Project 2: Calculating Taxes.

Visit www.irs.gov, and download the most recent version of forms 1040, and schedules A, B, C, and D.

Scenario 1: Calculate the taxes for someone who earned $60,000 in standard wage income (W-2 income), has no dependents, and takes the standard deduction.

Scenario 2: Calculate the taxes for someone who earned $20,000 in standard wage income, $40,000 in qualified dividends, has no dependents, and takes the standard deduction. (Qualified dividends are earnings on certain investments such as stocks.)

Scenario 3: Calculate the taxes for someone who earned $60,000 in small business income, has no dependents, and takes the standard deduction.

Based on these three scenarios, what are your impressions of how the income tax system treats these different forms of income (wage, dividends, and business income)?

Scenario 4: To get a more realistic sense for calculating taxes, youll need to consider itemized deductions. Calculate the income taxes for someone with the income and expenses listed below.

Married with 2 children, filing jointly Wage income: $50,000 combined

Paid sales tax in Washington State

Property taxes paid: $3200

Home mortgage interest paid: $4800

Charitable gifts: $120