Tim and Tammy are the same age and have greatly enjoyed their life. They began taking Social Security benefits at age 67, six (6) years ago. They are living off their benefits and a small amount ($1,050) of municipal bond interest. They have been able to save money in an IRA which they have contributed to over the years. The balance at the end of previous year was $640,000. Please answer QUESTION 2

1. Assuming their combined Social Security benefits are $36,500 in current year, how much of their Social Security benefit is taxable? How much federal income tax do they have for current year? Only consider their municipal bond income and their Social Security.

2. Assume the same facts as in question 1, but also assume that Tammy took a job making $21,000 in current year. They do not need the money, but Tammy wanted to help out and get out of the house. How much of their Social Security benefit is taxable? How much federal income tax do they have for current year?