Explain the filing requirements for the tax position taken in each of the prepared tax returns. Include the following:
Filing status
Qualifying dependents/relatives claimed, if applicable
Explain taxable and non-taxable income. Consider the following:
Taxable sources of income
Profiles with non-taxable income
Non-taxable income qualifications
Reporting of non-taxable income
Justify deductions taken in each of the prepared tax returns. Consider the following:
Standard versus itemized deductions
Deductions taken on prepared returns
Evaluate tax credits applied in each of the prepared tax returns. Consider the following:
Applicable credits taken
Describe client profiles to assist with tax planning preparations. Include the following:
High-level points from the profile(s) to determine clients’ goals
Relevant factors that could impact the tax planning process
Identify research necessary to find applicable tax planning solutions for the clients in each scenario. Include the following:
Methods for assessing the client's tax situation for future tax planning
Sources applicable to tax year in question to answer tax questions for the client’s scenario
Income limitations (i.e., earned income, income thresholds)
Decisions for any dependents
Create tax planning recommendations based on client profiles. Include the following:
Steps that will improve tax position based on each client's goals (i.e., applicable tax planning solutions)
Suggestions of how clients can do their taxes differently over the coming year to achieve their goals (i.e., changes that could be made to implement a tax planning strategy not currently applicable)
Examples of how clients can improve tax position for the upcoming year
Client(s) #1
Open Client 1040 1142
Primary Taxpayer’s Legal Name Joanna Roman
Primary Taxpayer’s Preferred Pronoun She
SSN ***-**-1142
Age 25
Occupation Gig Worker
Citizen/U.S. Resident Status U.S. Permanent Resident
Languages English; Italian
Marital Status Single
Spouse’s Legal Name N/A
Spouse’s Preferred Pronoun N/A
Spouse’s SSN N/A
Spouse’s Age N/A
Spouse’s Occupation N/A
Dependent(s) (# - Relationship) (Name/Age/SSN) N/A
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.
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.