Item 5 of 5 (20 points) During the 2020 tax year, Sally Jones earns a salary of $600,000 and Bill Smith earns a salary of $600,000. Neither individual had any other income during the year, and neither can itemize deductions. Refer to the 2020 tax rate schedules and standard deduction table from Appendix D when answering the following items: a) Assume Sally and Bill each file a Form 1040 income tax return using a single filing status. Show your calculation of Sally or Bill's taxable income and the resulting tax. What is Sally or Bill's average tax rate as a single person? What is the combined tax liability for both Sally and Bill if they each file their returns as unmarried individuals? b) Sally and Bill are thinking of getting married in 2020 and filing a Form 1040 using the married filing joint filing status. Show your calculation of their projected taxable income and their resulting tax. Determine the difference between this tax amount and the combined tax liability that you calculated in part (a) above, and correctly identify the difference as a marriage penalty or marriage bonus/benefit. What is Sally and Bill's average tax rate as a couple filing a joint return? All else equal, would you advise Sally and Bill to get married before the end of the 2020 tax year? Appendix D Tax Rates 2020 Tax Rate Schedules Individuals Schedule X-Single Schedule Z-Head of Household If taxable in But but oner Uveri The taxis $ 0 S 9,875 10% of taxable income $ 9,878 $ 40,125 $982.50 plus 12% af the excess mver $9,825 $ 46,125 S 85,525 $4,612.50 plus 22% of the excess er $40,125 $ 85,595 S163.300 $14,605 50 plus 245 of the cross $85.525 $163,300 S907 350 $33,271.50 plus 325 of the cross crver $163,300 $207,350 $518,000 $47,367.50 plas 35% of the excess crver $207,350 $518,400) $156,285 375 of the excess trver $518,400 Ir taxable incum Bull Uyur over The taxi ; 0 $ $ 14,100 10% of taxable income S 14,10 $ 53,200 $1.410 plus 12% of the excess over S14,100 SSA, $ 95,500 4,162 plus 22% of the excess wers SBS, SOU $163,300 $13.158 plus 20% of the cross OVO 885.500 5163,300 $207,350 $21,80 plus 328 of the CRCON OVET SI63.00 $207,350 $518,400 S45,926 plus 35% of the excess over $207,350 $518,401 SI54,793 plus 27 of the excess Over S518,400 Schedule Y-2-Married Filing Separately Schedule Y-1-Married Filing Jolntly or Qualifying Widower) If taxable income Over: Hur not OFTE The tax la Ir taxable income is But not over: uver: The tax is: 5 0 S 19.750 10% of taxable income $ 19,750 S 30.250 $1,975 plus 128 of the excess over $19,750 $ 40,250 $171 (I $9,235 plus 22% of the excess over $811,250) $171,080 S321, KI $29,211 NA 24% of the excess ure 5171,050 5326,600 114.700 566,513 plus 325 of the excess over $326,600 5111,700 5622.050 591,735 plus 35% of the excess mver $414,200 $622,00 $167.300.30 pas les of the excess mer $622.050 5 0 $9,875 90% of taxable income $ 9,875 $ 40,125 5987 50 plus 12% of the excess Over $9.875 $ 40,125 $ 85,525 $1.617 50 plus 22% of the excess cwer 40,125 $ 85,525 $169.900 $14.5. plus 24% of the excess cor 5525 $163,31 $207.350) $13.271. Si plus ?28 of the excess Over $163.300 3207,350 5311,025 $17.367.50 plus 25% of the excess over $207.350 $511,0125 2,653.75 plus 37% of the excess cer X11,025 Append xD D-1 Estates and Trusts If taxable incum is But not over: urer: $ 2.000 The taxis 10% of taxable income $260 plus 34% of the excess over $2,600 $1,904 plus 25% of the excess over 59,450 53,129 plus 37% of the excess over 512.950 $ 9,450 $12.990 312.950 Tax Rates for Net Capital Gains and Qualified Dividends Rale Taxe Lacou Ilead of Iluusehuld Trusts und Estates Single 015 1595 2015 Murried Filing Jointly ${I-SNIMILI SAIIKIT 406,! SCI- Murried Filing Separately $I-SUICKKI $441,4111-$248, RIMI 524, IL- SI-SALKKI S4XK11-$441,450 $441,451- 553,6611-5469,1% $40.51+ 52651-$13,15 $13,151+ This role applies to the net capital gains and sualified dividends that all within the prof taxable income specified in the table et capital gains ad rashid didne minced in sale in for this parent Basic Standard Deduction Amounts Amount of Each Additional Standard Deduction for Taxpayers Who Are Age 65 or Blind 2019 2020 Amount Amount Married tapuy $1,300 $1,300 Single taxpayer head of houshold $1,650 $1,650 2019 2020 Filling Status Amount Amount Married ruling Jointly $24,100 $24.800 Qualifying Widow or Wider $24,400 $24.800 Married Paling Separately $12.200 $12,400 Head of household $19,350 STR.650 Single $12,201) $12.41 Foudriduris claimed as a depender o deretur, the 2020 standard deduction is the grede of (1) 51.1011er (2) 5150 pilas candidate allo scos de standard detection of those we are not dependeals. Exemption Amount 2019 54,200 "Used to qualifyagestive gross income test 2020 $ $4,300 Corporations Rate Taxable income All 21% Item 5 of 5 (20 points) During the 2020 tax year, Sally Jones earns a salary of $600,000 and Bill Smith earns a salary of $600,000. Neither individual had any other income during the year, and neither can itemize deductions. Refer to the 2020 tax rate schedules and standard deduction table from Appendix D when answering the following items: a) Assume Sally and Bill each file a Form 1040 income tax return using a single filing status. Show your calculation of Sally or Bill's taxable income and the resulting tax. What is Sally or Bill's average tax rate as a single person? What is the combined tax liability for both Sally and Bill if they each file their returns as unmarried individuals? b) Sally and Bill are thinking of getting married in 2020 and filing a Form 1040 using the married filing joint filing status. Show your calculation of their projected taxable income and their resulting tax. Determine the difference between this tax amount and the combined tax liability that you calculated in part (a) above, and correctly identify the difference as a marriage penalty or marriage bonus/benefit. What is Sally and Bill's average tax rate as a couple filing a joint return? All else equal, would you advise Sally and Bill to get married before the end of the 2020 tax year? Appendix D Tax Rates 2020 Tax Rate Schedules Individuals Schedule X-Single Schedule Z-Head of Household If taxable in But but oner Uveri The taxis $ 0 S 9,875 10% of taxable income $ 9,878 $ 40,125 $982.50 plus 12% af the excess mver $9,825 $ 46,125 S 85,525 $4,612.50 plus 22% of the excess er $40,125 $ 85,595 S163.300 $14,605 50 plus 245 of the cross $85.525 $163,300 S907 350 $33,271.50 plus 325 of the cross crver $163,300 $207,350 $518,000 $47,367.50 plas 35% of the excess crver $207,350 $518,400) $156,285 375 of the excess trver $518,400 Ir taxable incum Bull Uyur over The taxi ; 0 $ $ 14,100 10% of taxable income S 14,10 $ 53,200 $1.410 plus 12% of the excess over S14,100 SSA, $ 95,500 4,162 plus 22% of the excess wers SBS, SOU $163,300 $13.158 plus 20% of the cross OVO 885.500 5163,300 $207,350 $21,80 plus 328 of the CRCON OVET SI63.00 $207,350 $518,400 S45,926 plus 35% of the excess over $207,350 $518,401 SI54,793 plus 27 of the excess Over S518,400 Schedule Y-2-Married Filing Separately Schedule Y-1-Married Filing Jolntly or Qualifying Widower) If taxable income Over: Hur not OFTE The tax la Ir taxable income is But not over: uver: The tax is: 5 0 S 19.750 10% of taxable income $ 19,750 S 30.250 $1,975 plus 128 of the excess over $19,750 $ 40,250 $171 (I $9,235 plus 22% of the excess over $811,250) $171,080 S321, KI $29,211 NA 24% of the excess ure 5171,050 5326,600 114.700 566,513 plus 325 of the excess over $326,600 5111,700 5622.050 591,735 plus 35% of the excess mver $414,200 $622,00 $167.300.30 pas les of the excess mer $622.050 5 0 $9,875 90% of taxable income $ 9,875 $ 40,125 5987 50 plus 12% of the excess Over $9.875 $ 40,125 $ 85,525 $1.617 50 plus 22% of the excess cwer 40,125 $ 85,525 $169.900 $14.5. plus 24% of the excess cor 5525 $163,31 $207.350) $13.271. Si plus ?28 of the excess Over $163.300 3207,350 5311,025 $17.367.50 plus 25% of the excess over $207.350 $511,0125 2,653.75 plus 37% of the excess cer X11,025 Append xD D-1 Estates and Trusts If taxable incum is But not over: urer: $ 2.000 The taxis 10% of taxable income $260 plus 34% of the excess over $2,600 $1,904 plus 25% of the excess over 59,450 53,129 plus 37% of the excess over 512.950 $ 9,450 $12.990 312.950 Tax Rates for Net Capital Gains and Qualified Dividends Rale Taxe Lacou Ilead of Iluusehuld Trusts und Estates Single 015 1595 2015 Murried Filing Jointly ${I-SNIMILI SAIIKIT 406,! SCI- Murried Filing Separately $I-SUICKKI $441,4111-$248, RIMI 524, IL- SI-SALKKI S4XK11-$441,450 $441,451- 553,6611-5469,1% $40.51+ 52651-$13,15 $13,151+ This role applies to the net capital gains and sualified dividends that all within the prof taxable income specified in the table et capital gains ad rashid didne minced in sale in for this parent Basic Standard Deduction Amounts Amount of Each Additional Standard Deduction for Taxpayers Who Are Age 65 or Blind 2019 2020 Amount Amount Married tapuy $1,300 $1,300 Single taxpayer head of houshold $1,650 $1,650 2019 2020 Filling Status Amount Amount Married ruling Jointly $24,100 $24.800 Qualifying Widow or Wider $24,400 $24.800 Married Paling Separately $12.200 $12,400 Head of household $19,350 STR.650 Single $12,201) $12.41 Foudriduris claimed as a depender o deretur, the 2020 standard deduction is the grede of (1) 51.1011er (2) 5150 pilas candidate allo scos de standard detection of those we are not dependeals. Exemption Amount 2019 54,200 "Used to qualifyagestive gross income test 2020 $ $4,300 Corporations Rate Taxable income All 21%
