U.S. Tax Puzzle

Blonzo is single and has no dependents. In 2014, Blonzo earned $40,000 in ordinary income as CEO of Blonzonics, and $8,000 in qualified dividends from Bananas Inc. That year he also made an extra $1000 of ordinary income by moonlighting as a professional dust collector.

(a) Without consulting the Internet, estimate how much the moonlighting increased his Federal taxes.

(b) Now do the estimate using any Internet information you can find.

(c) Finally, do the real calculation or use tax software. Did the increase agree with (a) and (b)? What is Blonzo's effective tax bracket rate?

Answer