Last year, Mrs. Washington had a taxable income of $61,000 and paid about 20% in taxes. Thisyearcontributed $4,200 to a traditional IRA. About how much could her tax liability be reduced?sheType your answer...

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Last year, Mrs. Washington had a taxable income of $61,000 and paid about 20% in taxes. This contributed $4,200 to a traditional IRA. About how much could her tax liability be reduced? year she

SWFT Essntl Tax Individ/Bus Entities 2020

23rd Edition

ISBN:9780357391266

Author:Nellen

Publisher:Nellen

Chapter17: Business Tax Credits And The Alternative Minimum Tax

Section: Chapter Questions

Problem 32P

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Concept explainers

Tax Deferred Retirement Benefits

It stands for Simplified Employee Pension Individual Retirement Account. This savings plan is for self-employed persons such as independent contractors, freelancers, entrepreneurs, etc. The tax rules of SEP IRA are the same as traditional IRA. Entrepreneurs can also open SEP IRA accounts for their employees and gain a tax advantage. The employees cannot make contributions to these accounts by themselves however they will be taxed upon withdrawal.

Question

Last year, Mrs. Washington had a taxable income of $61,000 and paid about 20% in taxes. This
year
contributed $4,200 to a traditional IRA. About how much could her tax liability be reduced?
she
Type your answer...

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