Julian Thomas, who is single, goes to graduate school part-time and works as a waiter at the Bay Grill in San Francisco. During 2018, his gross income was $20,700 in wages and tips. He has decided to prepare his own tax return because he cannot afford the services of a tax expert. After preparing his return, he comes to you for advice. Here’s a summary of the figures that he has prepared thus far:

Gross income:

Wages.........................................................     $12,500

Tips.............................................................          8,200

Adjusted gross income (AGI) ....................   $20,700

Less: Itemized deductions............................  −2,300

                                                                          $18,400

Less: Standard deduction .....................      −12,000

Taxable income..........................................     $ 6,400

Julian believes that if an individual’s income falls below $20,350, the federal government considers him or her “poor” and allows both itemized deductions and a standard deduction.

1. Calculate Julian Thomas’s taxable income.  Assume that the standard deduction for a single taxpayer is $12,000, 

2. Discuss Julian’s errors in interpreting the tax laws, and explain the difference between itemized deductions and the standard deduction.

3. Julian has been dating Elizabeth Moore for nearly four years, and they are seriously thinking about getting married. Elizabeth has income and itemized deductions that are identical to Julian’s. How much tax would they pay as a married couple (using the filing status of married filing jointly and a standard deduction of $24,000) versus the total amount the two would pay as single persons (each using the filing status of single)? Strictly from a tax perspective, does it make any difference whether Julian and Elizabeth stay single or get married? Explain.