economic

In Chapter 7, we analyzed the federal income tax system.  In order to determine federal income taxes due for a person or family, we need to know the following information for calculating federal income taxes (assuming no other income or deductions).

1.     Gross Income (usually W-2 income)          

2.     Standard Exemption

3.     Personal Exemption

In order to determine taxable income, you would make the following calculation:

            Gross Income minus Standard Exemption minus Personal Exemption

Go to the IRS website at http://www.irs.gov/pub/irs-pdf/i1040.pdf

On page 87 of the website, the IRS provides the 2013 tax rate schedules. 

For 2013, the standard exemptions are as follows: 

1.     Single or Married Filing Separately - $6,100

2.     Married Filing Jointly - $12,200

3.     Head of Household - $8,950

For 2013, the personal exemption is as follows:

1.     $3,900 per exemption.

SCENARIO #1

A married couple earns $75,690.  They have four children.  Determine the following:

1.     Federal Income Tax Due

2.     Average Tax Rate

3.     Marginal Tax Rate

SCENARIO #2

A single person earns $78,250.  He/She has three children.  Determine the following:

1.     Federal Income Tax Due

2.     Average Tax Rate

3.     Marginal Tax Rate

SCENARIO #3

A person who qualifies to be the Head of Household earns $178,215.  The Head of Household has two children.  Determine the following:

1.     Federal Income Tax Due

2.     Average Tax Rate

3.     Marginal Tax Rate

SCENARIO #4

A person who qualifies to be the Head of Household earns $69,750.  The Head of Household has one child.  Determine the following:

1.     Federal Income Tax Due

2.     Average Tax Rate

3.     Marginal Tax Rate

Write a 2-3 page summary report of your calculations.  Include your calculations in the report.  It must be done on a word processor and may be submitted by hard copy or email on October 28, 2014.  No late assignments will be accepted.