4. Mary W atson is 24 years old and single, lives in an apartment, and has no dependents. She expects to earn $50,000 as a sales assistant. $4,500 of her wages will be withheld for year 2014. She also expected to have interest income $500. Estimate her taxable income, tax liability, and tax refund or tax owed for year 2014 based on 2014 tax rates distributed in the class (personal exemption for 2014 is $3,950, and standard deduction is $6,200.)

Question

4. Mary W atson is 24 years old and single, lives in an apartment, and has no dependents. She expects to earn $50,000 as a sales assistant. $4,500 of her wages will be withheld for year 2014. She also expected to have interest income $500. Estimate her taxable income, tax liability, and tax refund or tax owed for year 2014 based on 2014 tax rates distributed in the class (personal exemption for 2014 is $3,950, and standard deduction is $6,200.)

Answer 1

To estimate Mary Watson's taxable income, tax liability, and tax refund or tax owed for the year 2014, we need to consider her various sources of income, deductions, and exemptions.

1. Start with Mary's earned income as a sales assistant: $50,000.
2. Subtract any withholdings from her wages: $50,000 - $4,500 = $45,500.
3. Add her interest income: $45,500 + $500 = $46,000. This is her total income before deductions.

Next, we need to calculate her deductions:
1. Subtract the standard deduction from her total income: $46,000 - $6,200 = $39,800.
2. Subtract the personal exemption: $39,800 - $3,950 = $35,850. This is her taxable income.

To calculate her tax liability, we need to use the tax rates for the year 2014. The tax rates are progressive, meaning different portions of income are taxed at different rates. Here's how it works:

1. The first $8,925 of taxable income is taxed at a rate of 10%.
2. The next $27,325 ($36,250 - $8,925) is taxed at a rate of 15%.
3. The remaining taxable income above $36,250 is taxed at 25%.

Based on Mary's taxable income of $35,850, we can calculate her tax liability as follows:

1. The first $8,925 is taxed at 10%: $8,925 * 0.10 = $892.50.
2. The remaining $26,925 ($35,850 - $8,925) is taxed at 15%: $26,925 * 0.15 = $4,038.75.

Therefore, her tax liability is $892.50 + $4,038.75 = $4,931.25.

To determine if Mary is eligible for a tax refund or if she owes additional taxes, we compare her tax liability to the total amount withheld from her wages during the year.

In this case, if the amount withheld for the year 2014 exceeds her tax liability ($4,931.25), she would receive a tax refund. If the amount withheld is less than her tax liability, she would owe additional taxes.

Note: This calculation is based on the information provided and the tax rates specified, but keep in mind that tax laws can vary, and there may be other factors that could affect the final result. It's always a good idea to consult a tax professional for accurate and personalized tax advice.