Dr. Sarah's Homer's Taxes NAME_________________________________ Circle Class   2:00 or 3:30

Homer realizing that
he has a "to-do" pile
with tax info on top.
Homer frantically
trying to do his taxes
Homer throwing his
tax return into the
closing post office doors.
Homer being hauled
off by the IRS.
        While the Simpsons are humorous, we only use them in class when they can help us learn mathematics or serve some other important course goal. In this case, we use the Simpsons to learn about advanced searching techniques on the web, and to lighten up the tax return process! You will be responsible for advanced web searching techniques. Also, be careful to answer all questions beginning with a bold dot and to follow directions very carefully. Homer gets into trouble when filling out a false tax return in the Trouble with Trillions 5F14 (4/5/98).
        You may have heard about Bush's tax cuts and the possible effects on the economy. Your taxable income determines the percentage that you are taxed at. The first part of everyone's taxable income is taxed at the lowest rate, and portions above a cutoff amount are taxed at higher rates. The portion of your income that would be subject to the 15% tax rate has been reduced to 10%. We are going to fill out a tax return for Homer by using your homework.
        The government estimates the average amount of deductions (income that is not taxable) for each class below and calls this average the standard deduction. We want the highest possible deduction since this gets subtracted off of our pay before we pay taxes (and we want to pay the least possible taxes). For 2002, the standard deductions are
Single: $4700.00 Married filing jointly: $7850.00
Head of Household: $6900.00 Married filing separately: $3925.00
  • Notice that Married filling joint return is the largest deduction that applies to Homer, so we choose that one. I have filled in the first part of the tax return for you and have checked the "Married filing joint return" box. The amount the taxpayer takes as their deduction is the larger of the largest applicable standard deduction (above) OR the exact amount of tax deductible purchases made over the year (itemized deduction - for example, state and local taxes, interest paid on a house, gifts to charity, ...) We will itemize Homer's deductions and see whether he should itemize or take a standard deduction. Then we will fill out his taxes. Definition:
    FICA    : Federal mandated social security and Medicare deductions. These may or may not be broken down separately on a paycheck.
    Note that you have Homer's Weekly Paycheck (from the homework you completed), so you must figure out the YEARLY info (52 weeks in a year) in order to get necessary info to do Homer's taxes.
  • Compute Homer's YEARLY (52 weeks) Itemized Deductions as follows: Below is an abbreviated version of Schedule A-Itemized Deductions. from the IRS, which I have partially filled in for you. Add up all of the state and local taxes/witholdings (anything that is not federal) and then compute the yearly taxes. SHOW WORK.

    Taxes Homer Paid

    Enter state and all local taxes

    		  

    Interest Homer Paid

    Enter home mortgage interest (if any)

     0 - I can't find this info for Homer, so we must enter 0.

    Gifts to Charity

    Enter gifts by cash or check (if any)

     0

    TOTAL DEDUCTIONS

    ADD ALL ENTRIES

    		  
  • Recall that we use the largest deduction in order to pay the least amount in taxes. Should we use the standard deduction or itemized deduction for Homer? What is this amount?

  • Do this for exploration and deep understanding (but do not use it for Homer's taxes): We don't have the home mortgage interest that Homer paid, so we must enter in 0 in the above for that amount. But, for deep exploration, let's see what would have happened if the year's mortgage interest was $7000. In this case would the standard deduction or itemized deduction be larger? Show work.



  • Start filling out Homer's tax return on the tax return sheet I handed out by following the directions below:
    Enter Homer's YEARLY GROSS Pay on line 7, 22, 35 and 36 (there are 52 weeks in a year). The rest of the lines don't apply to Homer, so I have filled them in with zeros.
    Check to see that row 36 has 24949.60
    Enter Homer's standard or itemized deduction from our work above on line 38. Fill in lines 39, 40 (read the instructions carefully!), and 41.
    Check to see that line 41 has 2099.6
  • COMPUTE Homer's TAX:
    We can see that Homer's taxable income on line 41 is very small! This puts him into the lowest tax bracket. The lowest tax bracket used to be 15%, but now it is taxed at 10%. Hence, Homer's total tax is 10% of his taxable income.
  • Homer's total tax is: ___________________________
    Enter Homer's total tax on line 42, 44, line 55, and also on line 61.
    Write the YEARLY Federal Witholding tax (52 weeks) (do not include FICA, which is not tax deductible) that was already withheld from Homer's paycheck on lines 62 and 69, then determine line 70 and also write this down on line 71a. Sign the tax return as the Paid Preparer.
  • Does Homer pay additional tax money or get a refund? How much?

  • WORTH MORE Given that Homer was audited in the episode, what advice do you have for Homer now that you have filled out his tax return? Relate your advice to the Trouble with Trillions episode. First summarize what was relevant to his tax return, then explain how you obtained data about him, explain how you filled out the tax return (you may refer to these sheets) and then give him advice:




























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