Eric, who is single with no dependents, has the following for the calendar year
ID: 2395784 • Letter: E
Question
Eric, who is single with no dependents, has the following for the calendar year 2018:
RECEIPTS FOR YEAR
Salary as Walmart greeter $ 16,200
Interest from Friendly Bank 2,236
Interest from City of Chula Vista 2,000
Dividends from U.S. corporations 69
Social Security benefits 18,000
EXPENDITURES FOR YEAR
Contribution to IRA 920
Unreimbursed medical expense 1,200
Home mortgage interest 3,400
State income and property taxes 3,200
Charitable contributions of cash 5,400
Tax preparation fee 175
Eric claims two exemptions.
How much is Eric’s adjusted gross income?
Assuming your answer to “1” was $22,000, how much is Eric’s taxable income?
Based on your answer to “2”, how much is Eric’s federal income tax?
*SHOW WORK*
Explanation / Answer
1. COMPUTATION OF ERIC'S ADJUSTED GROSS INCOME
Particulars Amount($) Amount($)
Income from salary
Salary as a wallmart greeter 16200
Income from other sources
Interest from friendly bank 2236
Interest from city of chula vista 2000.
Dividends from us corporations(exempt) 0
social security benefits (exempt) 0 4236
Gross total income 20436
Less:Deductions
contribution to ira 920(note1)
home mortgage interest 3400(note2)
state income and property taxes 3200(note 3)
charitable contributions of cash 5400(note 4)
tax preparation fee 175 (note 5) 13095
Adjusted gross income 7341
Note1:Contribution to traditional ira is deductable
Note 2:Home mortgage interest can be allowed if itemised in tax return and interest paid on first and second mortgage upto 100000$
Note3:Deduction can be paid on state income and property taxes
Note4:As per IRS we must actually donate cash or property. as we actually donated cash it can be allowed
Note 5:The IRS generallu allows to deduct tax preparation fees on the return for the year in which we paid them assuming tax preparation fees for the year 2018 it is dductable
2.If Eric's agjusted total income= $22000
Less:deduction for medical expense(10%of agi) 2200
Taxable income $19800
3.Computation o federal income tax
Upto $9525 10%(9525*10%) $952.5
on 10275*12% $1233
Total federal income tax $2185.5
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