Tony and Lyly are married during the tax year. Tony is a botanist at Red Corporation. Tony earns a salary of $70,000 per year.Lyly owns an accounting practice as a sole proprietor (it qualifies as a full trade or business). Lyly generates $100,000 of revenues during the year. She has the following business payments associated with her firm:Utilities: $2,000Office Rent: $15,000Office Supplies: $1,700Self-employed health insurance premiums: $5,000Self-Employment Tax (hers): $10,000Salary for her secretary: $25,000Fines/Penalties: $2,500State Income Tax (from business): $6,000Payroll Taxes (secretary’s): $2,000Meals: $1,200 (100% for 2021)Payment to officer to let her go from speeding while on her way to a client meeting $100 Lyly also contributed $6,000 into her Traditional IRA.They also have the following personal expenses during the year:Medical Expenses: $17,500State & Local Taxes (personal): $11,000Federal Income Tax Payments (personal): $7,000Cash Charitable Contributions: $20,000 The standard deduction amounts are listed below:Single: $12,550Head of Household: $18,800Married Filing Jointly: $25,100 Calculate the Gross Income, Adjusted Gross Income, and Taxable Income according to the income tax formula for Tony and Lyly. Please show your work for maximum points.

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Answered: Calculate the Gross Income, Adjusted…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Tony and Lyly are married during the tax year. Tony is a botanist at Red Corporation. Tony earns a salary of $70,000 per year.

Lyly owns an accounting practice as a sole proprietor (it qualifies as a full trade or business). Lyly generates $100,000 of revenues during the year. She has the following business payments associated with her firm:

Utilities: $2,000
Office Rent: $15,000
Office Supplies: $1,700
Self-employed health insurance premiums: $5,000
Self-Employment Tax (hers): $10,000
Salary for her secretary: $25,000
Fines/Penalties: $2,500
State Income Tax (from business): $6,000
Payroll Taxes (secretary’s): $2,000
Meals: $1,200 (100% for 2021)
Payment to officer to let her go from speeding while on her way to a client meeting $100

Lyly also contributed $6,000 into her Traditional IRA.

They also have the following personal expenses during the year:

Medical Expenses: $17,500
State & Local Taxes (personal): $11,000
Federal Income Tax Payments (personal): $7,000
Cash Charitable Contributions: $20,000

The standard deduction amounts are listed below:

Single: $12,550
Head of Household: $18,800
Married Filing Jointly: $25,100

Calculate the Gross Income, Adjusted Gross Income, and Taxable Income according to the income tax formula for Tony and Lyly. Please show your work for maximum points.

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