Question

Oscar is single with a taxable income for last year of $74,555. His employer withheld $16,381 in federal taxes. Use the tax table from Example 2 earlier in this lesson to determine Oscar’s tax. Does Oscar get a refund? Find the difference between Oscar’s tax and the amount withheld by his employer.

Answer 1

a. Oscar's tax liability is $12,265.

b. Yes, Oscar gets a refund.

c. Oscar's tax refund is $4,116.

How did we get these values?

a. Determine Oscar's tax using the tax table:

Oscar's taxable income is $74,555.

According to the tax table, for a single filer with taxable income between $74,550 and $74,600, the tax is $12,265.

So, Oscar's tax liability is $12,265.

b. Determine if Oscar gets a refund:

The amount withheld by his employer is $16,381.

Oscar's tax liability is $12,265.

Since the amount withheld is greater than his tax liability, Oscar gets a refund.

c. Find the difference between Oscar's tax and the amount withheld:

- Amount withheld by employer: $16,381

- Oscar's tax liability: $12,265

Now, subtract Oscar's tax liability from the amount withheld:

`\[ \text{Refund} = \text{Amount withheld} - \text{Tax liability} \]`

`\[ \text{Refund} = $16,381 - $12,265 \]`

`\[ \text{Refund} = $4,116 \]`

Therefore, Oscar's tax refund is $4,116.