A SINGLE FATHER'S TAX SITUATION

Ever since his wife's death, Eric Stanford has faced difficult personal and financial circumstances. His job provides him with a fairly good

income but keeps him away from his daughters, ages

$8$

$$and

$1$

$0$

$,$

$$nearly

$2$

$0$

$$days a month. This requires him to use in

$-$

home child care services

that consume a major portion of his income. Since the Stanfords live in a small apartment, this arrangement has been very inconvenient.

Due to the costs of caring for his children, Eric has only a minimal amount withheld from his salary for federal income taxes. Thus, more

money is available during the year, but for the last few years, he has had to make a payment in April

$-$

another financial burden.

Although Eric has created an investment fund for his daughters' college education and for his retirement, he has not sought investments

that offer tax benefits. Overall, he needs to look at several aspects of his tax planning activities to find strategies that will best serve his

current and future financial needs.

Eric has assembled the following information for the current tax year:

Earnings from wages, $

$1$

$1$

$4$

$,$

$2$

$4$

$1$

Interest earned on savings, $

$6$

$5$

IRA deduction, $

$6$

$,$

$5$

$0$

$0$

Checking account interest, $

$4$

$5$

Current standard deduction for filing status, $

$1$

$8$

$,$

$3$

$5$

$0$

Amount withheld for federa income tax, $

$8$

$,$

$8$

$2$

$5$

Tax credit for child care, $

$1$

$,$

$2$

$0$

$0$

Child tax credit, $

$4$

$,$

$0$

$0$

$0$

Filing status: head of household

student submitted image, transcription available

$1.$ What are Eric major financial concerns in his current situation?

$2.$ In what ways might Eric improve his tax planning efforts?

$3.$ Calculate the following:

a$)$ what is Eric taxable income?

b$)$ What is his total tax liability?

c$)$ Based on his withholdings, will Eric receive a refund or owe additional tax? What is the amount?