INCOME TAX PLANNING: FUNDAMENTALS

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INCOME TAX PLANNINGFUNDAMENTALS
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TAX LIABILITY MANAGEMENT

• Primary Goal of Financial Planning
• Primary Goal of Tax Planning
• Tax Planning Methods

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THE TAX CODE A BRIEF OVERVIEW

• Objectives
• Legal Status
• Key Forms
• 1040 form
• Schedule A -- Itemized Deductions
• Schedule B -- Interest and Dividend Income
• Schedule C -- Profit (Loss) from a Business
• Schedule D -- Capital Gains and Losses
• Schedule E -- Supplemental Income and Loss

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BASIC INCOME TAX CALCULATION

• Step 1 Determine Taxpayer Gross Income
• salaryinterestcash dividendsalimony
  received business income (loss)capital gains
  (losses)partnership, rental income
  (loss)other income
• Step 2 Subtract Adjustments to Income to get AGI
• Step 3 Compute Itemized Deductions or Standard
  Deduction
• Step 4 Compute Personal Exemption(s)
• Step 5 AGI - Step 3 - Step 4 Taxable Income
• Step 6 Determine Tax from Tables or Schedule
• Step 7 Subtract Credits to Obtain Tax Liability

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DEDUCTIONS I OBTAINING AGI

• Deductions for Adjusted Gross Income (AGI)
• The Purposes of AGI

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DEDUCTIONS II OBTAINING TAXABLE INCOME

• Standard Deduction
• Deductions from AGI (Schedule A)
• Phaseouts

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PERSONAL EXEMPTIONS

• Types of Personal Exemptions
• Exemption Amounts
• Exemption Phaseouts

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TAX CREDITS

• Examples
• Deduction Equivalence
• Example Bill Taxpayer is in the 28 bracket and
  qualifies for the 400 child care credit. The
  amount of deductions necessary to achieve the
  same tax benefit would be ______ ?
• Phaseouts

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INTERNAL REVENUE CODE(IRC) SYNTAX

• Example 401(k)(2)(A)
• Abbreviation for Section
• Section Number
• Subsection Designation
• Paragraph Number
• Subparagraph Designation