Question

TAXPAYER INFORMATION

1. Phillip and Claire Kirkland, ages 45 and 43, are married and live at 584 Cherry Drive, Boston, MA 59483. Phillip’s Social Security number is 111-11-1111 and Claire’s is 222-22-2222. The Kirkland have two children: Alexa, age 23, and Luke, age 19. Their Social Security numbers are 333-33-3333 and 444-44-4444, respectively. Alexa is a single college student and earned $8,000 during the summer. Phillip and Claire help Alexa through school by paying for her room, board, and tuition. Alexa lives at home during the summer. Luke has a physical handicap and lives at home. He attends a local university and earned $4,000 working for a marketing firm. In sum, Phillip and Claire provide more than 50% of both Alexa’s and Luke’s total support for the year.
2. Phillip is a Data Analyst for a small firm. His salary is $95,000, from which $19,000 of federal income tax and $8,000 of state income tax were withheld.
3. Claire owns Zane Consulting, a sole proprietorship that does fashion consulting. During the year, Claire’s gross revenues were $23,000. She incurred the following expenses:
Insurance $ 700
Software rental 5,400
Journals and magazines 150
Training seminars 1,200
Supplies 1,300
Donations to political campaign fund 800

4. Phillip and Claire paid $2,000 of health insurance premiums for the year for their family. In addition, Luke’s physician recommended that he see a physical therapist to help with his disability. Phillip paid the therapist $7,000 during the year because his insurance would not cover the bills.

5. Phillip enjoys playing guitar as a hobby and plays in a band. Phillip’s band has developed a local following. This year, his gross revenues were $1,200 for playing shows and $700 on CD sales. He incurred the following expenses:
Studio rent expenses $1,300
Sound system repairs 200
CD Production 500
New guitar and amplifier 800




6. Claire purchased 100 shares of Grubhub Co. stock on May 1, 1992, for $1,000. Grubhub Co. was declared bankrupt during the current year.
7. Phillip and Claire went to Las Vegas and won $5,000 at the blackjack table. The next night, they lost $6,000.
8. Phillip and Claire gave $900 to their church and, during the year, they had the following other income and expenses:
Real estate taxes $1,400
Property taxes on car 500
Home mortgage interest expense 12,000
Credit card finance charges 2,600
Tax return preparation fee ($600 is allocable to Claire’s business) 1,000
Interest from a savings account 800
Interest from City of Boston bonds 700
Dividend from IBM stock 400

Answer 1

To calculate the net annual income for each job position, deduct taxes, social security, and Medicare from the gross annual income. Then, divide the net annual income by 12 to calculate the monthly income. Lastly, for Peter's best option, he should compare the net monthly incomes of different job positions and consider his monthly expenses.

Step-by-step explanation:

To calculate the Net Annual Income for each job position, we need to deduct taxes, social security, and Medicare from the gross annual income. For example, for Phillip's data analyst position, his net income would be calculated as follows:

• Gross Annual Income: $95,000
• Federal Income Tax: $19,000
• State Income Tax: $8,000
• Social Security deduction (6.2% of gross): $5,900
• Medicare deduction (1.45% of gross): $1,377.50

Net Annual Income = Gross Annual Income - Federal Income Tax - State Income Tax - Social Security deduction - Medicare deduction
Net Annual Income = $95,000 - $19,000 - $8,000 - $5,900 - $1,377.50
Net Annual Income = $60,722.50

To calculate the monthly income, we divide the net annual income by 12: $60,722.50 / 12 = $5,060.21

For Peter's best option, he would need to compare the net monthly incomes of the different job positions and consider his monthly expenses. Whichever job position provides enough income to cover his expenses and have some leftover for savings would be the best option.