Use the 2020 tax information below to answer this question.
Tax Rates
Rate Single Married Filing Jointly
10% $0 - $9,875 $0 - $19,750
12% $9,875 - $40,125 $19,750 - $80,250
22% $40,125 - $85,525 $80,250 - $171,050
24% $85,525 - $163,300 $171,050 - $326,600
32% $163,300 - $207,350 $326,600 - $414,700
35% $207,350 - $518,400 $414,700 - $622,050
37% $518,400 or more $622,050 or more
Standard Deductions
Single Married Filing Jointly
$12,400 $24,800
Diamond is a 27-year-old, full-time college student sharing rent with a roommate who is filing separately from Diamond. Diamond made $12,800 at her part-time job in 2020. She does not have any adjustments or itemized deductions.
Find Diamond's taxable income. Round to the nearest cent.
$
Diamond qualifies for a $231 earned income tax credit. Compute Diamond's tax owed. Round to the nearest cent.
$
Suppose Diamond's W-2 says that she paid $320 in taxes in 2020. Does Diamond owe taxes, or is she due a refund?
Has to pay
Refund
Calculate Diamond's taxes owed or refund. Round your answer the nearest cent.
$
To calculate Diamond's taxable income, we need to subtract the standard deduction from her income.
Taxable income = Diamond's income - Standard deduction
Taxable income = $12,800 - $12,400
Taxable income = $400
Diamond's taxable income is $400.
Next, we need to calculate Diamond's tax owed using the tax rates.
Diamond falls under the 10% tax rate as her taxable income falls within the range of $0 - $9,875 for single filers.
Tax owed = Taxable income * Tax rate
Tax owed = $400 * 0.10
Tax owed = $40
Diamond's tax owed is $40.
If Diamond's W-2 says that she paid $320 in taxes in 2020, it means she has already paid more taxes than what she owes. Hence, Diamond is due a refund.
To calculate the refund, we subtract the tax owed from the taxes paid.
Refund = Taxes paid - Tax owed
Refund = $320 - $40
Refund = $280
Diamond is due a refund of $280.