Exam 4: Tax Planning and Strategies

Latisha is a single person who makes $40,000 per year. This year she paid $2,000 in student loan interest, $1,500 in medical expenses, $7,200 in rent and $4,800 in car loan payments. She contributes $3,600 per year to her 401K plan at work. Give her some tax advice.

Since their taxes are becoming more complex, Bob and Janet are concerned about making a mistake or getting audited. They should

Bang Nguyen recently graduated from college and started working in a good job. He has a little money invested in a stock that pays no dividends. He lives in an apartment, is single, and has no dependents. He has a $22,000 student loan balance and he paid $600 interest in 2011. He is considering going back to school part-time for some additional computer classes. He does not have a personal IRA and he contributed 2% of his $38,750 salary to his 401K plan at work for 2011. He is just completing his tax return for 2011. Based on the information below, answer the following questions. -What is Bang's taxable income for 2011?

Which of the methods listed below is not used by the IRS as a tax collection mechanism?

You wish to make a charitable contribution of $2,000 to a qualified organization. You are currently in the 28 percent marginal tax bracket. By how much would this contribution lower your tax bill assuming your other itemized deductions exceed the standard deduction?

Excise taxes

Which factors affect your choice between claiming itemized deductions and the standard deduction?

Bang Nguyen recently graduated from college and started working in a good job. He has a little money invested in a stock that pays no dividends. He lives in an apartment, is single, and has no dependents. He has a $22,000 student loan balance and he paid $600 interest in 2011. He is considering going back to school part-time for some additional computer classes. He does not have a personal IRA and he contributed 2% of his $38,750 salary to his 401K plan at work for 2011. He is just completing his tax return for 2011. Based on the information below, answer the following questions. -Bang's average tax rate for 2011 is closest to which of the following?

For many years Andy paid someone else to file his income tax return. After taking a personal finance course at his local college, Andy feels he is ready to tackle it on his own for tax year 2012. Andy is single with an income of $35,000 and has no dependents. He has little interest income from savings, does not have a personal IRA, and plans to itemize deductions. Andy owns a home and travels a lot with his job. He pays some of his own work-related expenses because his employer does not pay for all of them. His only personal investments include 1,000 shares of stock he inherited from his uncle, which he does not intend to sell for many years because the blue-chip company has a strong history of dividend income and share price appreciation. However, he does contribute monthly to his 401(k) plan at work. -To help Andy with his tax planning, he should carefully track and maintain records for all of the following expenses during the tax year except ________.

The least expensive, most accurate, and easily accessible source of help with filing your tax return properly is

Name the categories of filing status.

Bang Nguyen recently graduated from college and started working in a good job. He has a little money invested in a stock that pays no dividends. He lives in an apartment, is single, and has no dependents. He has a $22,000 student loan balance and he paid $600 interest in 2011. He is considering going back to school part-time for some additional computer classes. He does not have a personal IRA and he contributed 2% of his $38,750 salary to his 401K plan at work for 2011. He is just completing his tax return for 2011. Based on the information below, answer the following questions. -What is Bang's marginal tax rate for his current level of taxable income?

A source of tax-free income is

Explain the ways income taxes are paid or collected.

Three years ago you purchased a share of CompUTech stock for $4, which you could sell today at the current market price of $150. What would be your capital gain on the sale, ignoring commissions?

Which of the following would offset your tax liability in a direct dollar for dollar manner and may actually increase your tax refund beyond the amount paid during the tax year?

Katarina and Richard are a busy young couple with a son, Caleb, who is 6 and twin daughters, Stacy and Casey, who are actively exploring the world as four-year-olds. Before the twins were born, Katarina and Richard bought their first home with plenty of indoor and outdoor space for a growing young family. The Bajorshiks are concerned about their 2011 tax issues, but they are also committed to planning for the future of their family. Next year Richard should be able to pay off the remaining balance of his law school student loans. Contributing to Richard's Roth IRA is an annual priority. The following information reflects tax year 2011. Gross income $98,712 Student loan interest $1,965 Katarina's traditional IRA $1,500 Total itemized deductions $14,987 Standard deduction for 2011 $11,600 Personal exemption amount $3,700 Marginal tax bracket 25% -What is the Bajorshiks' adjusted gross income?

Adjusted gross income is your total gross income adjusted for inflation.

Daisy is a divorced single parent who is currently paying back a college loan, attending graduate school part-time, and working full-time earning $42,000. She has custody and provides all support for her child. Which of the following adjustments, deductions, or credits might apply to her?

Why is tax planning so important?