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Taxation Case Study

A brief study on how to save on taxes in varied familial conditions Or Change in filing status its tax implications.

INTRODUCTION
Taxation Case Study

Our clients Mr John Smith & Ms Mary Thomson were friends and worked together in 2016. They got married on July 20, 2017. In 2018, Mrs. Mary Smith gave birth to a baby boy and named him Jack. While they were on their journey towards a happily ever after. In October 2019, quite suddenly & most unfortunately, Mr. John had passed away. Horrified by this devastating incident, Ms. Mary has decided to raise her only son as single mother and so she started working again to support herself and her son.

CHALLENGES

 

  • Changes in filings – To help Ms. Mary file IT returns from Year 2016 to 2022.

 

  • Lawful solution – To come up with a solution that is the most appropriate and beneficial for Ms. Mary.

 

  • Save costs – To help Ms. Mary save money and avoid unnecessary taxes from Government.

PROPOSED SOLUTIONS

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  • Tax year 2016 – Ms. Mary Thomson was unmarried and working so shall file her tax return as ‘Single’.

    • .

  • Tax year 2017 – John and Mary were married as on July 20, 2017, so can file their tax returns together as ‘Married Filing Jointly’.

    • .

  • Tax year 2018 – John and Mary were married and having a dependent child as on December 31, 2018, so can file their tax returns together as “Married Filing Jointly” and claim Mr. Jack as dependent on their tax return.

    • .

  • Tax year 2019 – Mr. John Smith died in October 2019. However, as per regulations Mrs. Mary Smith may file tax return as ‘Married Filing Jointly’ if Spouse died during the year.

    • .

  • Tax year 2020 – As per regulations, If Ms. Mary Smith is not remarried as on December 31, for the next 2 years, she may file her tax return as Qualifying Widow(er).

    • .

  • Tax year 2021 – As per regulations, If Ms. Mary Smith is not remarried as on December 31, for the next 2 years, she may file her tax return as Qualifying Widow(er).

    • .

  • Tax year 2022 – As per regulations, Ms. Mary Smith may file her tax return as ‘Head of Household’ as a qualified dependent son has lived with her in the home for more than half a year and she paid more than half of the cost of keeping up a home for the year.

    • RESULTS AND BENEFITS

    After implementing the proposed solutions, Ms. Mary Smith could claim the most beneficial filings with the following outcomes:

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  • Save on bills – Ms. Mary could claim the maximum standard deductions for the filing status.

    • .

  • Earn credits – She could gain eligibility for credits like child and dependent care, child tax credit etc.

    • .

  • Save costs & time – Our automated process and integrations helped minimize manual data entry efforts and reduced the time spent on reconciliation, resulting in cost savings for the client/party.

    • CONCLUSION

    • By performing a deep case study, abiding by the applicable individual/personal tax laws, and implementing cost-saving solutions, AccountingAccumen helped client file her taxes within the tax law limits.
    • By opting for our most beneficial and appropriate filing status solutions, Ms. Mary Smith could successfully reduce her tax liability.

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