It is crucial for all citizens to pay taxes in order to ensure national development. If not properly planned for, taxes can be too much on a person’s income causing the individuals to bear a larger tax load than others. In this case study, Shelby receives a tax refund of $800. The tax return can prove beneficial to her if she considers some strategies listed below.
Question 1: Tax refund suggestions
First, she can use the refund to pay off some of her loans such as the student loan (Sherraden, 2017). In doing that she gets the advantage of reducing the amount of interest charged on her as the loan stays unpaid. She should consider the loan with the highest interest rate since it is the one that will accumulate more at the end of a loaning interval. Shelby can also use the tax refund to start an emergency fund to cater for unexpected situations. She can open a medical insurance policy to cater for her in case she falls ill. Moreover, she can start a retirement plan with the money by opening an individual retirement account (IRA).
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Question 2: Tax planning strategies
In addition to proper utilization of the tax return, Shelby can apply some strategies in order to reduce the total tax she pays. She can do this by doing a review of her income and removing any payments that are listed but are not accounted for in her salary. Doing this will reduce the total tax she is charged (Daley & Coates, 2015). This action will ensure that only the money that she receives at the end of the month is taxed and not any other allowances that she cannot account for. Moreover, she can pile up low-income assets and register them as one to reduce the total tax she pays on individual assets. She should also review her registered assets and write off any assets that are no longer bringing her income.
Question 3: Financial planner sheet
Furthermore, Shelby can use a financial planner sheet to reduce unwanted spending as she has been doing in past years when she used to go for clothe-shopping sprees. She should plan on increasing her savings in order to get money enough to sponsor her future projects such as opening up her own business or buying a house and other future necessities. She can also set up a personal superannuation plan to save on her retirement ages. If Shelby follows the list above she will definitely become a better spender of her money and reduce tax charged on her.
References
Daley, J., & Coates, B. (2015). Property taxes . Grattan Institute.
Sherraden, M. (2017). Can the poor save? Saving and asset building in individual development accounts . Routledge.
