TaxAssurances Blog

Executive Summary

I’ve had the pleasure of working with an assistant dean for a long time. Since before they had a spouse and children. Things are delightfully different for them family wise now but taxes are a thing they worry about.

With that said, we work together not just during tax season on tax planning but year-round as well when life events happen. This case study walks through the circumstances of their 2022 tax return with their spouse and children.

Background

• The married couple had a combined total income of a little over $91k. They have 3 children and one of them was a newborn in 2022.
• The assistant dean lives in a CT suburb and works in a NY suburb. The area manager lives and works in CT.
• The assistant dean had an LLC that had no revenue and roughly $400 worth of expenses for 2022.
• They own their home.
• They did not make any charitable donations in 2022.
• They had interest income from a home property escrow account.
• They had no investment accounts that had any dividends or capital gains or losses.
• They had no cryptocurrency investments or other income
• The area manager contributed to and used their employer HSA account
• The area manager went to school in an effort to get their undergraduate degree and the assistant dean went to school for an advanced degree.
• The area manager received unemployment income.
• The assistant dean received income because one of the spouses had a child and they stayed home after the birth of the child for a number of months before going back to work.

Results

• The couple received an IRS refund of just over $4.5k.
• They owed a little over $400 to NYS on a nonresident tax return.
• Based on their 2022 tax information we determined that it was more beneficial to file the tax returns jointly instead of separately. The difference was by over $3k.
• Based on their tax information we determined that it was more beneficial to take the standard deduction than the itemized deduction once we added up the state income taxes and property taxes, they paid along with the interest on the mortgage that they paid.
• They received a refund from the state of CT of almost $800 and had it directly deposited into their savings account.
• They received a $2k credit on their CT tax return for paying income taxes to NYS.
• The qualified for and received the child tax credit of $6k ($2k per child) for the year.
• They had their children in child are so they qualified for and receive the dependent child care credit for $600.
• Because they were pursuing their undergraduate and advanced degrees the couple qualified for and receive an education credit of just over $1k and an american opportunity credit of just over $800.
• The income for maternity leave incurred a self-employment tax. We attached Schedule SE to the return.

Challenges & Solutions

Again, I’ve worked with the assistant dean for a number of years and know that they are very concerned with not ever owing taxes once the tax preparation process for the year is complete.

Solution #1

Since I’ve been working with the assistant dean for a number of years in making sure that w4 withholdings adequately reflected what taxes need to be withheld the couple understood how to overpay their taxes during the year. This attention to W4 withholdings is something that we will continue to review and adjust as the couple makes more money and or takes on new jobs or business endeavors.

Conclusion

The journey of this assistant dean and their family stands as a testament to the power of proactive tax planning and a comprehensive understanding of individual financial circumstances. With the ever-evolving landscape of familial dynamics, income streams, and tax regulations, the meticulous collaboration throughout this case study underscores the importance of a year-round commitment to tax optimization and preparation.