Tax planning is the process of exploring ways to reduce an individuals tax liability. It requires careful analysis of an individuals financial situation coupled with extensive tax re

Overview

Tax planning is the process of exploring ways to reduce an individual’s tax liability. It requires careful analysis of an individual’s financial situation coupled with extensive tax research to determine the most efficient way to reduce tax liability. This assignment is designed to prepare you for Project Two by allowing you to select a set of cases to research and identify ways to reduce tax liability. Each case leads you into a particular area of research into tax credits.

Directions

Review the Client Tax Profiles B Descriptions found in the Supporting Materials section below. Each of the five sets of profiles is linked to a tax planning scenario category. Each category provides you with two client scenarios to review. Identify two different categories to compare for this assignment. They are grouped by tax planning category. The categories range from education tax credits to self-employment tax credits. The profiles link directly to each client’s Form 1040. Form 1040 will provide a level of detail that is not called out in the profile alone. Complete the table for both categories you choose. Each category contains information about two different primary taxpayers. You will compare the two clients within each category. Look at the Module Six Assignment Template found in the What to Submit section for a better understanding of how to complete this comparison. Once you complete the comparison table you will select the category that most interests you as the topic for Project Two.

The template contains a table with three parts. Begin by filing in the high-level information for each of the clients in the first category. Then, dig deeper by opening the 1040’s for each of the primary taxpayers to complete the grey section. This will provide deeper insights into client income streams, deductions, and tax credits. In the final part you will list tax planning topics to research. Complete all three parts of the comparison for the first category. Then, repeat this process using a second category. Once you have completed the table, you will have enough information to determine which category interests you most. You will choose one as your topic for Project Two.

Note: There are five sets of client data contained in the Client Tax Profiles B document. Each set represents a category within tax planning. To show how each category may be applied to clients, there are two client profiles within each category that provide different tax scenarios. This allows you to compare two client scenarios within a single category of tax planning. The words category and scenario are used interchangeably in this assignment.

Specifically, you must address the following rubric criteria by completing the template provided:

  1. Complete the high-level view of the client tax profiles.
    1. Identify the category.
    2. Identify the client IDs within the category.
    3. Enter taxpayer’s names.
    4. Enter filing status.
    5. Enter the spouse’s name if applicable.
    6. List the dependents.
  2. Perform an analysis based on reviews of the additional information from client profiles and Form 1040.
    1. Income Streams: Consider all forms of income, look at the AGI or taxable income.
    2. Deductions: Review deductions for the tax year.
    3. Tax Credits: Review tax credits for the tax year.
  3. List multiple tax planning factors.
  4. Make a client tax profile selection on the template (Client Profile Set #). This scenario will be the category you use for Project Two.

What to Submit

Submit your completed Module Six Assignment Template for grading. Sources should be cited according to APA style.

Supporting Materials
The following resources support your work on the project:

ACC 330 Module Six Assignment Template

Directions

Begin by filing in the high-level information for each of the clients in the first category. Then, dig deeper by opening the 1040s for each of the primary taxpayers. This will provide deeper insights into their income streams, deductions, and tax credits. Complete all three parts of the comparison for the first scenario. Then, repeat this process using a second category. Once you have completed the table below you will have enough information to determine which category interests you most. Choose one category to use for Project Two, and enter the number of the client set you plan to use under #4 below.

1. Complete the high-level view of the client tax profiles.

a. Identify the category type.

b. Identify the client IDs.

c. Enter taxpayer’s names.

d. Enter filing status.

e. Enter the spouse’s name if applicable.

f. List the dependents.

2. Perform an analysis based on reviews of the additional information from client profiles and Form 1040.

a. Income Streams: Consider all forms of income, look at the AGI or taxable income.

b. Deductions: Review deductions for the tax year.

c. Tax Credits: Review tax credits for the tax year.

3. List multiple tax planning factors.

4. Make a category selection. [Enter the number here of the client set you plan to use in Project Two.]

Tax Category Comparison Table of Two Client Profile Sets

Client Profile Set #

[Enter the first client profile Set # here.]

[Enter the second client profile Set # here.]

Category/ Scenario Type

[Enter the first category here]

[Enter the second category here]

Client ID #

[last four digits of SN# of primary]

[last four digits of SN# of primary]

[last four digits of SN# of primary]

[last four digits of SN# of primary]

Primary Taxpayer Name

Filing Status

Spouse’s name (if applicable)

Dependents (list)

1040 Income Streams (list)

1040 Deductions (list)

1040 Tax Credits (List)

Tax planning topics to research (List)

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ACC 330 Client Tax Profiles B Description 2 Clients for Tax Planning Scenario – Set 1 Schedule C and estimated Tax Payments 2 Tax Planning Scenario 1 3 Clients for Tax Planning Scenario – Set 2 Education Credits 3 Tax Planning Scenario 2 4 Clients for Tax Planning Scenario – Set 3 MFS Standard versus Itemized Deductions 4 Tax Planning Scenario 3 5 Clients for Tax Planning Scenario – Set 4 IRA Contributions 6 Tax Planning Scenario 4 7 Clients for Tax Planning Scenario – Set 5 Bunching Deductions 7 Tax Planning Scenario 5 8

ACC 330 Client Tax Profiles B Description

Note: There are five sets of client data contained in this Client Tax Profile document. Each set represents a category within tax planning, such as Set 2 Education Credits. To show how each category may be applied to clients, there are two client profiles within each category that provide different tax scenarios. This allows you to compare two client scenarios withing a single category of tax planning. The words category and scenario are used interchangeably in this assignment.

Important: This profile collection will be used in Module Six Case Study and will focus on a single category for Project Two in Module Seven.

Review each of these scenarios completely by opening their corresponding Form 1040 tax returns. They are linked to the client profile. These clients have each asked for ways to reduce their tax liability.

Clients for Tax Planning Scenario – Set 1 Schedule C and estimated Tax Payments

Tax Planning Scenario – Schedule C and Estimated Tax Payments

Client(s) #1

Client(s) #2

Open Client 1040

1142

Open Client 1040

1143

Primary Taxpayer’s Legal Name

Joanna Roman

Primary Taxpayer’s Legal Name

Malik Ali

Primary Taxpayer’s Preferred Pronoun

She

Primary Taxpayer’s Preferred Pronoun

He

SSN

***-**-1142

SSN

***-**-1143

Age

25

Age

71

Occupation

Gig Worker

Occupation

Gig Worker

Citizen/U.S. Resident Status

U.S. Permanent Resident

Citizen/U.S. Resident Status

U.S. Citizen

Languages

English; Italian

Languages

English

Marital Status

Single

Marital Status

Single

Spouse’s Legal Name

N/A

Spouse’s Legal Name

N/A

Spouse’s Preferred Pronoun

N/A

Spouse’s Preferred Pronoun

N/A

Spouse’s SSN

N/A

Spouse’s SSN

N/A

Spouse’s Age

N/A

Spouse’s Age

N/A

Spouse’s Occupation

N/A

Spouse’s Occupation

N/A

Dependent(s) (# – Relationship) (Name/Age/SSN)

N/A

Dependent(s) (# – Relationship) (Name/Age/SSN)

N/A

Additional information:

Additional information:

· Joanna is a designer who makes one-of-a-kind clothing. She sells her designs on Etsy, at local consignment shops, and at festivals.

· Her pieces are handmade and only made once. She does not repeat designs, so all pieces are original. She does not maintain any inventory.

· This was the first year that Joanna made a profit, as sales increased tremendously after her social media pages grew more popular.

· She has been tracking her expenses using a spreadsheet and has spent time researching items she can deduct as business expenses, but because she was so busy, she thinks that she forgot to track some expenses that would be deductible for future years.

· Malik retired three years ago and has been collecting Social Security and taking required minimum distributions from his retirement account with Fidelity.

· He paid $1,785 in Medicare premiums and $255 for Part D premiums (prescription drug plan).

· He recently started driving for Uber. He has found he enjoys talking to his customers and driving around his town when he has time to spare.

· He reported income earned from driving for Uber and the related mileage expense that is tracked in the app.

· He added a few additional expenses that he incurred as well.

· When he was fully retired, he only reported his retirement income and was sometimes not required to file. He noticed that he is now required to file to report this part-time income and owed taxes.

Tax Planning Scenario 1

These clients have each asked for ways to reduce their tax liability and are interested in knowing what additional deductions they can take to reduce their net income earned from their self-employed income. They are also wondering if they should make estimated tax payments because they read that if they continue to owe taxes each year that they might be subject to penalties.

Clients for Tax Planning Scenario – Set 2 Education Credits

Tax Planning Scenario – Education credits

Client(s) #1

Client(s) #2

Open Client 1040

1129

Open Client 1040

1132

Primary Taxpayer’s Legal Name

Trilby Keller

Primary Taxpayer’s Legal Name

Robert James

Primary Taxpayer’s Preferred Pronoun

She

Primary Taxpayer’s Preferred Pronoun

He

SSN

***-**-1129

SSN

***-**-1132

Age

47

Age

48

Occupation

Accounting Manager

Occupation

Psychologist

Citizen/U.S. Resident Status

U.S. Citizen

Citizen/U.S. Resident Status

U.S. Citizen

Languages

English

Languages

English

Marital Status

Married

Marital Status

Married

Spouse’s Legal Name

David Keller

Spouse’s Legal Name

Nora James

Spouse’s Preferred Pronoun

He

Spouse’s Preferred Pronoun

She

Spouse’s SSN

***-**-1130

Spouse’s SSN

***-**-1133

Spouse’s Age

53

Spouse’s Age

48

Spouse’s Occupation

Bookstore manager

Spouse’s Occupation

Office Manager

Dependent(s) (# – Relationship) (Name/Age/SSN)

1 – Son; Wyatt Keller (Age 22) (***-**-1131)

Dependent(s) (# – Relationship) (Name/Age/SSN)

2 – Sons; Kris James (Age 18) (***-**-1134); Nolan James (Age 18) (***-**-1135)

Additional information:

Additional information:

· This year was Wyatt’s fourth year in college.

· Next year, he is considering moving onto his master's degree. The Kellers have claimed the American Opportunity Credit for Wyatt for four years.

· The Kellers anticipate paying Wyatt’s qualified education expenses towards his master's degree program next year.

· Wyatt will remain a full-time student and the Kellers provide full support to Wyatt while he is enrolled in school.

· Kris and Nolan are twins who will begin attending the local community college in the Fall.

· The James’s plan is to support both children financially through the next four years while attending school.

· They have already started to accumulate expenses as they prepare to send both children off to school, such as application fees, new computers, and repairs to their cars to make sure they will not encounter issues with car troubles while away at school.

Tax Planning Scenario 2

These clients are each concerned with reducing their tax liability and are interested in knowing what amount of education tax credits will be available to them for their college-age children next tax year.

Clients for Tax Planning Scenario – Set 3 MFS Standard Versus Itemized Deductions

Tax Planning Scenario – MFS Standard Deduction Versus Itemized Deductions

Client(s) #1

Client(s) #2

Open Client 1040

1136

Open Client 1040

1137

Primary Taxpayer’s Legal Name

Kai Lee

Primary Taxpayer’s Lega

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