Quiz 2: Expanded Tax Formula, Forms 1040a and 1040, and Basic Concepts
Income tax is the tax paid by individuals, household, and business entities to the government on the earnings that they have. The rules and regulations are supervised by IRS which is a government body. Form 1040 is the expanded and biggest tax form followed by 1040a.AGI is adjusted gross income which is calculated by subtracting the allowed deductions from the gross income. Deductible is the amount which is allowed to be deducted from the income of the individual and is not the part of taxable income.AGI is aggregated gross income. For AGI deductions are those deductions which are permitted to take even when AGI calculations are not done. The three examples of for AGI deductions are as follows: • The expenditures which are related to work, made by teachers. • The expenses made for premium paid for insuring office building.• The expenses made for maintenance of the work premise.
Use Form 1040A. Adjusted Gross Income is $77,100; Tax Liability is $7,379; Child tax credit is $1,000; Total Tax net of Credits is $6,379; Refund is $8,231.
Income tax is the tax paid by individuals, household and business entities to the government on the earnings that they have. The rules and regulations are supervised by IRS which is a government body. Income tax return is basically the form which the taxpayer has to fill and fill information about the details of his earnings and tax paid, if any. Form 1040 is the expanded and biggest tax form followed by 1040A. These forms have several sections which are related to earning, deduction, credits and expenses. Filing status is the category under which the taxpayer qualifies and fills the form related to that category. The income-tax payers could file their income-tax under different status which are dependent on circumstances of the tax payer. The five-filing status are as follows: • Single where an unmarried person files the return and he should also not qualify under category of head of household and widow(er). • Married and filing jointly i. e. married couple is filing return jointly and they can even file jointly even after separation till divorce is not final. • Married and filing separately i. e. married couple is filing their returns separately. Filing as head of the household. When a person wants to qualify for head of household filing status then it is necessary that the person should have certain qualifications as the person should be citizen of country or should be resident in country U for that year. The person should be unmarried. The person should not be widow or widower. The person should maintain a household for more than half year in the country. • Filing with status of widow or widower and has dependent child. If taxpayer has not remarried then he can file under this status till two years from the death of spouse. The person should have satisfied all conditions of filling jointly when spouse was alive.