NGPF Activity Bank

Taxes

CALCULATE: Your Federal Taxes

In this activity, you will use sample W-2 and 1099 forms as well as information about deductions
and credits to calculate the taxes owed and refund of each individual.

Part I: Scenarios
To illustrate how different circumstances affect your tax return, we’ll explore the case of four
individuals. Assume all individuals are filing as single and not claimed as a dependant:

Name Employment Info W-2 Form Deductions Credits

Ashley Roslin ● Worked around ● Ashley made ● Ashley has

10 hours/week at a $50 no credits
Ashley’s
a local coffee donation to available
W-2
shop for $13/hour an animal
shelter

Melinda Flowers ● Worked ● As an ● Melinda

around 20 independent has $350
hours/week at contractor, in credits
a local ice Melinda was
Melinda’s
cream shop able to
W-2
● Worked deduct $645
irregularly as in business
Melinda’s
an related
1099
independent expenses
contractor for and $925 for
a landscaping vehicle use
company

Elyse ● Worked as a bus ● Elyse paid ● Elyse has

McPherson driver making $1,500 in $1,000 in
$32/hour plus state and credits
overtime pay local taxes
Elyse’s
and made
W-2
$5,000 in
charitable
contribution
s

Jameson ● Work as an Jameson’s ● Jameson ● Jameson

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 Michaels independent 1099 paid $16,000 has
contractor in mortgage $1,400 in
consulting for interest, credits
a tech firm $2,500 in
charitable
contribution
s

Part II: Taxable Income and Deductions

Before calculating taxes, you will sometimes be able to apply deductions, which reduce the
amount of your total income that will be taxed.

The deductions that will apply in this activity:

Personal Deductions
1) Take the standard deduction of $13,850 for single individuals in 2023. 90% of filers use this
option.
2) Itemize deductions if the total deductions will be more than the standard deduction. This
would include items like:
a) Interest on the first $750,000 of a mortgage
b) State and local taxes up to $10,000
c) Charitable contributions
Business Deductions
3) If you receive a 1099 for work as an independent contractor, you can deduct business
expenses on top of your personal deductions

Example
You made $30,000 last year as an independent contractor and are able to apply deductions of
$10,000 in personal expenses and $3,200 in business expenses. For personal expenses, it’s better
to take the standard deduction of $13,850. You will calculate your taxes owed on $30,000 - $13,850
- $3,200 = $12,950 of taxable income.

1. Consider each individual’s situation, then complete the table below by listing the
income reported on all W-2/1099 forms in column (a), total deductions in column (b)
and their taxable income after deductions in column (c).

Name Gross Income on Total Deductions Taxable Income after

W-2/1099 (b) Deductions
(a) (c)

Ashley $6,240.00 $50.00 $6,190.00

Melinda $21,151.00 $1,570.00 $19,581.00

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Elyse $34,220.00 $6,500.00 $27,720.00

Jameson $66,500.00 $18,500.00 $48,000.00

Part III: Federal Income Taxes Owed

US Federal Income Taxes are a progressive tax system, which means that different portions of your
income are taxed at different rates. Here are the 2023 tax brackets for single individuals:

Example
If your taxable income is $57,500 after all deductions, we would calculate federal income taxes
owed like this:

Tax Bracket Taxable Income Remaining Taxes Owed

10% Bracket Total income remaining: The first $11,000 is taxed at

$57,500 10%:
$11,000 * .10 = $1,100 taxes
owed

12% Bracket Total Income remaining: This bracket covers the next
$57,500 - $11,000 = $46,500 $33,725 in taxable income.

You can find this by

subtracting the top of this
bracket from the top of the
previous bracket:
$44,725 - $11,000 = $33,725

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 $33,725 * .12 = $4,047 taxes
owed

22% Bracket Total income remaining =
$46,500 - $33,725 = $12,775
This bracket covers the next
$50,650 in taxable income but
we only have $12,775 left:
$12,775 * .22 = $2,810.50 taxes
owed

Summary calculation
Total taxes owed = $1,100 + $4,047 + $2,810.50 = $7,957.50 total federal income taxes owed

2. Now it’s your turn! Calculate the total taxes owed for each individual.
a. First, transfer the Taxable Income after Deductions column (c) from part II into
column (c) below.
b. Next, calculate the amount owed for each bracket interval up to the individuals’
highest tax rate.
c. Finally, add these values together to find their overall taxes owed.

Name Taxable 10% Bracket 12% Bracket 22% Bracket Total Taxes
Income after (d) (e) (f) Owed
Deductions (g)
(c)

Ashley $6,190.00 $11,000 $619.00

Melinda $19,581.00 $11,000/ 1029.72 $2,129.72

$1,100

Elyse $27,720.00 $11,000/ $16,720.00/ $3,106.40

$1,100 $2,006.40

Jameson $48,000.00 $11,000/ $33,725.00/ $3,275.00/ $5,867.50

$1,100 $4,047.00 $720.50

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Part IV: Credits
Credits are a reduction in your Total Taxes Owed AFTER your taxes are calculated. There are a lot
of different credits for things like child care, education, health care, and adoption.
There are some credits that are refundable, which means that you will be paid if they cause a
refund in total taxes owed. However, most credits are non-refundable, which means that they will
reduce your total taxable income to $0 but will not give you a refund.
All of the credits in this activity are non-refundable credits.

Example
You calculated that you owe $4700 in taxes and have a $500 tax credit. Your new taxes owed after
credits would be $4,700 - $500 = $4,200 in taxes owed after credits.

3. Transfer the Total taxes owed column (g) from part III into column (g) below. The
amount of each individual’s total credits is listed in Part I and can be brought down to
column (h) below. Use this information to complete column (i) of the table.

Name Total Taxes Owed Total Eligible Credits Taxes Owed after Credits
(g) (h) (i)

Ashley $619.00 $0.00 $619.00

Melinda $2,129.72 $350.00 $1,779.72

Elyse $3,106.40 $1,000.00 $2,106.40

Jameson $5,867.50 $1,400.00 $4,467.50

Part V: Summary
To wrap things up, let’s calculate and compare each individual’s marginal and effective tax rate.
We will also check to see if each individual will owe money in taxes or receive a refund.
● Your marginal tax rate is the highest tax bracket in which you owe taxes.
● If you divide your taxes owed after all deductions and credits by your total taxable income
after deductions, then multiply by 100, you will calculate your effective tax rate.
Example
Total income: $70,050.00
Total taxable income after deductions: $57,500.00
Total taxes owed: $8,387.60 total federal taxes owed

● Your marginal tax rate is 22% because that is the highest tax bracket that your money is
taxed in

● Your effective tax rate will be

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You can calculate whether you will get a refund or owe additional taxes by subtracting your total
taxes owed and the amount that is already withheld on your W-2 or 1099.
Example
You owe $8,367.60 and you had $9,250.60 federal income tax withheld from your paycheck on box
2 of your W-2.

$8,367.60 - $9,250.60 = -$883.00. Because you paid more than you owed, you will receive an
$883 refund!

4. Transfer column (i) from Part IV above into column (i) below. Use the above example to
complete the table below to summarize each individual’s taxes.

Name Taxes Owed Marginal Tax Effective Tax Federal Taxes Refund/
after Credits Rate Rate Withheld on Owed Taxes
(i) ( j) (k) W-2/1099 (m)
(l)

Ashley $619.00 $196.25 $422.75

Melinda $1,779.72 $534.96 $1,245.00

Elyse $2,106.40 $3,947.30 -$1,840.90

Jameson $4,467.50 $0.00 $4,467.50

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