Tom and Betsy, who are married filing jointly, reported a standard deduction of $11,400 on their 2010 tax return. They paid $500 to the state for income taxes in 2010. In 2011, they received a $125 refund of state taxes paid in 2010. What is the amount that Tom and Betsy need to report on their 2011 tax return?

Question

Tom and Betsy, who are married filing jointly, reported a standard deduction of $11,400 on their 2010 tax return. They paid $500 to the state for income taxes in 2010. In 2011, they received a $125 refund of state taxes paid in 2010. What is the amount that Tom and Betsy need to report on their 2011 tax return?

A. $0
B. $125
C. $375
D. $500

and for this one i'm doing 500 - 125 and i'm getting C as my answer but according to my teacher its WRONG

Answer 1

To determine the amount that Tom and Betsy should report on their 2011 tax return, we need to consider a few factors.

First, since they are married filing jointly, they reported a standard deduction of $11,400 on their 2010 tax return. However, this information is not relevant to calculating the amount to report on their 2011 tax return.

Secondly, they paid $500 to the state for income taxes in 2010. This means that in 2010, they had a deduction of $500 for state taxes paid.

In 2011, they received a $125 refund of state taxes paid in 2010. This refund does not need to be reported as income on their 2011 tax return, as it is simply a return of previously paid taxes.

Therefore, the correct amount that Tom and Betsy need to report on their 2011 tax return is $0 (Option A). They do not need to include the $125 refund as income since it was a return of previously paid taxes and not additional income.