Individual Tax Research and Planning Assignment Help
Question No. 1
For Sue, this advice is a combination of good news, not so good news situations. The first good news for Sue is that there are two solid options for tax credits for working individuals seeking higher education. These are the American opportunity credit and the lifetime learning credit. The first not so good news is that these credits are limited based on percentages of the amount paid for education, and are phased out above certain levels based on an individual's AGI (Spilker, 2019).
Based on the information given, I'm assuming that Sue is filing single, is not concerned with other children claiming credits, and her only income is from her waiting tables. According to an article from U.S. News & World Report, the median salary of a waitress was $20,820 in 2017, though that figure can vary depending on the location (U.S. News & World Report, 2019). This should put Sue well below any AGI phase out limits for either credit.
With both credits being available, the choice of which to go with comes down to how much Sue ends up paying for her school. The AOC credit will provide her a credit equal to the first $2,000 of eligible expenses plus 25% of the next $2,000 for a total maximum of a $2,500 credit. Meanwhile, the lifetime learning credit will provide a 20% credit on eligible expenses up to a maximum of $10,000, providing a maximum credit of $2,000. Based on current college costs, and Sue's sophomore status, the AOC credit is probably her best bet. If her costs were $4,000, she would get the maximum credit from the AOC, but she would only be able to claim $800 under the lifetime learning credit. Even if she was able to max out the lifetime learning credit, she would still have $500 dollars more available with the AOC credit.
As far as retirement savings go, I will once again reference Dave Ramsey, whose advice would be similar to my own. The best use of Sue's money while attending college would be to put it towards getting through school and graduating either debt free, or as close as possible (Ramsey, 2019). While it is great for Sue to think about retirement planning, she would be hard pressed to find a return on her money that equaled her not having to pay against student loan debt. In addition, graduating debt free would allow Sue to fully contribute to her workplace retirement savings once she did find a job in human resources once she graduates, and her earnings wouldn't be eaten away by the amount she spends towards student loans.
Assuming Sue is able to make the most of her waitressing gig, and cover her school costs with scholarships, tax credits, and her available cash flow, the next advice I would give her regarding retirement savings would be to pursue a Roth IRA. It's unlikely her waitressing gig would give her access to a 401k or Roth 401k option, but if either of those are available, they should take precedence. If not however, she should look for an investment professional that can assist her in setting up a Roth IRA option which will use after tax money to fund her retirement. The best thing about this option is that all of the growth will be tax free when she reaches retirement age. The Roth options taper off above a certain AGI threshold, but with Sue's waitressing salary she should fall well below of that limit so this provides her with the best option to save and grow her money in a tax advantaged state for retirement.
Question No. 2
Currently there are two tax credits and one for adjusted gross income deduction that Sue can use for education. For definition, tax credits reduce the tax one pays. These subtract from the taxes owed amount. The for adjusted gross income deduction is used to compute adjusted gross income.
Since Sue is a sophomore, her best tax credit will probably be the American Opportunity Tax Credit. This will give a tax credit of up to $2,500 per year based upon the cost of Sue's tuition, fees, and course materials for that year. To get the full $2,500 credit, Sue must be spending $4,000 on tuition, fees, and course materials per year: The first $2,000 is at one hundred percent and then next $2,000 at twenty-five percent (Miller, 2019).
The requirements for this tax credit require Sue to be enrolled at least half-time in a program leading to a degree for at least one academic period of the year. This must also be in the first four years of post-secondary education. So, Sue might fit in perfectly.
She also must make a modified adjusted income below $90,000, the tax credit starts phasing out at a modified adjusted gross income of over $80,000 (Miller, 2019).
If she is not going to school half-time then she could use the Lifetime Learning Credit instead. These different tax credits are interchangeable, meaning that only one of these tax credits can be claimed at a time (Miller, 2019).
The Lifetime Learning Credit can give a tax credit up to $2,000. This is based upon twenty percent of the tuition, fees, and course materials of the year. Meaning that Sue would have to spend up to $10,000 in tuition, fees, and course materials to fully utilize the credit (Miller, 2019).
The half-time, degree-searching, and four years of college or less requirements of the American Opportunity Tax Credit are not part of this tax credit. However, it does have a lower income maximum, with the tax credit staring to be phased out after $57,000 modified adjusted gross income and being completely phased out at $67,000 (Miller, 2019).
With regards to retirement accounts, the main ones are 401(k), Individual Retirement Accounts (IRAs), and Roth IRAs (Retirement Plan Income and Tax Benefits, 2019).
Both 401(k) and IRAs take pretax dollars and contribute to a retirement account for the future. The benefit of these plans is that the contribution to these plans are a for AGI deduction now. Later on, as the plan gets distributed to you, taxes are paid on the distributions. The Roth IRAs are taxed this year, but their distributions in the future are tax free (Retirement Plan Income and Tax Benefits, 2019).
In addition to all this, there is a Retirement Savings Contributions Credit, also known as Saver's Credit. As long as Sue is over 18, is not a full-time student, and is not a dependent of anyone else, she can get a tax credit based upon her contributions to a retirement plan. Sue could get up to a $1,000 ($2,000 if married) tax credit for contributing to a retirement plan based upon her AGI and contribution amount (Retirement Savings Contributions Credit (Saver's Credit), 2019).
Question No. 3
Sue is working at a sports bar waiting on tables while attending college. She is currently enrolled as a sophomore in the school of business at State University majoring in human resource management. What are the possible tax credits or deductions that she can take for her tuition, books, supplies, transportation to classes and fees associated with her education?
Sue also needs your advice about finding a retirement plan or saving plan to start putting some money away for retirement. What advice do you have for her?
Explain the below question. Based on above paragaraph.
If she/he is in school now, what can she/he take as a education deduction/credit? She/he incurred $5,000 in tuition, books and stuff for the year. Yes, he/she is taking 12 hours of classes, considered full time. She works at the local sports Bar, Dr Ed's Sports Bar and Foods. She/he is making around $1,000 a month reported, part time job. What do you think?
Question No. 4 - Nursing Question.
Where the research takes place is important to consider. Environments like the hospital can be easier to control than some environments. Are there any environments that you cannot control? How would you handle research in that case?
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In connection with issuing either of the American opportunity credit and the lifetime and the learning credit. The best option for sue would be the former mainly because of the following major reasons which being that this benefit helps in claiming not only tuition expenses, other fees expenditure but also helps in claiming the expense incurred on the course material and the books as well as the other read materials including in the course syllabus (IRS. 2019). Further, it avails the tax benefits which can be claimed not as a tax payer limit but as a student limit. According to Sue situation four years are enough to pay of the expense deduction will be waived accordingly.
On account of the Roth IRA it is definitely a safe and a balanced choice as compared to the traditional retirement plan, primarily because the such earning are always tax free, which are without any break and withdrawals. The other benefit is that they are not taxable at the time of withdrawal if done after retirement and also within the limit was under $ 10000 (FINRA. 2019).
Understanding the current situation of the Sue and it work nature as well as the studying hours and the savers credit build in it is advisable that the AOC credit is well under the clause as well as the options applied by the Sue and as classes opted for 12 hours which is an full time course none should be a problem to reach a desirable limit. In terms with the Savers Credit is also a good option to explore as it is a non-refundable tax credit which aims to provide an well balanced scheme which helps the individual to save guard people who are shown in the lower or lower middle level group of salary (IRS. 2019). As the name suggest it builds the space which provides excellent relief in terms with the tax saving and that to on a larger margin. On the more, if balanced with the AGI plan the same suits much more beneficially as compared to the other schemes and the future and present plan of action.
Question 3 (a)
The possible Tax deduction and the Tax credits can be laid as follows:-
- American Opportunity Tax Credit (AOTC), refunded can be upto 40 %
- Lifetime learning tax credit which can be upto $ 2000
- Student Loan Interest Deduction which can be availed up to $ 2500
- Tuition and Fees Deduction which can be availed up to $ 4000 (IRS, 2019)
In terms with the retirement plan following plans are beneficial
- Traditional IRA Plans in this case these are non-taxable only in the year of in which contribution is made however, at the time income received or which is withdrawal will be taxed as the normal tax slab rate (FINRA. 2019).
- IRA Plan - In this case it is a reverse action the withdrawal is completely tax free after the retirement time.
However, in both the plans the contribution can be done till the year 70.5 years.
Question 3 (b)
In terms with the tax deduction the maximum can be claimed will be around $ 4000, which will be deducted from the assessable income, further this income can be claimed as a deduction even if the itemised deduction is not done for the return. Further, there is no issue on account of income as the MAGI limit is free (IRS. 2019). There is no limit set for claiming the deduction, adding more to it can be claimed irrespective of the fact whether the income is full time income or being the part time income. On the more as per the act taking once class or subject class for the whole semester will also help the individual to claim such benefit. The element which is essential to understand is that the education tax credits is claimed in the year expense has been incurred.
Environments other than the hospitals which are uncontrollable while performing nursing environment will be home options as well as the office options. It can be very difficult in terms with the nursing at home or in an household environment mainly because all the equipment's cannot be available nor the medical facility on complete basis can be availed. Further, it lacks the expert opinion and ready available advice, it can at time lack timely response and also lead to un expected situation and conditions which can be at times fatal. The other place can be in ambulance or the medical vans where the main purpose is purely on account with the availing transportation from place of incidence to the hospital and therefore, things can anywhere slip or be out control at time of nursing.
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