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× > -::-MindTap . Cengage Lear × ? Secure https:// g cengage com /static/ b uindex.html?nbid-832861&nbN; deld. 320 47471&deploym; MINDTAP Assessment activity: Chapter 03 - Prepraring Your Taxes Back to Assignment Keep the Highest: /5 Attempts 5. Steps to taxable income and tax iability owed What steps should you take when completing a tax return? When preparing a tax retun, it is important to complete each step in the order prescribed. Cick in each entry field then type the prescribed step. Step A: Determine Adjusted Gross Income Step B: Calculate Taxable Income Larger of itemized deductions or standard deduction Step C: Calculate Tax Liability Cakculate tax using tax tables or tax rate schedules Cootinne without savingExplanation / Answer
Steps for determining tax liability:
Step A: Determine adjusted gross income
Gross income
Less:
Adjustments (also called above-the-line deductions)
Equals:
Adjusted Gross income
Less:
Step B: Calculate taxable income
Larger of Itemized deductions or standard deduction
Less:
Exemptions
Equals:
Taxable income
Step C: Calculate tax liability
Calculate tax using tax table or tax rate schedule
Less:
Credits
Plus:
Other taxes
Equals:
Total tax
Other taxes includes self employment tax, unreported social security and Medicare tax, Additional tax on IRS, Household employment tax, etc.
Step A: Determine adjusted gross income
Gross income
Less:
Adjustments (also called above-the-line deductions)
Equals:
Adjusted Gross income
Less:
Step B: Calculate taxable income
Larger of Itemized deductions or standard deduction
Less:
Exemptions
Equals:
Taxable income
Step C: Calculate tax liability
Calculate tax using tax table or tax rate schedule
Less:
Credits
Plus:
Other taxes
Equals:
Total tax
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