Joyce, a widow, lives in an apartment with her two minor children (ages 8 and 10
ID: 2455014 • Letter: J
Question
Joyce, a widow, lives in an apartment with her two minor children (ages 8 and 10), whom she supports. Joyce earns $33,000 during 2015. She uses the standard deduction ($9,250) and qualifies for head-of-household filing status. The personal exemption amount for 2015 is $4,000.
Round all computations to the nearest dollar.
Click to access Exhibit 13.3 Earned Income Credit and Phaseout Percentages and the tax rates schedules.
a. Calculate the amount, if any, of Joyce's earned income credit.
$
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The earned income credit, which has been a part of the law for many years, consistently has been justified as a means of providing tax equity to the working poor. In addition, the credit has been designed to help offset regressive taxes that are a part of our tax system, such as the gasoline tax. Further, the credit is intended to encourage economically disadvantaged individuals to become contributing members of the workforce.
b. During the year, Joyce is offered a new job that has greater future potential than her current job. If she accepts the job offer, her earnings for the year will be $39,000. Determine the increase or decrease in Joyce's net cash flow if she accepts the new job. Use the Tax Rate Schedule when computing her income tax.
KeepsOld Job Takes
New Job Tax calculation: Salary $33,000 $39,000 Less: standard deduction Less: personal and dependency exemptions Taxable income $ $ Income tax $ $ Less: earned income credit Net tax due or refund $ $ After-tax cash flow: Salary $33,000 $39,000 Less: net tax due or add refund After-tax cash flow $ $ Net SelectincreasedecreaseCorrect 17 of Item 2 in cash flow $
Explanation / Answer
Joyce, a widow, lives in an apartment with her two minor children (ages 8 and 10
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