Complete the following. In these problems, apply your knowledge of tax rate structures, tax liability, and tax return preparation.
Problem 40:
Use the information in Table 1-3. If the federal tax system was changed to a proportional tax rate
structure with a tax rate of 17%, calculate the amount of tax liability for 2016 for all taxpayers. How does
this amount differ from the actual liability?
TABLE 1-3
Individual Income Tax Returns from 2016, Number of Tax Returns, Taxable Income (in thousands), Total
Tax Liability (in thousands), and Average Tax Rate by Ranges of Adjusted Gross Income
Problem 44:
Cameron is single and has taxable income of $93,341. Determine his tax liability using the tax
tables and using the tax rate schedule. Why is there a difference between the two amounts?
Problem 46:
Determine the tax liability, marginal tax rate, and average tax rate (rounded to two decimal
places) in each of the following cases. Use the tax tables to determine tax liability.
a. Single taxpayer, taxable income of $33,862:
Liability =
Marginal =
Average =
b. Single taxpayer, taxable income of $83,877:
Liability =
Marginal =
Average =
Problem 48:
Determine the tax liability, marginal tax rate, and average tax rate (rounded to two decimal
places) in each of the following cases. Use the tax tables to determine tax liability.
a. Married taxpayers, taxable income of $33,862:
Liability =
Marginal =
Average =
b. Single taxpayer, taxable income of $91,229:
Liability =
Marginal =
Average =
Problem 53:
Xavier and his wife Maria have total W-2 income of $91,932. They will file their tax return as
married filing jointly. They had a total of $7,910 withheld from their paychecks for federal
income tax. Using the tax tables, determine the amount of refund or additional tax due upon
filing their tax return. Indicate whether the amount is a refund or additional tax.
Problem 33:
In which of the following cases may the taxpayer claim head of household filing status?
a. The taxpayer is single and maintains a household that is the principal place of abode of
her infant son.
b. The taxpayer is single, maintains a household for herself, and maintains a separate
household that is the principal place of abode of her dependent widowed mother.
c. The taxpayer was married from January to October and lived with his spouse from
January to May. From June 1 to December 31, the taxpayer maintained a household that
was the principal place of abode of his married son and daughter-in-law, whom the
taxpayer can claim as dependents.
d. Same as (c) except the taxpayer lived with his ex-spouse until August and maintained the
household from September 1 to the end of the year.
Problem 35:
Roberta is widowed and lives in an apartment complex. She receives $8,000 of social security
income that she uses to pay for rent and other household expenses. The remainder of her living
expenses is paid by relatives and neighbors. The total amount of support paid by Roberta and the
others totals $22,000. Amounts paid for support during the year are as follows:
Roberta
Ed (neighbor)
Bill (son)
$8,000
4,000
5,000
Jose (neighbor)
Alicia (niece)
2,000
3,000
a. Which of these persons is entitled to claim Roberta as a dependent absent a multiple
support agreement?
b. Under a multiple support agreement, which of these persons is entitled to claim Roberta
as a dependent? Explain your answer.
c. If Roberta saved all of her social security income and the other persons paid for the
shortfall in the same proportions as shown, which of these persons would be entitled to
claim Roberta as a dependent under a multiple support agreement? Explain your answer.
Problem 39:
Determine the amount of the standard deduction for each of the following taxpayers for tax year
2018:
a. Christina, who is single.
b. Adrian and Carol, who are filing a joint return. Their son is blind.
c. Peter and Elizabeth, who are married and file separate tax returns. Elizabeth will itemize
her deductions.
d. Karen, who earned $1,100 working a part-time job. She can be claimed as a dependent by
her parents.
e. Rodolfo, who is over 65 and is single.
f. Bernard, who is a nonresident alien with U.S. income.
g. Manuel, who is 70, and Esther, who is 63 and blind, will file a joint return.
h. Herman, who is 75 and a qualifying widower with a dependent child.
Problem 40:
Using the appropriate tax tables or tax rate schedules, determine the amount of tax liability in
each of the following instances:
a. A married couple filing jointly with taxable income of $32,991.
b. A married couple filing jointly with taxable income of $192,257.
c. A married couple filing separately, one spouse with taxable income of $43,885 and the
other with $56,218.
d. A single person with taxable income of $79,436.
e. A single person with taxable income of $297,784.
f. A head of household with taxable income of $96,592.
g. A qualifying widow with taxable income of $14,019.
h. A married couple filing jointly with taxable income of $11,216.
Problem 45:
Charles and Joan Thompson file a joint return. In 2017 they had taxable income of $92,370 and
paid tax of $14,571. Charles is an advertising executive, and Joan is a college professor. During
the fall 2018 semester, Joan is planning to take a leave of absence without pay. The Thompsons
expect their taxable income to drop to $70,000 in 2018. They expect their 2018 tax liability will
be $8,022, which will be the approximate amount of their withholding. Joan anticipates that she
will work on academic research during the fall semester.
During September, Joan decides to perform consulting services for some local businesses.
Charles and Joan had not anticipated this development. Joan is paid a total of $35,000 during
October, November, and December for her work.
What estimated tax payments are Charles and Joan required to make, if any, for tax year 2018?
Do you anticipate that the Thompsons will be required to pay an underpayment penalty when
they file their 2018 tax return? Explain your answer.
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