Joyce, a widow, lives in an apartment with her two minor children (ages 8 and 10
ID: 2478613 • 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.
a. Calculate the amount, if any, of Joyce's earned income credit.
$
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
IT for 19750 1315+(15%*(19750-13150))= 2305 IT for 25750 1315+(15%*(25750-13150))= 3205 Income EIC for 2 children 33,000 33,050 2,407 39,000 39,050 1,143 Keeps Takes Old Job New Job Tax calculation: Salary $33,000 $39,000 Less: standard deduction 9250 9250 Less: personal and dependency exemptions 4000 4000 Taxable income $19,750 $25,750 Income tax 2305 3205 Less: earned income credit 2407 1143 Net tax due or refund -102 2062 After-tax cash flow: Salary $33,000 $39,000 Less: net tax due or add refund -102 2062 After-tax cash flow $33,102 $36,938 Net inc(dec.) in cash flow $102 ($2,062)
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