I need some help with assignmnet I got:?

Question

Jim is 66 years old and his wife 58 years old .jim is retired and receives S.S in the amount of $10000 per year.his wife withdrew $12000 from her IRA. they r filing a joint return. what is their tax liabiliy?

Please, help and explain....I know it suppose to be simple

Answer 1

Judy is almost correct.

It seems that she overlooked one little thing.

Since the wife is 58 and not 59 1/2 (don't ask where the 1/2 year comes in...I don't have a clue) there is a 10% penalty on the $12,000 (assuming it isn't a Roth IRA).

Assuming that is their entire income no regular tax would be due. However, the 10% penalty would still apply. So the tax liability would be $1,200.

To prove this simply look at a form 1040. On line 60 (2007 form) the tax is added in after all of the deductions.

Hope this helps.

Edit:

  I guess I should explain that several years ago a tax return would use the term "tax liability". But, that was several years ago. They no longer use that term. So it is very easy for someone that has been doing taxes for many years to make the mistake that Judy made. And, when you consider that you still have to use the number that was refered to as "Tax Liability" on other forms it is even more understandable.

  

  During the time they still used that term...Judy would be 100% correct.. I don't like it that they change the names.  Such as 'Income Statement' to 'Profit and Loss Statement'...etc.. What was wrong with income statement...so what if it is a loss, that is simply negative income.

I think it is the people that sell the printer cartridges that are adding more words...so we will need to buy more cartridges.

Answer 2

His ss wouldn't be taxable.  Her $12,000 is, but the 2 exemptions and standard deduction is more than that, so they have no taxable income, so no tax.