Part 1 How much tax do I pay in total during the course of a typical year? Purpose of Assignment This case study will provide you with an opportunity to gain a deeper understanding of the impact of taxation in the daily lives of taxpayers. By considering any and all taxes incurred by a curious client, you will gain a greater appreciation of the extent to which taxes permeate all of our lives. Assignment Facts Your clients, Mr. & Mrs. Harkins (Robert and Amy) have been clients for many years. In your most recent meeting with them, they asked how much you thought they pay out in total taxes over the course of a year. Your tax planning has mainly been focused on reducing their federal and resident state income tax liabilities, so you have never addressed what their ENTIRE tax burden would be over the course of the year. To answer the question, you started to consider what you have learned about them from the previous work you have done. Having completed the clients federal and state income tax returns for tax year 2022, you are aware of the following information: Robert and Amy are both employed and receive wages reported on a Form W-2. Robert receives a salary of $180,000 as an executive at a consulting firm. Amy receives a salary of $200,000 in her position as marketing director of a midsize corporation. Each of them puts aside 10% of their salary pre-tax for their respective retirement plans; Amys company pays a portion of her health insurance (family plan); the remaining $14,000 is taken from her salary pre-tax. The couple has some investment income: interest income of $10,000 and dividend income of $20,000 ($15,000 of which are qualified dividends). In addition, they have capital gains from sales of securities: Short Term = $5,000; Long Term = $20,000 Robert and Amy have two grown children, Melissa (22) and Greg (21). They are both currently in college; however, they have moved back home and are not working. The couple lives in Massachusetts. In addition, they own a vacation home in a neighboring state. Annual real estate taxes are $18,000 and $12,000 for their primary and vacation residences, respectively.

Revision Date: 09/2023 2 Based on having known the Harkins for many years, you are aware of the following items which may not be apparent based on a review of their income tax returns: They live a fairly comfortable lifestyle, enjoy dining out, and consume their share of potent potables (booze). Each taxpayer has their own vehicle; none of their driving is business-related. Their children do not contribute to any household expenses which include, among other things, utilities, groceries, liquor, mortgage, real estate taxes. They even have the kids on their mobile phone plan. Each child has their own vehicles and their parents pretty much take care of all the expenses including gas and maintenance. They typically spend four weeks annually at their vacation home. They do not have enough expenses to itemize; they take the standard deduction.

1. Prepare a detailed information request for presentation to the Harkins. This client is likely to believe that due to your continuing relationship you already have everything you need from us. Of course, that is not true. 2. Consider providing a table with headings to assist the client in understanding exactly what information you are requesting. Hint: Be sure to consider the many federal and state taxes which include, but are not limited to consumption taxes, excise taxes, surtax for higher income, real estate taxes, and any other taxes that they might be required to pay. 3. Discuss the social and/or economic policies (i.e. beyond the need to raise revenues) that may be the underlying reason behind those tax items mentioned in Part 1. 4. Include in your discussion whether each tax is: progressive, proportional (flat) or regressive.