Executive Summary

Braiding hair is a skill that blends artistry, precision, and dedication. Like any profession, those who excel in this craft earn income for their expertise and are obligated to fulfill their tax obligations. This case study delves into the intricacies of the 2022 tax return meticulously prepared by TaxAssurances for a married couple—where one partner is a skilled hair braider and the other juggles roles as an Uber driver and car repair technician.

Background

• They work as a hair braider, Uber driver and auto repair technician.
• The couple is married.
• They are claiming one child.
• They rent their home and do not own it.
• Both live and run their businesses and work in Westchester County New York.
• There are no after school care expenses for their child.
• There was $80k of revenue generated by the braiding business.
• There were $61k of business related expenses for the braiding business.
• There was $12k of driver revenue.
• There were $28k worth of of driver expenses.
• There was $14k of car repair technician W2 wages.
• They did not have any investments.
• They did not have any charitable contributions.

Results

• In preparing the return, it was determined that it was more advantageous to file the tax return jointly rather than separately.
• The couple received just over $4k of federal tax refund directly deposited into their savings account.
• They received almost $3k of a NYS tax refund directly deposited into their savings account.
• It was more beneficial to take the standard deduction than the itemized deduction because they did not own their home or make charitable donati0ns.
• They had a federal earned income tax credit of just over $3,7000.
• They had an additional child tax credit of $1,500.
• They had a NYS earned income tax credit of $1,120.
• They had a NYS Empire state child credit of $330.
• They had just over $1,300 of a self employment tax deduction.

Challenges & Solutions

Having a business comes with multiple challenges. When a married couple with a child each has their own business, keeping track of everything becomes even more challenging. As a tax preparer it was important to not rush the tax preparation process for this couple. We needed to go over everything so that we had the best tax prep outcome possible. Below, we’ll go through the solutions that gave them that outcome.

Solution #1

Thoroughly reviewing their business-related expenses proved pivotal in minimizing their overall tax liability and securing the tax refund. Identifying deductible expenses and ensuring they were appropriately accounted for on their tax return played a crucial role in the realization of the tax refund they ultimately received.

Solution #2

Claiming the earned income tax credit at the federal and state level was a huge tax benefit to this couple. It’s a somewhat complicated formula in determining the amount of the credit, but ultimately, it was a huge help.

Solution #3

Claiming all child tax credits at the federal and state level was also a huge help in preparing their tax return. Without it they would have received much less of a tax refund at the federal and state level.

Solution #4

The spouse that had federal and state tax withholdings from their W2 income was helpful as well.

Conclusion

Navigating the intricate landscape of a joint tax return for a married couple with diverse professional roles presented both challenges and opportunities. The careful preparation of the 2022 tax return for this hair braider, Uber driver, and car repair technician couple underscored the significance of meticulous attention to detail. By opting for a joint filing, the couple unlocked various tax credits and deductions that significantly enhanced their overall tax refund.

Thoroughly reviewing and documenting business-related expenses emerged as a cornerstone solution, providing a comprehensive view of their financial landscape. This meticulous approach not only minimized their tax liability but also ensured that every eligible deduction was accounted for, contributing substantially to their federal and state tax refunds.

The strategic utilization of tax credits, particularly the earned income tax credit at both federal and state levels, played a pivotal role in optimizing their tax outcome. This complex yet valuable component of the tax code proved to be a substantial benefit for the couple, enhancing their financial position.

Furthermore, leveraging child tax credits, both at the federal and state levels, emerged as a key strategy. These credits not only augmented their tax refund but also reflected the financial support provided for their child.

Lastly, the incorporation of tax withholdings from the W2 income of one spouse added a layer of financial stability and contributed to the overall positive outcome of the tax return. This strategic decision ensured a smoother tax process and a more favorable financial result.

In conclusion, the successful preparation of this couple’s tax return highlights the importance of tailored tax strategies, careful consideration of available credits and deductions, and a thorough understanding of the intricate tax code. Moving forward, continued attention to detail and proactive tax planning will be crucial for sustaining their financial well-being as they navigate the complexities of their multi-faceted professional lives.