Based on the client profile given below (15%) Calculate a tax estimate for your client. Use the 2014 1040 long form. Assume that your clients file a joint return. What will be your clients adjusted gross income (AGI)? How much will they have in exclusions? Will they take the standard deduction or itemize? What will be the amount of the deduction? What is the total amount of exemptions they will qualify for? What will be their taxable

income? Will they qualify for the child tax credit? If so, for how much? What will their federal tax bill be?

Lisa and Harrys information:

Annual Income - $90,000

Cars - $30,000

Furniture - $20,000

Mortgage - $90,000

Balance Remaining on Cars - $4,000

Utilities - $350 a month

Checking Account - $2,000

Savings Account - $4,000

IRA - $12,000 (Lisa)

401K -$50,000 (Harry)

Stocks - $30,000

Emergency Fund - $1500

529 Plan - $25,000

Credit Cards Bills - $550 a month

Lisa and Harry, 35 and 33, have now been married for 5 years and are considering life insurance. Lisa doesnt have any coverage, whereas Harry has a $50,000 group policy at work. The couple have 2 young children, ages 3 and 4. Lisa earns $30,000 annually from a part-time home-based business. Harrys annual salary is $60,000. From their income, they save approximately $7500 a year. The remainder goes toward expenses. The couple estimates that the children will be financially dependent for another 17 years. This includes college expenses which are estimated to be approximately $60,000 a year for the two of them. In preparation for a visit with their insurance agent they estimated the following expenses if Harry were to die:

Immediate needs at death - $25,000

Outstanding debt (Including mortgage repayment) 94,000

Transitional funds for Lisa to expand her business and fully support the family - $30,000

College Expenses for both children - $240,000

They also anticipate, should Harry die, that Lisa will receive $3,600 a year in Social Security survivors benefits until the youngest child turns 18 and $6,000 annually in pension benefits until Lisa turns 80. Lisa projects her gross annual income to be $40,000 after her business expansion. Once the children are self-supporting, Lisa wants to plan a spousal life income-that is, funds to make up the difference between her income and pension benefits and her expenses for 15 more years from age 45 to age 60. Lastly, she wants to plan on $30,000 a year in retirement income for another 20 years, from age 60 to age 80. She anticipates receiving 5 percent after-tax, after inflation return on their investments. However, she hasnt reviewed her accounts In years and really doesnt know the return on investment.

To date, the couple have accumulated a total of $124,500 of assets, not including $45,000 of home equity or the cars and furniture. Their assets include $1,500 in an emergency fund, $12,000 in an IRA for Mary Jane, $30,000 in other investments, and $50,000 in Mikes 401k plan through his employer.

Lisa and Harry have 25 and 27 years to go until retirement. They estimate theyll need approximately $1.2 million to retire and live comfortably. A retirement savings of $1.2 million is the ideal amount and will allow them to take exotic vacations together each year to different countries. It will also allow them to maintain memberships at the local country club where annual fees are approximately $20,000. Harry also has a passion for restoring classic cars and anything less than the ideal amount would put a damper on their lifestyle. They know its a challenge to reach the ideal amount but theyd like to put their best foot forward and see what happens.

They save approximately $7,500 a year. Lisas savings goes into an IRA at a local bank that doesnt offer investment options but is tied to a savings vehicle with an annual yield of .45%. Harry on the other hand has money ($50k) in his employer sponsored 401k plan. He doesnt like a lot of risk so he took the advice of someone he met at a local bar and had $15,000 of the funds allocated toward stocks, $25,000 in bonds, and another $10,000 in cash and cash equivalents. Theres another $30,000 in an investment portfolio that he inherited from his father. The value of this portfolio doesnt appear to change much either. He doesnt know why his father owned this combination of stocks. Hes reluctant to change any of the holdings for sentimental reasons.

Harry is not a risk taker. Hes concerned about losing money. His father told him stories about the 1929 stock market crash and hes been somewhat leery ever since. To him, traditional savings and money market accounts are the best things going. Everyone tells him the stock market is a great way to grow his money so he could retire someday. Although his portfolio hasnt growth much with the current allocation, his thinking is - if the stock market should go down, at least I wont lose everything. Lisa isnt much different. Her IRA subaccounts are invested in a money market that yields .45%. Why? Because she overheard her beautician say, her fiance knows investing and right now, he thinks were heading for a major market correction. They have no idea what investments make up the 529 plan. All they know is except for their deposits, the value hasnt changed much over the past 5 years.