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Liberty Tax Service Online Basic Income Tax Course. Lesson 6

Liberty Tax Service Online Basic Income Tax Course. Lesson 6 . HOMEWORK CHAPTER 5. HOMEWORK 1: Henry H. (SSN 288-40-1920, born 3/18/1967) and Helen N. Howards (SSN 201-21-2121, born 2/10/1969) are married and live at 137 Grover Lane, Denver, CO 80202. They are filing a joint return.

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Liberty Tax Service Online Basic Income Tax Course. Lesson 6

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  1. Liberty Tax Service Online Basic Income Tax Course.Lesson 6

  2. HOMEWORK CHAPTER 5 HOMEWORK 1: Henry H. (SSN 288-40-1920, born 3/18/1967) and Helen N. Howards (SSN 201-21-2121, born 2/10/1969) are married and live at 137 Grover Lane, Denver, CO 80202. They are filing a joint return. Henry is an industrial worker and Helen is a candy maker. They have one child, Herbert (SSN 249-36-4987, born 5/19/1997) whom they claim as their dependent and who is a qualifying child for the child tax credit. They received $90 interest on a CD at Oakwood Bank. Their itemized deductions on their 2007 joint return were $10,850. Using the following documents, complete the front page of Form 1040 and on the second page, line 62. Complete Schedule B, if needed.

  3. HOMEWORK CHAPTER 5

  4. HOMEWORK CHAPTER 5

  5. HOMEWORK CHAPTER 5

  6. HOMEWORK CHAPTER 5

  7. HOMEWORK CHAPTER 5

  8. HOMEWORK CHAPTER 5

  9. HOMEWORK CHAPTER 5 Homework 1 - Answer

  10. HOMEWORK CHAPTER 5 Homework 1 - Answer

  11. HOMEWORK CHAPTER 5 Homework 1 - Answer

  12. HOMEWORK CHAPTER 5 HOMEWORK 2: Frank S. (SSN 061-38-2625, born 11/9/1972) and Karen C. Walt (SSN 078-41-4662, born 4/28/1977) are married filing a joint return and live at 6 Red Fox Parkway, Hialeah, FL 33002. Last year they filed a joint return and did not itemize their deductions. Frank is a greenhouse engineer and Karen is an executive assistant. They have two children, Kara (SSN 031-42-3800, born 8/3/1997) and Abigail (SSN 092-46-5921, born 2/1/2002) Walt, and both are qualifying children for the child tax credit. Complete the front page of Form 1040, line 62 and Schedule B, if needed, for the Walts.

  13. HOMEWORK CHAPTER 5

  14. HOMEWORK CHAPTER 5

  15. HOMEWORK CHAPTER 5

  16. HOMEWORK CHAPTER 5

  17. HOMEWORK CHAPTER 5

  18. HOMEWORK CHAPTER 5 Homework 2 - Answer

  19. HOMEWORK CHAPTER 5 Homework 2 - Answer

  20. HOMEWORK CHAPTER 5 Homework 2 - Answer

  21. HOMEWORK CHAPTER 5 Homework 2 - Answer

  22. Chapter 6: Standard Deduction and Your Income tax Chapter Content Standard Deduction Figuring Your Income Tax Key Ideas Objectives Learn About Standard Deduction Determine Who Can Use The Standard Deduction Know How to Figure Your Income Tax

  23. Deductions Deductions • Amounts that can be subtracted from AGI to figure taxable income. • You may be able to subtract either the standard deduction or itemized deductions. • When allowed to make the choice, use the method that gives you the lower tax.

  24. Standard Deduction Standard Deduction • Amount that reduces the amount of income on which you are taxed. • Benefits in that it eliminates need to itemize actual deductions. • Entered on line 40 of Form 1040.

  25. Standard Deduction The standard deduction depends on: • Filing status • Whether you are 65 or older and/or are blind. • Whether you can be claimed as a dependent on another taxpayer’s return. Higher if you are 65 or older and/or are blind. • Refer to Tables 6-1, 6-2, and 6-3 to figure standard deductions.

  26. Standard Deduction Form 1040, Page 2

  27. Standard Deduction

  28. Standard Deduction

  29. Standard Deduction

  30. Standard Deduction – Problem 1 George is 54 years old and is married to Jenni, age 51. They are filing a joint return (neither is blind or claimed as a dependent on another return). What is their standard deduction? a. $13,000 b. $10,900 c. $ 5,450

  31. Standard Deduction – Problem 1 George is 54 years old and is married to Jenni, age 51. They are filing a joint return (neither is blind or claimed as a dependent on another return). What is their standard deduction? b. $10,900

  32. Standard Deduction – Problem 1 Form 1040, Page 2

  33. Standard Deduction – Problem 2 Bob and Betty are both over 65 years old (born before January 2, 1944) and are filing a joint return. Neither is blind nor claimed as a dependent on another return. They check the appropriate boxes on line 39a and enter 2 in the box. According to Table 6-2, what is their standard deduction? a. $13,000 b. $11,950 c. $10,900

  34. Standard Deduction – Problem 2 Bob and Betty are both over 65 years old (born before January 2, 1944) and are filing a joint return. Neither is blind nor claimed as a dependent on another return. They check the appropriate boxes on line 39a and enter 2 in the box. According to Table 6-2, what is their standard deduction? a. $13,000 Form 1040, Page 2 2

  35. Standard Deduction – Problem 3 Michael is single and claimed as an exemption on his parents' 2008 tax return. He has interest income of $780 and wages of $150. He has no itemized deductions. Using Table 6-3, what is Michael’s standard deduction? a. $5,450 b. $ 900 c. None of the above

  36. Standard Deduction – Problem 3 Michael is single and claimed as an exemption on his parents' 2007 tax return. He has interest income of $780 and wages of $150. He has no itemized deductions. Using Table 6-3, what is Michael’s standard deduction? b. $ 900

  37. Standard Deduction – Problem 3

  38. Standard Deduction – Problem 4 Daniel, a 22-year-old full-time college student, is claimed on his parents’ 2008 tax return. Daniel is married and files a separate return. His wife does not itemize deductions on her separate return. Daniel has $200 in interest income and wages of $3,800. He has no itemized deductions. Using Table 6-3, what is Daniel’s standard deduction? a. $ 900 b. $5,450 c. $4,100

  39. Standard Deduction – Problem 4 Daniel, a 22-year-old full-time college student, is claimed on his parents’ 2008 tax return. Daniel is married and files a separate return. His wife does not itemize deductions on her separate return. Daniel has $200 in interest income and wages of $3,800. He has no itemized deductions. Using Table 6-3, what is Daniel’s standard deduction? c. $4,100

  40. Standard Deduction – Problem 4

  41. Standard Deduction Most taxpayers have a choice of either taking the standard deduction or itemizing their deductions. You are NOT eligible to take the standard deduction if: • You are married and filing a separate return, and your spouse itemizes deductions, or • You are a nonresident or dual-status alien during the year.

  42. Standard Deduction Higher Standard Deduction for Real Estate Taxes For 2008, your standard deduction is increased by the state and local real estate taxes you paid, up to $500 ($1,000 if married filing jointly). The real estate taxes must be taxes that would have been deductible on Schedule A if you had itemized your deductions (covered in Chapter 8). Higher Standard Deduction for Net Disaster Loss For 2008, your standard deduction is increased by your net disaster loss. Your net disaster loss is your personal casualty losses from a federally declared disaster minus any personal gains. Casualty losses are covered in Chapter 13. Standard Deduction Amount Check the box on line 39c if you are claiming the standard deduction and the amount includes real estate taxes or a net disaster loss. 42

  43. Exemptions • For most taxpayers, the exemption amount is determined by multiplying $3,500 (for 2008) by the number of exemptions (personal exemptions plus dependent exemptions) entered on line 6d. Enter your taxable income on line 43 of Form 1040.

  44. Your Income Tax & Withheld Taxes Figuring Income Tax Taxable income = AGI minus standard or itemized deductions and exemptions. 1. If no adjustments, AGI, line 37 is the same as total income on line 22. 2. Exemption amount is determined by multiplying the number of exemptions on line 6d of Form 1040 by $3,500 (line 42). 3. Enter your taxable income on line 43 of Form 1040.

  45. Your Income Tax & Withheld Taxes There are various methods for computing your tax. Depends on: • amount of your taxable income • whether required to use Schedule D, Capital Gains and Losses, to report a capital gain. If not reporting capital gain income or qualified dividends, use either the Tax Table or the Tax Rate Schedules to determine your income tax.

  46. FIGURING YOUR INCOME TAX After your taxable income reaches a certain level, each additional dollar is taxed at a progressively higher rate. • Your tax is based on filing status and taxable income. • Capital gains (income from the sale of property such as stocks, etc.) and qualified dividends are taxed at different rates.

  47. FIGURING YOUR INCOME TAX The tax computation methods used by most taxpayers depend on the amount of taxable income reported on line 43 of Form 1040. • Do not use AGI to determine the tax computation method. • Figure your tax on line 44. Form 1040, Page 2

  48. TAX TABLE Use if taxable income is less than $100,000. • Taxable income is arranged in rows of taxable income groups. Each group is called a bracket. • Filing status is arranged in columns. • Use MFJ column for QW. • Tax on the taxable income is found where income bracket row and filing status column meet.

  49. TAX TABLE – Problem 1 Cliff and Kate are married filing a joint return. Their taxable income on Form 1040, line 43 is $32,704. They will use the Tax Table. How much tax are Cliff and Kate liable for on their income of $32,704? a. $4,009 b. $4,106 c. $4,525

  50. TAX TABLE – Problem 1 Cliff and Kate are married filing a joint return. Their taxable income on Form 1040, line 43 is $32,704. They will use the Tax Table. How much tax are Cliff and Kate liable for on their income of $32,704? b. $4,106

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