Answer:
Explanation:
To determine what Paul will pay or receive, we need to calculate his total tax liability and compare it to the amount he already paid in federal tax.
For 2021, the tax brackets and rates for individuals filing married separately are as follows:
10% on taxable income up to $9,950
12% on taxable income over $9,950 up to $40,525
22% on taxable income over $40,525 up to $86,375
24% on taxable income over $86,375 up to $164,925
32% on taxable income over $164,925 up to $209,425
35% on taxable income over $209,425 up to $523,600
37% on taxable income over $523,600
First, we need to determine which tax bracket Paul falls into based on his taxable income of $27,205. Since his income is between $9,950 and $40,525, he falls into the 12% tax bracket.
To calculate his total tax liability, we can use the following formula:
(total taxable income) x (tax rate) - (tax credit) = total tax liability
Plugging in the numbers for Paul, we get:
($27,205) x (0.12) - ($1,630) = $2,267.60
Note that we subtract a tax credit of $1,630 since Paul is filing married separately and has taxable income below the phase-out threshold for the credit.
Now, we can compare Paul's total tax liability of $2,267.60 to the $3,410 he already paid in federal tax. Since he paid more than his total tax liability, he will receive a refund of:
$3,410 - $2,267.60 = $1,142.40
Therefore, Paul will receive a refund of $1,142.40 from the federal government.