Question

Sample IRS Tax Schedule, 20xx 2 GROSS TAXABLE EARNINGS, E TAXES DUE 3 Single 4 0 to 6,999.99 0.1E 5 7,000 to 28,399.99 0.15E-350 6 28,400 to 68,799.99 0.25E-3,190 7 68,800 to 143,499.99 0.28E-5,254 8 143,500 to 311,949.99 0.33E-12,429 9 311,950 and over 0.35E18,668 10 Head of Household 11 0 to 9,999.99 0.10E 12 10,000 to 38,049.99 0.15E-500 13 38,050 to 98,249.99 0.25E-4,305 14 98,250 to 159,099.99 0.28E-7,252.50 15 159,100 to 311,949.99 0.33E-15,207.50 16 311,950 and over 0.35E21,346.50 17 Married Filing Jointly 18 0 to 13,999.99 0.10E 19 14,000 to 56,799.99 0.15E-700 20 56,800 to 114,649.99 0.25E-6,380 21 114,650 to 174,699.99 0.28E-9,819.50 22 174,700 to 311,949.99 0.33E-18,554.50 23 311,950 and over 0.35E24,793.50 24 Married Filing Separately 25 0 to 6,999,99 0.10E 26 7,000 to 28,399.99 27 28,400 to 57,324.99 28 57,325 to 87,349.99 0.15E-350 0.25E-3,190 0.28E-4,909.75 29 87,350 to 155,974.99 0.33E-9,277.25 30 155,975 and over 0.35E12,396.75 Joshua Smith's income was $56,500. Compare his taxes due if he files as single to the amount due if he files as head of household. Show your work or explain how you got your answer. (4 points)

Answer 1

To determine Joshua Smith's taxes due based on the tax schedule provided, we will calculate his taxes owed for both filing statuses: Single and Head of Household.

Filing as Single

1. Income: $56,500

2. Tax bracket: He falls into the third bracket:

   • 28,400 to 68,799.99

3. Tax calculation:

   • Base tax from the previous brackets:
     • Up to 28,399.99: $350 (from bracket 2)
     • 28,400 to 56,500: This is 28,500 ($56,500 - $28,400).
     • Tax rate: 0.25 (from bracket 3)
     • Tax due for this range: 28,500 * 0.25 = $7,125

4. Total tax due:

   • Total tax = Base tax + Tax from current bracket = $350 + $7,125 = $7,475

Filing as Head of Household

1. Income: $56,500

2. Tax bracket: He falls into the third bracket:

   • 38,050 to 98,249.99

3. Tax calculation:

   • Base tax from the previous brackets:
     • Up to 38,049.99: $500 (from bracket 12)
     • 38,050 to 56,500: This is 18,450 ($56,500 - $38,050).
     • Tax rate: 0.25 (from bracket 13)
     • Tax due for this range: 18,450 * 0.25 = $4,612.50

4. Total tax due:

   • Total tax = Base tax + Tax from current bracket = $500 + $4,612.50 = $5,112.50

Comparison of Taxes Due

• Taxes Due if Filing as Single: $7,475
• Taxes Due if Filing as Head of Household: $5,112.50

Conclusion

Joshua Smith would owe $7,475 if he files as Single and $5,112.50 if he files as Head of Household. Therefore, he should file as Head of Household to save on taxes. The difference in taxes due is $7,475 - $5,112.50 = $2,362.50.