Gary and Wendy are married and file a joint tax return claiming their seven children, ages 7,
Question:
Gary and Wendy are married and file a joint tax return claiming their seven children, ages 7, 9, 11, 13, 15, 17 and 19, as dependents. They pay Susan Smith $18,000 per year to care for their children after school and provide some house cleaning (you can ignore household employment taxes).
Information for 2020 includes the following:
AGI including Gary’s earned income of $420,000 and Wendy’s earned income of $50,000 $490,000
Federal income taxes (all paid in 2020) 108,000
State and local income taxes (all paid in 2020) 21,000
Real estate property taxes 8,700
Home mortgage interest 13,200
Charitable contributions 7,900
(You can ignore any possible additional medi-care tax and net investment income tax.)
Starting with AGI, show each step of the tax formula and calculate taxable income, tax (before credits), child (after credits), tax due (refund due).
The rows could be labeled as follows:
AGI
Less from AGI deductions
Itemized Deductions
Exemptions
Taxable Income
Tax on Taxable Income (before credits
) Less Tax Credits:
Child Tax Credit
Child & Dependent
Care Credit Total
Tax Credits + 100%
Taxation for Decision Makers 2014
ISBN: 9781118654545
6th edition
Authors: Shirley Dennis Escoffier, Karen Fortin