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Calculation of Taxable Income of a Person Who Works for a Company

Question

Rosemary is single and works for Big B Corporation. Her only income consists of her Big B salary and interest on a saving account. During the year, she has $400 withheld from her salary for state income taxes and $7800 for federal income taxes. Her brother provides her with the following calculation of her taxable income and income tax liability:

Salary                                                                    $36,000
Interest income                                                        $3,100
Les: State tax withheld                                                (400)
Equals: Gross Income                                              $38,700
Less:  Deduction for adjusted Gross income
Standard deduction                                                   (5,450)
Equals: Taxable income                                            $33,250

Income tax liability ($33,250 × 25%)                           $8,313
Less: federal withholding                                            (7,800)
Equals: Tax due                                                            $513

Explain the errors that Rosemary’s brother has made in calculation het taxable income and/or her income liability.

Use the calculation by:
A.     tax tables 2012
B.     Tax rate schedules 2012

Summary

The question belongs to Finance and it is about calculating the taxable gross income of a person working for a company and gets interest from a savings account. The calculations have been given in the solution in detail.

Total Word Count 116

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