Assignment:
A Single Father's Tax Situation 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 daugh- ters, ages 8 and 10, nearly 20 days a month. This requires him to use in-home child care services that consume a major por- tion of his income. Since the Stanfords live in a small apart- ment, 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 to select investments that offer tax benefits. Over- all, 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, $47,500 Interest earned on GIC: $125 $2,000: RRSP Deduction $65: Savings account interest $4,863: Amount withheld for federal income tax Total non- refundable tax credit amounts: $13,200 Child care deduction: $6,300. Filing status: head of household Calculate the following:
a. What is Eric's 2007 taxable income?
b. What is his total 2007 tax liability? What is his average 2007 tax rate?
c. Based on his withholding, will Eric receive a refund or owe additional tax? What is the amount?