24211_ch04_final_p001-012

Therefore no more than 750 6150 5500 earned income

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Unformatted text preview: of W's income is unearned income. (See Examples 25 and 26 and pp. 4-26 and 4-27.) 4-24 This problem illustrates the difficulties encountered when the taxpayer is a dependent and the kiddie tax applies. (See Examples 25, 26 and 27 and pp. 4-27 through 4-28.) a. Adjusted gross income (interest) Less: Standard deduction Personal exemption Taxable income Unearned income (interest) Less: Base amount Net unearned income 11b. Result: All $100 of taxable income is taxed at 10 percent. Adjusted gross income (interest) Less: Standard deduction Personal exemption Taxable income Unearned income (interest) Less: Base amount Net unearned income 11c. $ 1,950 ( ,950) ,000) ( $ 1,000 $ 1,950 (1,900) $ , 50 $ 1,050 ( ,950) ,000) ( $ ,100 $ 1,050 (1,900) $ ,000 Result: $50 is taxed at parents' rate of 25 percent, and $950 ($1,000 $50) is taxed at 10 percent. Adjusted gross income ($900 interest and wages $5,000) Less: Standard deduction ($5,000 earned income $300) Personal exemption Taxable income Unearned income Less: Base amount Net unearned income $ 5,900 (5,300) ,000) ( $ ,600 ,900 (1,900) $ ,000 $ 11d. Result: All $600 of taxable income is taxed at 10 percent. Adjusted gross income (interest $3,500 and wages $500) Less: Standard deduction Personal exemption Taxable income Unearned income Less: Base amount Net unearned income $ 4,000 ( ,950) ,000) ( $ 3,050 $ 3,500 (1,900) $ 1,600 11- Result: $1,600 is taxed at 25 percent, and $1,450 ($3,050 $1,600) is taxed at 10 percent. (See pp. 4-26 through 4-30.) 4-25 An individual generally is not required to file an individual income tax return if his or her gross income is less than the sum of the appropriate standard deduction (including any additional amount for the elderly) and the personal exemption(s). A single individual whose gross income is less than $9,500 ($5,800 $3,700) in 2011, for example, is not required to file (unless he or she has self-employment income of at least $400). (See pp. 4-32 and 4-33.) 4-6 Chapter 4 Personal and Dependency Exemptions; Filing Status; etc. 4-26 a. b. The due date for the individual income tax return is the fifteenth day of the fourth month following the close of the taxable year, or April 15, for the vast majority who report on the calendar year. Extensions of time to file the return lasting for up to six months are available upon filing the proper form(s). The extension, which is requested using Form 4868, is automatic. There is no extension of time to pay the estimated tax due. October 15, the fifteenth day of the fourth month following the close of the taxable year. (See p. 4-35.) 4-27 a. b. c. The automatic extension on Form 4868 is for six months, usually until October 15. There is no additional extension. The penalty for failure to file is 5% of the tax due ($0) per month (or part thereof) up to a maximum of 25%. Penalty: $0 .05 $0 per month. However, the minimum $135 penalty applies after 60 days. (See pp. 4-35 and 4-36.) 4-28 If R actually owes $4,000 for 2011, estimates of $900 ($4,000 .90/4) each must have been paid by April 15, June 15, September 15, and January 15 (2012) to avoid penalty. (See pp. 4-37 through 4-39.) The lesser of $9,000 (90 percent of the current year tax of $10,000 ($5,500 income tax and $4,500 selfemployment tax)) or $8,925 (100 percent of the prior year tax--$4,950 $3,975) must be paid. The required amount for each quarter to avoid penalty is therefore $2,232 ($8,925/4). (See Example 32 p. 4-38.) a. b. c. d. No, an extension avoids the penalty for failur...
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