Question

focus on question 2.

an I Is theilr StuallU a federal tax refund or owe taxes each year? planned? (L03.4) 4. Survey friends REAL LIFE PERSONAL FINANCE A SINGLE FATHER'S TAX SITUATION Ever since his wife's death, Eric Stanford has faced difficult personal and financial Interest earned on savings, S65 IRA deduction, $5,000 Checking account interest, $45 circumstances. His job provides him with a fairly good income but keeps him away Three exemptions at $4,050 each from his daughters, ages 8 and 10, nearly 20 days a month. This requires him to use Current standard deduction for filing status, in-home child care services that consume a major portion of his income. Since the Amount withheld for federal income tax Stanfords live in a small apartment, this arrangement has been very inconvenient. 9,300 $5,825 Tax credit for child care, $1,200 Child tax credit, $2,000 Filing status: head of household Due to the costs of caring for his children. Eric has only a minimal amount withheld from his salary for federal income taxes. Thus more money is available during the year, but for the last few years, he has had to make a payment in April-another finan- cial burden Questions 1. What are Eric's major financial con- cerns in his current situation? planning efforts? a. What is Eric's taxable income? (Refer 2. In what ways might Eric improve his tax Although Eric has created an investment fund for his daughters' college education and for his retirement, he has not sought investments that offer tax benefits. Overall, he needs to look at several aspects of his tax planning activities to find strategies that will best serve his current and future financial needs. 3. Calculate the following: to Exhibit 3-1) b. What is his total tax liability? (Use tax rate table, page 80) What is his average tax rate? Eric has assembled the following informa- tion for the current tax year: c. Based on his withholding, will Eric receive a refund or owe additional tax? What is the amount? Earnings from wages, $84,212 INANCIAL SERVICES: SAVINGS PLANS AND ACCOUNTS Jamie Lee Jackson, age 26, is in her last semester of college, and graduation day is lust

Answer 1

Answer to point 2

Eric can improve his tax planning by taking advantage of child care tax benefit, investigate and identify tax exempt investment, and change the withholding amount to avoid owing a large amount in April. Also Eric can look out for flexible job arrangements allowing him to spend time with his family and saving day care expenses.