Saji and Henry Lozano are married for all of 2023 and have an AGI of $130,000, taxable income of $120,000 and calculated income tax liability of $50,000. Their income tax liability in 2022 was $40,000, and they made the minimum amount of withholding and estimated income tax payments to ensure that they will not be subject to any estimated tax penalties. In addition, they had $5,700 withheld from their wages for their portion of Social Security and Medicare taxes and provided you with the following information: They maintained a home for Saji’s dependent 85 year old father. They have one child, Joshua, who is 15 years old and meets the requirements of a qualifying child. During the year they spend $10,000 on a nanny to watch him while they are both at work. Required: What is the Lozano’s net tax due(refunded) for 2023? explain why the net tax due for 2023 is 1800
To calculate the Lozano's net tax due or refund for 2023, we need to consider their tax liability, withholdings, and any credits they may be eligible for. Let's go through the calculation: 1. **Tax Liability**: Their calculated income tax liability is $50,000. 2. **Withholdings and Payments**: They made the minimum amount of withholding and estimated income tax payments to avoid penalties. We don't have the exact amount, but we know it's at least the required amount to avoid underpayment penalties. For simplicity, let's assume they paid exactly $50,000 through withholdings and/or estimated payments, matching their tax liability. 3. **Tax Credits**: - **Child Tax Credit**: For Joshua, they can claim a $2,000 credit. - **Credit for Other Dependents**: For Saji’s father, they can claim a $500 credit. - **Child and Dependent Care Credit**: They can claim a credit based on $3,000 of the $10,000 spent on a nanny, which at a 20% rate would be $600. 4. **Total Credits**: $2,000 (Child Tax Credit) + $500 (Credit for Other Dependents) + $600 (Child and Dependent Care Credit) = $3,100 in total credits. 5. **Net Tax Due**: If we subtract the total credits from their tax liability, we get $50,000 (tax
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