24211_ch04_final_p001-012

4 25 and 4 26 141950 12700 11100 23800 118150

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Unformatted text preview: As a result, the personal exemption amount is zero, and the standard deduction is limited to the larger of $950 or the child's earned income plus $300. The calculations are as follows: a. b. c. J's taxable income $2,050 ($3,000 $950) Amount taxed at parents' rate $1,100 ($3,000 $1,900); and $950 at the child's rate. L's taxable income $2,200 ($1,200 $2,500 $1,500) Amount taxed at parents' rate $600 ($2,500 $1,900) and $1,600 at the child's rate. L's taxable income $3,650 ($6,600 $2,850 $5,800). Note that the potential standard deduction of earned income of $6,600 $300 or $6,900 cannot exceed the maximum deduction of $5,800. Amount taxed at parents' rate $950 ($2,850 $1,900) and $2,800 at the child's rate. (See Example 27 and pp. 4-27 through 4-28.) 4-46 G's adjusted gross income (interest income) Less: Standard deduction Personal exemption Taxable income Unearned income Base amount Net unearned income Tax at parents' rate whose income is $131,500 ($2,100 25%) Tax at G's rate [($3,050 $2,100 $950) 10%] Total tax 11(See Example 28 and pp. 4-26 through 4-30.) $ 4,000 $ 950 0 ,950) ( $ 3,050 $ 4,000 (1,900) $ 2,100 $ ,525 ,095 $ ,620 4-10 Chapter 4 Personal and Dependency Exemptions; Filing Status; etc. 4-47 a. b. No. The failure to file penalty is based on the net tax due, which is $0 in this case. In fact, T is entitled to a refund of $1,000 ($11,000 withheld $10,000 tax due). $200 ($1,000 tax due 5% 4 months). The failure to file penalty is based on the amount due as of the due date, April 15, $1,000 ($10,000 tax $9,000 withheld.). (See p. 4-36.) 4-48 a. b. c. The automatic extension is for six months, so a calendar year extended due date is October 15. To avoid the failure to pay penalty, the taxpayer must pay 90 percent of the tax due or $10,800 (90% $12,000). The amount required to be submitted is $7,800 [($12,000 .90 = $10,800) $2,500 withheld $500 estimated payment]. The failure to file penalty is 1/2 of 1 percent (.005) per month on the amount due (up to a maximum of 25 percent). R's penalty is $84 computed as follows (assuming he paid the tax paid with the extension computed in part b of $7,800). Final amount of tax due Payments Withholding $ 2,500 Estimated tax payments 500 7,800 Paid with extension Total payments through due date 4/15 Amount due after payments Months outstanding till paid on July 20 May 15 June 15 July 15 July 17 (any part of a month is considered a full month Total months outstanding Failure to pay penalty .5% per month Failure to file penalty There is not a minimum failure-to-file penalty. (See Example 30 and p. 4-36.) 4-49 a. $12,000. The lesser of 100 percent of the prior year's tax ($12,000) or 90 percent of the current year's tax ($20,000 90% $18,000). Since estimates are due four times during the year, each payment is $3,000. Even though there is no penalty, K owes $8,000 ($20,000 $12,000 assumed paid) with his return, when filed. Required installment ($12,000 25%) Prepayments by due date [estimated tax payment $1,000 withholding prorated $750 ($3,000/4)] Underpayment Penalty rate 365 days to due date/365 Penalty for first quarter 11c. K may use the annualized income installment to avoid penalty in the first quarter and perhaps the second and third. However, if he uses it for one quarter, he must use it for each quarter. $ 3,000 (1,750) $ 1,250 10% $ ,125 , 1 $ ,125 $15,000 (10,800) $ 4,200 1 1 1 1 $ 4 .005 84. b. (See Examples 32 and 33 and pp. 4-37 through 4-40.) Solutions to Problem Materials 4-11...
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