Tax Basic Computations Part 1.
960cb60ea874b06e105f569917caba6f75c76001.xls
Page 1 of 2
Sam and Susan are single Gross Salary in 2011 Interest on City of Charlotte Bonds
Federal income tax withheld
Sam-2011 $70,000 $5,000
$10,000
Susan-2011 $120,000 $5,000
$20,000
Allowable deductions on Form 1040 Taxable income
Exhibit 1 Pg. 18, 20 Income Tax before credits? (below)
($20,000)
($20,000)
Tax Due to IRS or (Refund)?
Income tax computations below
Sam
Front Cover Top full layer Excess Amount Total
Taxable Income X Taxable Income X
Tax Rate
Income Tax
=
Tax Rate Income Tax
Susan
Front Cover Top full layer Excess Amount Total
= Sam Susan
Part 2.
Pg. 8 Pg. 8 Pg. 8
Continue the case above
Marginal tax rate? Average tax rate? Effective tax rate?
Part 3 Social Security Taxes-Case Above How much social security tax is withheld?
Base Pg. 12
Sam $0
X X Tax Rate 6.20% = 1.45% = 6.20% = 1.45% =
Susan $0
Tax
Sam
OASDI MHI
Pg. 12
Total Tax - Sam X Susan OASDI X MHI Total Tax - Susan Note: temporary change in tax law for social security for 2011.
Part 4 Part 5.
Part 6.
Pg. 13
Part 7.
Pg. 31 Income Shifting
Take-home Pay Use information above. Assume no state income tax. What is Susan's take-home pay each year? Employer Tax Deposit with IRS How much total tax does employer deposit each year related to compensation of Susan? Not counting unemployment tax Assume the employer gets full credit for state unemployment taxes, how much federal unemployment tax is paid each year for Susan? .8% of first $7,000 Change Susan's income from Salary to Corporate Bond Interest. Susan gives bonds earning $10,000 per year to her son, Sam. How much is the net tax savings for the family? Assume gift was made on 1-1-2011. the family will save 3% of $10,000. Sam is in 25% marginal bracket - Susan - 28%.
Basic Tax Computations Part 1.
960cb60ea874b06e105f569917caba6f75c76001.xls
Page 2 of 2
Sam and Susan are single Gross Salary in 2011 Interest on City Charlotte of Bonds
Federal income tax withheld
Sam-2011 $70,000 $5,000
$10,000
Susan-2011 $120,000 $5,000
$20,000
Allowable deductions on Form 1040 Taxable income
Exhibit 1 Pg. 18, 20 Income Tax before credits? (below)
Tax Due to IRS or (Refund)?
($20,000) $50,000 $8,625 ($1,375)
Tax Rate X 25% = Tax Rate X 28% =
($20,000) $100,000 $21,617 $1,617
Income Tax $4,750 3,875
Income tax computations below
Sam
Front Cover Top full layer Excess Amount Total
Taxable Income $34,500 15,500 $50,000 Taxable Income $83,600 16,400 $100,000
$8,625
Income Tax $17,025 4,592
Susan
Front Cover Top full layer Excess Amount Total
$21,617 Sam
25.00% 17.25% 15.68%
Part 2.
Pg. 8 Pg. 8 Pg. 8
Continue the case above
Marginal tax rate? Average tax rate? Effective tax rate?
Susan
28.00% 21.62% 20.59%
Part 3 Social Security Taxes-Case Above How much social security tax is withheld?
Pg. 12
Sam $5,355
X X Tax Rate 6.20% = 1.45% = 6.20% = 1.45% =
Susan $8,362
Tax $4,340 $1,015
Sam
OASDI MHI
Base $70,000 $70,000
Pg. 12
Total Tax - Sam $106,800 X Susan OASDI MHI $120,000 X Total Tax - Susan Note: temporary change in tax law for social security for 2011.
$5,355
$6,622 $1,740
$8,362
Part 4 Part 5.
Part 6.
Pg. 13
Part 7.
Pg. 31 Income Shifting
Take-home Pay Use information above. Assume no state income tax. What is Susan's take-home pay each year? Employer Tax Deposit with IRS How much total tax does employer deposit each year related to compensation of Susan? Not counting unemployment tax Assume the employer gets full credit for state unemployment taxes, how much federal unemployment tax is paid each year for Susan? .8% of first $7,000 Change Susan's income from Salary to Corporate Bond Interest. Susan gives bonds earning $10,000 per year to her son, Sam. How much is the net tax savings for the family? Assume gift was made on 1-1-2011. the family will save 3% of $10,000. Sam is in 25% marginal bracket - Susan - 28%.
$91,638 $36,723
$56
$300