Arrabellia Cunningham is 24 years old and single, lives in an apartment with no dependents. Last year she earned $55,000 as a sales representative for Planning Associates. $3,910 of her wages was withheld for federal income taxes. In addition, she had interest income of $142. She takes the standard deduction. Calculate her taxable income, tax liability and tax refund or tax owed for 2018.

The Taxable income is $43,142

The Tax liability is $5,430.74

The Tax tax owed for 2018 is $1,520.74

Explanation:

To calculate the taxable income use the following formula

Taxable income = Earnings + Interest income - Standard Deduction

Earnings = $55,000

Interest income = $142

Standard Deduction = $12,000

Placing values in the formula

Taxable income = $55,000 + $142 - $12,000

Taxable income = $43,142

The Tax Liability can be calculated as follow

Tax Liability = 22% of Income above $38,700

Tax Liability = $4,453.50 + ( Taxable income - $38,700 ) x 22%

Tax Liability = $4,453.50 + ( ( $43,142 - $38,700 ) x 22%)

Tax Liability = $4,453.50 + $977.24

Tax Liability = $5,430.74

Tax owed for 2018 = Tax Liability - Tax withheld

Tax owed for 2018 = $5,430.74 - $3,910

Tax owed for 2018 = $1,520.74

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