Web Application Chapter 12 page 495

Erin Raynaud will calculate her own taxes this year. She knows she has to determine her total income, calculate adjusted gross income and subtract the standard deductions or itemized deductions (whichever is larger), from her adjusted gross income. Sounds simple enough, but Raynaud is not sure what is meant by adjusted gross income. Her first step was to visit www.irs.gov/taxi. From here she selected Tax Terms, and selected the letter A for Adjusted Gross Income.

1. Based on information from the Web site, define adjusted gross income.

Erin investigates some other Web pages that cover adjusted gross income. From www.irs.gov/taxi she goes to www.irs.ustreas.gov/prod/forms_pubs/pubs/p5900105.htm. Go to this site and answer the following questions.

2. According to this Web site, what are the conditions affecting whether or not you can take a deduction for contributions made to your traditional IRA? What are the conditions affecting the amount of the deduction?

Note to the wise: Saving money now in an IRA for your retirement (yes, even though it seems like a million years away) could be one of your smartest moves yet.

3. According to Table A in this publication, IRA deductions for a single person or head of household are eliminated if a modified AGI is greater than amount?

Include the date of the information in your answer.

© Copyright 2000 Addison Wesley Longman, Inc.