Juan and Cecilia Martinez are married with two children, both of whom live at home. The...

Transcribed Image Text:

Juan and Cecilia Martinez are married with two children, both of whom live at home. The children are ages 16 and 13. Juan is the vice president of Community Bank, and his annual salary is $94,000. Community Bank provides all of its employees with free group-term life insurance ($50,000 in coverage) and free medical and dental health insurance coverage. Juan's health insurance cost Community Bank $7,250. The bank's cost of his group-term life insurance coverage was $4,900. Community Bank offers a 401(k) plan for its employees, and Juan elected to contribute $3,900 in 2023. Community Bank matched his contribution on a dollar for dollar basis. Juan had federal income tax withholding of $11,050 in 2023. In August, Juan was recognized for 10 years of employment with the bank. Juan received a watch worth $250 and a $750 Visa gift card. Cecilia is a part-time architect, and she received $16,000 of fees from her clients during 2023. (She is considered to be a sole proprietor.) She is also a 50% partner in a partnership which operates a graphic design business. She received a $24,000 cash distribution from the partnership this year, and the total partnership net income for 2023 was $80.000. The children are from Cecilia's first marriage. Cecilia continues to receive alimony from her former husband. Alimony totaled $10,000 for the current year, and her former husband also paid child support of $15.000. Cecilia's divorce was finalized in 2015. Juan and Cecilia received interest income of $200 from a savings account, $375 from a US Treasury bond, and $140 from a bond issued by the City of Tuscaloosa. Also during the year, Cecilia received a cash gift of $5,000 from her parents, and Juan won $6.000 at a slot machine in Biloxi in October. Juan purchased 1,000 shares of ABC Corporation stock at the beginning of the year for $100 per share. The stock is currently trading at $105 per share. The deductions for AGI, which include the deduction for self-employment tax, total $9,700. The total self-employment tax liability for Cecilia for 2023 is $2,260. Itemized deductions total $20,000 for 2023. Juan and Cecilia qualify for a $4,000 child tax credit for the two children. Recall that the standard deduction for married filing jointly taxpayers in 2023 is $27.700. Calculate the following: gross income, adjusted gross income, taxable income, tax liability, and tax due/refund for the current year. You must use the individual income tax formula format for your solution and show all work in order to obtain any points for this question! Juan and Cecilia Martinez are married with two children, both of whom live at home. The children are ages 16 and 13. Juan is the vice president of Community Bank, and his annual salary is $94,000. Community Bank provides all of its employees with free group-term life insurance ($50,000 in coverage) and free medical and dental health insurance coverage. Juan's health insurance cost Community Bank $7,250. The bank's cost of his group-term life insurance coverage was $4,900. Community Bank offers a 401(k) plan for its employees, and Juan elected to contribute $3,900 in 2023. Community Bank matched his contribution on a dollar for dollar basis. Juan had federal income tax withholding of $11,050 in 2023. In August, Juan was recognized for 10 years of employment with the bank. Juan received a watch worth $250 and a $750 Visa gift card. Cecilia is a part-time architect, and she received $16,000 of fees from her clients during 2023. (She is considered to be a sole proprietor.) She is also a 50% partner in a partnership which operates a graphic design business. She received a $24,000 cash distribution from the partnership this year, and the total partnership net income for 2023 was $80.000. The children are from Cecilia's first marriage. Cecilia continues to receive alimony from her former husband. Alimony totaled $10,000 for the current year, and her former husband also paid child support of $15.000. Cecilia's divorce was finalized in 2015. Juan and Cecilia received interest income of $200 from a savings account, $375 from a US Treasury bond, and $140 from a bond issued by the City of Tuscaloosa. Also during the year, Cecilia received a cash gift of $5,000 from her parents, and Juan won $6.000 at a slot machine in Biloxi in October. Juan purchased 1,000 shares of ABC Corporation stock at the beginning of the year for $100 per share. The stock is currently trading at $105 per share. The deductions for AGI, which include the deduction for self-employment tax, total $9,700. The total self-employment tax liability for Cecilia for 2023 is $2,260. Itemized deductions total $20,000 for 2023. Juan and Cecilia qualify for a $4,000 child tax credit for the two children. Recall that the standard deduction for married filing jointly taxpayers in 2023 is $27.700. Calculate the following: gross income, adjusted gross income, taxable income, tax liability, and tax due/refund for the current year. You must use the individual income tax formula format for your solution and show all work in order to obtain any points for this question!

Answer rating: 100% (QA)

Step 4 Tax Liability To calculate the tax liability well apply the 2021 tax rates and brackets to th... View the full answer