Identify taxable or nontaxable income, calculate taxable income, identify tax planning strategies Background: Sam and Ricci are a happily married young couple. They work hard and save diligently. Here comes the tax season and they plan on filing their joined tax report. They hope they can get some tax refund. They would also like to find out ways to save their tax payments in the future, so that they can raise children and prepare for their education fund. Sam has a full-time job and makes $4,200 each month after taxes. He is also a teacher and last year he earn $700 out of a teaching job. Sam’s student loan balance is $22,000, he pays $250 each month. The interest payment he made on his student loan in last year is $1,800. Besides that Sam also has a car loan of $12,200 and credit card balance of $3,000. Sam’s withheld federal income tax is $10,000. (Let’s ignore state and local tax amount) Ricci just graduated from college and has been working part time. Her workplace pays her $2,000 a month after taxes. Due to her excellent job performance and superior customer feedback, her boss gave her a total of $3,700 bonus last year. Her savings account has earned $20 in last year. Last year she graduated from her undergraduate program, and she paid $7,900 in tuition (she also qualified for the American Opportunity Credit). Ricci doesn’t have student loans. Ricci’s withheld federal income tax is $4,800. (Ignore state and local tax amount) Sam and Ricci both have IRA accounts. Sam contributes $2000 a year and Ricci contributes $1000 to her account in each year. They bought a house a few years ago. Their mortgage payment per month is $1500. Last year, they made a total of $5,400 interest payment on their mortgage. Their property tax payment last year is $4,000 Your Tasks: (for calculations, You MUST show your work to earn credit) Help the couple to calculate: (hint: some of the information provided may not be relevant to the tax report) Their total gross income AGI (adjusted gross income) Total Itemized deductions If the standard deduction is $23,000 for their tax year, is the couple better off using the standard deduction or itemizing? Why? What is the couple’s taxable income? Suppose the income tax rate for their filing status is 20%, will they get tax refund or need to pay more tax that the amount withheld? Is there anything that they could do to shield more of their income from taxes? Identify 2 to 3 tax planning strategies that are applicable to their situation. Submit your work in WORD file to DropBox folder prior to its deadline. Answer

Answer rating: 100% (QA)

Based on below computaion i would recommend Sam and Ricci to choose itemized deduction for b... View the full answer