Simon is single and a stockbroker for a large investment bank. During 2020, he has withheld from his paycheck $2,250 for state taxes and $400 for city taxes. In June 2021, Simon receives a state tax refund of $145. Enter the amount Simon should include in his 2021 taxable income based on the scenarios stated below.If an amount is zero, enter "0".a. How much is included in 2021 taxable income if Simon uses the standard deduction?$fill in the blank 1b. How much is included in 2021 taxable income if Simon has itemized deductions other than state and city income taxes of $10,350?$fill in the blank 2c. How much is included in 2021 taxable income if Simon has itemized deductions other than state and city income taxes of $9,850?

Given information, withheld from his paycheck=$2,250 for state taxes and $400 for city taxes. Simon receives a state tax refund =$145.●How much is included in 2021 taxable income if Simon uses the standard deduction? Answer: 0 Because Simon uses the standard deduction ($12,400) in 2020, he doesnot have to include the income tax refund in his 2021 taxable income. He would only include the refund or a portion of it, if he had itemized his deductions and deducted more state and city taxes then he actually owed(he received a tax benefit). ●b. Simon must include the $145 income tax refund in his 2021 taxable income. He has deducted $2,650 in state and city taxes in 2020 when his actual state and city taxes should have been $2,505 [$400 ($2,250 -$145 refund)]. Therefore, his total itemized deductions were overstated by $145 [reported as $13,000 ($10,350 + $2,650) instead of $12,855 ($10,350 +$2,505)]. ●c. Simon must include $100 of the income tax refund in his 2021 taxable income. As in part b, Simon has deducted $2,650 in state and city taxes in 2020 when his actual state and city taxes should have been $2,505[$400 + ($2,250 - $145 refund)]. However, even though Simon’s reported deductions of $12,500 ($2,650 + $9,850) exceed his actual deductions of $12,355($9,850+ $2,505) by $145, Simon has benefited only by the amount his reported deductions exceed the standarddeduction of $12,400 Remember, at a minimum Simon is entitled to the standard deduction. Therefore, Simon only includes $100($12,500 -$12,400) of the tax refund in his income for 2021. Hence, a. 0b. 145c. 100

Answered: Simon is single and a stockbroker for a…

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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Simon is single and a stockbroker for a large investment bank. During 2020, he has withheld from his paycheck $2,250 for state taxes and $400 for city taxes. In June 2021, Simon receives a state tax refund of $145. Enter the amount Simon should include in his 2021 taxable income based on the scenarios stated below.

If an amount is zero, enter "0".

How much is included in 2021 taxable income if Simon uses the standard deduction?

$fill in the blank 1

How much is included in 2021 taxable income if Simon has itemized deductions other than state and city income taxes of $10,350?

$fill in the blank 2

How much is included in 2021 taxable income if Simon has itemized deductions other than state and city income taxes of $9,850?

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