Accounting for Taxes (34221)
PSUT| 2nd Sem. 2021/2022
Individuals’ Taxation – US Tax Code
Case.1 (File Status: Single): Adam is a single US taxpayer. He has the following information related to his
tax file for the year 2018 (amounts in $)
-
Gross Income: 165’000
Accepted Deductions for Adjusted Gross Income: 40’800
Itemized Deductions: 17’400
Personal Exemption: 3’700
Standard deduction (as indicated on the attached table).
Tax Prepayment: 7’600
Tax Rate: $ 0 – 10’000: 10%; $10’001 – 72’500: 15%; $72’501 – 146’500: 25%
Required: Calculate Tax Due/Refund for the year 2018.
Case 1: Solution – Individuals’ Taxation – US Tax Code
In this case, the tax year (2018) is a supposition (for teaching & training purposes only)
Item
US$
Gross Income
Less: Deductions for Adjusted Gross Income
Adjusted Gross Income
Less: Greater of Std. Deduction or Itemized Deduction
Less: Personal Exemption
Taxable Income
Tax Liability
Less: Prepaid Income Tax
Income Tax Due (Refund)
Works
165’000
(40’800)
124’200
(17’400) Std. greater than Itemized
(3’700)
103’100
18’025(1)
(7’600)
10’425 This amount to be paid
to the tax authorities
(1)10’000*10%+62’500*15%+30’600*25%
1
Taxation (43221)
| Accounting Dept., PSUT, 2022
Case.2 (File Status: Married Jointly): Jimmy and Sarah are US married couples. They agreed to have
“Married Filing Jointly” tax status. The following information available about their income and other tax
related information for the year 2016:
-
Gross Income: Jimmy $196’300, Sarah $205’850
Accepted Deductions for Adjusted Gross Income: 82’400
Itemized Deductions (Jointly): 32’860
Tax Prepayment taxes: Jimmy 12’750, Sarah 14’090
Tax credit (Jointly): $6’500
Required: Use the following tax tables to calculate Tax Due/Refund for the year 2016
Filing Status
Standard Deduction
Personal Exemption
Single
$6,300
$4,050
Married Filing Jointly
$12,600
$4,050 Each
Married Filing Separately
$6,300
$4,050
Head of Household
$9,300
$4,050
Qualifying Widow(er)
$12,600
$4,050
2016 Tax Brackets (for taxes due in April 16, 2017)
Tax Rate
Single
Head of household
10%
15%
25%
28%
33%
35%
39.6%
Up to $9,325
$9,326 to $37,950
$37,951 to $91,900
$91,901 to $191,650
$191,651 to $416,700
$416,701 to $418,400
$418,401 or more
Up to $13,350
$13,351 to $50,800
$50,801 to $131,200
$131,201 to $212,500
$212,501 to $416,700
$416,701 to $444,550
$444,551 or more
Tax rate
Married filing jointly or qualifying widow
Married filing separately
10%
15%
25%
28%
33%
35%
39.6%
Up to $18,650
$18,651 to $75,900
$75,901 to $153,100
$153,101 to $233,350
$233,351 to $416,700
$416,701 to $470,700
$470,701 or more
Up to $9,325
$9,326 to $37,950
$37,951 to $76,550
$76,551 to $116,675
$116,676 to $208,350
$208,351 to $235,350
$235,351 or more
2
Taxation (43221)
| Accounting Dept., PSUT, 2022
Case 2: Solution – Individuals’ Taxation (Married-Jointly Filing) – US Tax Code
In this case, the tax year (2016) is a supposition (for teaching & training purposes only)
Item
US$
Gross Income
Less: Deductions for Adjusted Gross Income
Adjusted Gross Income
Less: Greater of Std. Deduction or Itemized Deduction
Less: Personal Exemption
Taxable Income
Tax Liability
Less: Prepaid Income Tax
Less: Tax credit
Income Tax Due (Refund)
(2)
402’150
(82’400)
319’750
(32’860)
(8’100)
278’790
67’217(2)
(26’840)
(6’500)
Works
196’300+205’850
Std. vs. Itemized
(4’050*2)
(12’750+14’090)
33’877 This amount to be paid
to the tax authorities
Taxable Income: $278’790
Tax Liability Calculation
Category/Amount
18’650
57’250 (75’900-18’650)
77’200 (153’100-75’900)
80’250 (233’350-153’100)
45’440 (278’790-233’350)
278’790
3
Taxation (43221)
Tax Rate %
10%
15%
25%
28%
33%
Total
Tax Amount
1’865
8’587
19’300
22’470
14’995
67’217
| Accounting Dept., PSUT, 2022