Analysis of Federal Taxation - Assignment Example

 With other deductions totaling $55,960, and real estate taxes being deducted separately at $2,200, their total deductions were $57,960.This led to Dan and Cheryl having a taxable income of $118,790 because the total deductions were deducted from their AGI. This meant that their total tax for 2010 would be $22,060. Payments and credits would equal $159. The tax estimated that Dan and Cheryl would actually have to pay would be $21,901, which would be 12.03% of the total income of $182,050.

This puts Dan and Cheryl in the 25% tax bracket.Some detailed calculations had to be done before all of these figures were made. First of all, every wage and compensation of any kind was annotated, as well as federal tax withholding, OASDI, Medicare, and state taxes if they applied. For federal taxes, Cheryl only had $500 of withholding taken out of her $45,000-dollar salary, so it is natural that a majority of Dan and Cheryl’s taxes would probably come from her not having had federal withholding taken away from her salary.

Additionally, Dan only had $20,000 dollars’ worth of federal withholding taken away from his salary, so he was probably due for paying at least some more federal tax that was not taken out in withholding.Dan was reimbursed for all but $20 worth of travel expenses, excluding the $9,600 dollars that were used for gas mileage, which was calculated by multiplying 30 cents per mile times the 32,000 miles used for business out of a total of 38,000 miles. Certain expenses of Dan’s couldn’t be reimbursed—for example, entertainment of customers.

But all of Cheryl’s costs associated with her nursing profession were legitimate expenses—for professional dues, uniforms, and nursing journals related to her profession. Some other expenses that were tacked on to Dan’s business expense account could not be added on, such as utilities for the whole entire house.