Mary Watson is 24 years old and single, lives in an apartment, and has no depend

Question

Mary Watson is 24 years old and single, lives in an apartment, and has no dependents. Last year she earned $45,000 as a sales assistant. As Mary was paid, a total of $3,910 was withheld for federal income taxes. In addition, she had interest income of $142. SHOW YOUR WORK.
1. What is Mary’s taxable income?
2. What is Mary’s tax liability? For standard deduction and exemption, use the amounts in your textbook for 2014. For liability, use the 2014 tax table at the back of your textbook.
3. What is the amount owed or refund?

Explanation / Answer

1. Mary’s taxable income

Adjusted gross income = salary + interest income

= $45000 + $142

   = $45142

less: standard deduction =$6200

less: personal exemption = $3950

Taxable income = $34992

2. Mary’s tax liability = 15% * ($34992 - $9076) = $3887.4

10% * 9075 = $907.5

$4794.9

3. Amount owed = $4794.9 - $3910

= $884.9

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