Tax Strategies Assignments
Chapter Assignments: - Two Required parts - See bottom of page r and separate document) Page
Required: Tax Questions for the IRS
Required: See Chapter 3 Supplemental Form 1040 Tax Assignment
Chapter Sections:
Taxes in Your Financial Plan
The Basics of Federal Income Tax Filing Your Federal Income Return Using Tax Planning Strategies
Chapter Terms:
sales tax, excise tax, property tax, estate tax, inheritance tax, gift tax, income tax, Social Security / Medicare Form 1040 earned income
investment income - interest, dividends, rent, capital gains passive income versus active income exclusions
tax-exempt income - (example: municipal bonds)
tax-deferred income - (example: retirement accounts) adjustments to income
Adjusted Gross Income (AGI) tax shelters
tax deductions
standard deduction versus itemized deductions - (You can only take one or the other; you can not take both!) itemized deductions go on Schedule A (state income tax, real estate tax, mortgage interest, gifts to charities, etc.) personal exemptions taxable income marginal tax rate average tax rate
AMT - The Alternative Minimum Tax tax credits withholding and estimated payments tax strategies - home mortgage interest deduction, starting a business tax audit - correspondence audit versus office audit versus field audit tax avoidance versus tax evasion
Sam and Janet Evening need help with their taxes. They have no children. Below are the numbers you will need to help them complete their tax return. Follow the first and second tax exercise example handouts and fill in their Form 1040 tax return. (Hint: Do you see the asterisks next to certain lines? Hmmm?) The itemized deductions from Schedule A on line 40, the personal exemptions on line 42, and the tax on lines 44 and 47 (and a few other lines) are already computed for you. You do not need to complete Schedule A, Itemized Deductions.
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Wages, salaries, tips, etc. from Form(s) W-2 (gross income)
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$41,950
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Taxable interest (gross income)
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50
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IRA deduction (adjustment to income)
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1,000
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Student loan interest deduction (adjustment to income)
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1,000
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Itemized deductions (from Schedule A - line 40)
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18,000
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Personal exemptions (2 persons * $3,950 - line 42)
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7,900
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Taxes (already computed from tax tables - lines 44 and 47 and a few others...)
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1,413
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Federal income tax withheld from W2 form (line 64)
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1,800
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Note to online students: You can use the Form 1040 on pages 2 and 3 of this document. They are very similar to the two Form 1040 tax handouts from this chapter. This requires you to print the two pages, hand-write the information, scan the two pages, and submit them as a single or multiple pdf or graphic files. Or you could demonstrate your advanced document handling skills and use the IRS-supplied Form 1040 pdf file that is on the class web page or available directly from the IRS web site (www.irs.gov). Using Adobe Acrobat Reader (or any of the many other pdf-enabled programs), you can type the above information directly into the Form 1040 form, save it, and submit it directly as a pdf file. Won't you be proud of yourself?! (Currently, the legal problem with saving data to pdf files is that a signature must still be hand-written. Therefore, you still need to print the document and sign manually before it is a legal document. There are currently a few systems that allow for "digital signatures" but eventually, there will be a standard "digital signature" protocol that allows people to digitally "sign" all contracts and other legal documents. When you file your tax returns electronically, you are "digitally signing" the tax return according to the specifications created by the IRS and used by the vendors who offer electronic filing.)
Required: Tax questions for the IRS (www.irs.gov or 800-829-1040) - Be careful! Make sure your information is current!
1) What are the maximum amounts that can be contributed to a Traditional IRA, Roth IRA and 401(k) per year?
2) What is the maximum amount of capital loss that can be deducted from your income taxes per year?
3) How long is the extension of time to file your income taxes that Form 4868 gives a taxpayer?
4) What percentage(s) of the estimated taxes should an individual taxpayer pay through withholding? Careful!
5) What are the names of the 2 or 3 types of educational tax credits available to college students & their parents?
When researching the above questions, make sure you find the data for 2015!
Required: Supplemental Form 1040 Tax Assignment
Handout: Supplemental Tax Assignment. This assignment is very much like the first and second tax exercises.
Attachment:- Tax_Assignment.pdf