FOR YEAR 2021 Joyce, a single parent, lives in an apartment with her two minor children (ages 8 and 10), whom she supports. Joyce earns
FOR YEAR 2021
Joyce, a single parent, lives in an apartment with her two minor children (ages 8 and 10), whom she supports. Joyce earns $33,000 during 2021. She uses the standard deduction and files as a head of household.
Round all computations to the nearest dollar.
Click to access Earned Income Credit and Phaseout Percentages Table and the tax rates schedules.
a. Calculate the amount, if any, of Joyce's earned income credit.
b. During the year, Joyce is offered a new job that has greater future potential than her current job. If she accepts the job offer, her earnings for the year will be $39,000; however, she is afraid she will not qualify for the earned income credit. Determine the increase or decrease in Joyce's net cash flow if she accepts the new job. Since the child tax credit will be the same under either scenario, you can ignore it for purposes of this analysis. Use the Tax Rate Schedule when computing her income tax.
of the amount over $ 0 14,200 2021 Tax Rate Schedules Single-Schedule X Head of householdSchedule Z If taxable of the If taxable income is: But not amount income is: But not Over- over- The tax is: over Over- over- The tax is: $ 0 $ 9,950 ........ 10% $ 0 $ 0 $ 14,200 ......... 10% 9,950 40,525 $ 995.00 + 12% 9,950 14,200 54,200 $ 1,420.00 + 12% 40,525 86,375 4,664.00 + 22% 40,525 54,200 86,350 6,220.00 + 22% 86,375 164,925 14,751.00 + 24% 86,375 86,350 164,900 13,293.00 + 24% 164,925 209,425 33,603.00 + 32% 164,925 164,900 209,400 32,145.00 + 32% 209,425 523,600 47,843.00 + 35% 209,425 209,400 523,600 46,385.00 + 35% 523,600 157,804.25 + 37% 523,600 523,600 156,355.00 + 37% Married filing jointly or Qualifying widow(er) Married filing separately-Schedule Y-2 Schedule Y-1 If taxable of the If taxable income is: But not amount income is: But not Over- over- The tax is: over- Over- over The tax is: $ 0 $ 19,900 ........ 10% $ 0 $ 0 $ 9,950 ......... 10% 19,900 81,050 $ 1,990.00 + 12% 19,900 9,950 40,525 $ 995.00 + 12% 81,050 172,750 9,328.00 + 22% 81,050 40,525 86,375 4,664.00 + 22% 172,750 329,850 29,502.00 + 24% 172,750 86,375 164,925 14,751.00 + 24% 329,850 418,850 67,206.00 + 32% 329,850 164,925 209,425 33,603.00 + 32% 418,850 628,300 95,686.00 + 35% 418,850 209,425 314,150 47,843.00 + 35% 628,300 168,993.50 + 37% 628,300 314,150 84,496.75 + 37% 54,200 86,350 164,900 209,400 523,600 of the amount over $ 9,950 40,525 86,375 164,925 209,425 314,150 Exhibit 13.2 Earned Income Credit and Phaseout Percentages Tax Year 2021 Earned Income Base Amount Credit Percentage Maximum Credit Phaseout Base Phaseout Percentage Phaseout En at Income $ 9,820 10,640 14,950 14,950 15.30 34.00 40.00 $1,502 3,618 5.980 6,728 $16,610 25,470 25,470 25,470 15.30 15.98 21.06 21.06 $26,430 48,108 53,865 57,414 45.00 15.30 Number of Qualifying Children Married, Filing Jointly No children One child Two children Three or more children Other Taxpayers No children One child Two children Three or more children Married, Filing Jointly No children One child Two children Three or more children Other Taxpayers No children One child Two children Three or more children $ 9,820 10,640 14,950 14,950 15.30 34.00 40.00 45.00 $1,502 3,618 5,980 6,728 $11,610 19,520 19,520 19,520 15.98 21.06 21.06 $21,430 42,158 47,915 51,464 2020 $ 7,030 10,540 14,800 14,800 7.65 34.00 40.00 45.00 $ 538 3,584 5.920 6,660 $14,680 25,220 25,220 25,220 7.65 15.98 21.06 21.06 $21,710 47,646 53,330 56,848 $ 7,030 10,540 14,800 14,800 7.65 34.00 40.00 45.00 $ 538 3,584 5.920 6,660 $ 8,790 19,330 19,330 19,330 7.65 15.98 21.06 21.06 $15,820 41,756 47.440 50,954 Keeps Old Job Takes New Job Tax calculation: Salary $33,000 $39,000 Less: standard deduction Taxable income $ $ Income tax Lolli $ Less: earned income credit Net tax due or refund After-tax cash flow: Salary $33,000 $39,000 Less net tax due or Add refund After-tax cash flow $ Net in cash flow if accept new job
