John and mary jane made charitable contributions of

This preview shows page 1 - 2 out of 2 pages.

John and Mary Jane made charitable contributions of $3,700 during the year and paid an additional $1,800 in state income taxes in 2015 upon filing their 2014 state income tax return. Their deductible home mortgage interest was $8,200, and their property taxes came to $4,800. They paid sales taxes of $2,000, for which they have receipts. They paid a ticket of $150 that Mary Jane received for running a red light (detected by a red light camera). Part 1—Tax Computation Calculate John and Mary Jane’s tax (or refund) due for 2015. Gross Income Salary (A) $147,000 Interest on certificates of deposit 4,100 Share of S corporation income (B) 1,100 Award 2,000 Child Support (C) 0 Adjusted gross income (D) $154,200 Itemized Deductions Medical Expenses (E) $0 State income taxes withheld (F) 9,200 Home mortgage interest paid 8,200 Property taxes paid 4,500 Charitable contributions 4,000 (25,900) Personal and dependent exemptions (3,800x2) (G) (7,600) Taxable income (H) $120,700
Tax on $120,700 (I) $22,425 Less: Federal Income tax withheld (23,200) Net tax payable (or refund due) ($775) Part 2—Tax Planning Assume that the Diazes come to you for advice in December 2015. John has learned that he will receive a $30,000 bonus. He wants to know if he should take it in December 2015 or in January 2016. Mary Jane will quit work on December 31 to stay home with the baby. Their itemized deductions will decrease by $3,100 because Mary Jane will not have state income taxes withheld. Mary Jane will not receive the employee award in 2016. She expects the medical benefits received to be $9,000. The Diazes expect all of their other income items to remain the same in 2016. Write a letter to John and Mary Jane that contains your advice, and prepare a memo for the tax files. Mr. and Mrs. D, As per your request, I am informing you about the tax implications of receiving a bonus in 2015 versus 2016. Based on the information you provided, I have calculated tax liability for both scenarios.

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture