security tax now or the decrease in Social Security benefits when she retires, which would you recommend she choose? Explain your answer thoroughly.

1a) $45,000 * 0.062 = $2,790 1b) 6.2% + 1.89% = 8.09%; $45,000 * 0.0809 = $3640.50 2a) $45,000 * 0.42 = $18,900 2b) 42% - 13% = 29% $45,000 * 0.029 = $13,050 3) You should probably recommend she pay the extra taxes now. If the tax were increased by 1.89%. Cindy would have to pay an extra $3640.50 - $2,790 = $850.50 per year for the 32 years before she retires. This adds up to $27,216 over the length of 32 years. On the other hand, if benefits were decreased from 42% of her salary to 29% of her salary the time of Cindy's retirement (approximations), she would receive $18,900 - $13,050 = $5,850 less per year after she retires. This adds up to $58,500 in just 10 years.

Arthur's yearly taxable income totals $116,600, and he pays $30,910.66 in federal income tax every year. Approximately what is Arthur's net federal income tax rate?

26.5%

The chart below summarizes Ralph's annual expenses for the upcoming year. Based on the information in the graph, approximately what percent of his total budget will be for federal taxes?

30%

Tax returns filed manually have a 20% chance of containing errors, while tax returns filed electronically have a 0.05% chance of containing the same. If 2.7 million tax returns are filed each way, how many more erroneous manually filed returns will there be than erroneous electronically filed returns?

538,650

0.05% of all tax returns filed electronically contain errors, but 20% of all tax returns filed manually contain errors. If 3.3 million tax returns are filed each way, how many more manually filed returns containing errors will there be than electronically filed returns containing errors?

658,350

What is the difference between a tax credit and a tax deduction?

A tax credit reduces the amount of money you must pay, while a tax deduction reduces your taxable income.

One possible solution to a diminishing Social Security payroll is to increase the Social Security tax by 1.89%. How would such an increase effect the tax on an annual salary of $54,000?

Annual tax would increase by $1,020.60.

Sam is thinking of retiring from his job after many years of faithful service. During the last 35 years at his job, his annual salary averages to $37,991. Every month, his bills total $1,755. How much money would Sam need each month to supplement his monthly Social Security benefit (assuming his annual benefit is 42% of his salary average) and still be able to pay his bills?

At least $425.32

Christina will be retiring next month from her job after 35 years as a school bus driver. Over the last 35 years, Christina's annual salary averaged $22,040. She expects to receive some money each month from Social Security and plans to take the rest of the money she needs to pay the monthly bills from savings. Each month her bills total to about $1,375. Assuming her annual Social Security benefit will be 42% of her salary average, how much will she need to take from savings each month to help pay the bills?

At least $603.60

One possible solution to a diminishing Social Security payroll is to decrease the Social Security benefit by 13%. How would such a decrease effect the benefits on a salary of $54,000?

Benefit would decrease by $7,020 annually.

Which of the following characteristics does apply to Medicare Part A but does not apply to Medicare Part B?

Covers hospital inpatient services

Doug is filing singly. His net taxable income is $80,575. Every week, $304 is withheld from his earnings for income tax. Based on the table below, what can Doug expect when his taxes are due?

Doug will owe an additional $731.

Explain how filing your tax return online can make payments easier.

Electronic tax returns allow you to make online payments, which are faster and simpler than paying by check. There is no chance of an electronic payment being lost in the mail. Also, electronic filing allows for the file-now-pay-later system, which can make it simpler to budget for any taxes due.

Which of the following statements accurately describes the result of a decreasing worker-per-beneficiary ratio in the Social Security system?

Fewer taxed workers than beneficiaries means that more money is being drawn from the system for the money put in. This leaves a shortage of money in the system making benefits for future beneficiaries unsure.

Gareth is single and has a net taxable income of $54,446. Over the year, his employer has collected $9,100 in withheld payroll tax. Based on the table below, what should Gareth expect when his taxes are due?

Gareth will owe the IRS $850.

Harry and Helen are married, filing jointly. Their combined taxable income is $65,922. Every week, a total of $187 is withheld from their pay. Based on the table below, what can Harry and Helen expect when their taxes are due?

Harry and Helen will receive a refund of $555.

Which group or groups can typically draw benefits that are funded by Social Security taxes? I. Disabled workers II. Laid-off workers III. Family members of deceased workers

I and III

Leigh is the head of a household and earned $43,763 in taxable income this year. Over the course of the year, her employer withheld a total of $6322 for income tax. Based on the table below, what can Leigh expect when her taxes are due?

Leigh will receive a refund of $316.

Which of the following statements accurately describes the result of an increasing worker-per-beneficiary ratio in the Social Security system?

More taxed workers than beneficiaries means that the system is collecting more money for the money being drawn out. This leaves money in the system and secures benefits for future beneficiaries.

Ralph's current annual income is $32,000. Using the graph shown below, Ralph has calculated that he will have to pay a total of $9,280 in federal taxes this year. Which of the following statements is true?

Ralph's calculation is correct, he will have to pay $9,280 in federal taxes this year.

Which of the following statements explains the relationship between Social Security and Medicare taxes?

Social Security is applied to all wages up to the maximum taxable earnings. Medicare is applied to all wages without limit.

Calculate the Social Security and Medicare tax that would be applied to an annual salary of $35,400.

Social Security tax: $2,194.80, Medicare tax: $513.30

Calculate the Social Security and Medicare tax that would be applied to an annual salary of $56,010.

Social Security tax: $3,472.62, Medicare tax: $812.15

Calculate the Social Security and Medicare tax that would be applied to an annual salary of $125,000. Use $106,800 for maximum taxable earnings.

Social Security tax: $6,621.60, Medicare tax: $1,812.50

Calculate the Social Security and Medicare tax that would be applied to an annual salary of $235,430. Use $106,800 for maximum taxable earnings.

Social Security tax: $6,621.60, Medicare tax: $3,413.70

Curtis just recieved a raise at work increasing his salary by $8,500. He knows that an increase in salary will increase the amount of federal income taxes withheld from his paycheck. Which of the following statement best describes the effect his raise will have on state income tax withholdings?

State income tax is usually a set percentage of federal income tax. With an increase in federal he will see an increase in state withholding.

Many communities today are concerned with their local government's ability to appropriately manage the taxes it collects. If a government spends more money on expenditures than it collects in taxes, it may end up with not enough money, called deficit. Which of the following could result in a county government budget in deficit?

The county gives all public school teachers a $2,000 raise without adjusting taxes.

Chris is calculating his deductions for his tax return. He is filing singly. He can claim $1,813 from property taxes, $1,513 from medical expenses, and $761 from state income tax. The standard deduction for a single filer is $5,700. How does the standard deduction compare to Chris's deductions?

The standard deduction is $1,613 better than Chris's deductions.

Mr. and Mrs. Nedage are filing a joint tax return. While listing their deductions, they find that they can deduct $2,150 from medical bills, $826 from state taxes, $3,133 from charitable donations, and $1,331 from interest on their mortgage. The standard deduction for married couples filing jointly is $8,350. How does the standard deduction compare to the Nedages' deductions?

The standard deduction is $910 better than the Nedages' deductions.

What is the standard deduction used for?

The standard deduction is the minimum deduction that anyone may claim.

What is the defining feature of a progressive tax?

Under a progressive tax, those with more income shoulder more of the tax burden.

Which of the following is a benefit Social Security does not offer?

automobile insurance

Which of the following is considered a purchase tax?

excise tax

For each of the following wages, determine the Social Security tax that would be withheld. Use $106,800 for maximum taxable earnings. i. $23,660 ii. $89,000 iii. $166,090

i. $1,466.92 ii. $5,518.00 iii. $6,621.60

For each of the following wages, determine the Medicare tax that would be withheld. i. $23,660 ii. $89,000 iii. $166,090

i. $343.07 ii. $1,290.50 iii. $2,408.31

Which of the following is something you would not expect to see withheld from your paycheck?

sales tax

Who should fill out the W-2 form?

the taxpayer's employer