Q1. Discuss some tax planning strategies that can maximize the benefit of itemized deductions
Proper tax planning strategies are important in helping an individual in maximizing his/her deductions in years that he/she itemizes and hence maximizing the benefit of itemized deductions. This helps one to save much of the money during the tax time. Some of the planning strategies that can maximize the benefit of itemized deductions include;
a) Bundle Medical Expenses to Maximize Itemized Tax Deductions
By having expenses in the year in a bundle helps one to maximize itemized tax deductions and hence enhancing saving. To achieve fully the benefits of this strategy, one need to compute annually an estimation of what 10% of his/ her AGI (adjusted gross income) would be, have a record of ones running totals of out-of-pocket medical expenses every year and when your expenses hit your target, determine the expenses to bundle in the current year. Deductions from the taxable income for medical expenses incurred by an individual are allowed if they are not covered by the health insurance and to the extent that they do not exceed 10 % of ones gross income.
b) Pre-Pay State Taxes
This strategy applies when individuals pay their state income taxes on time before an end of the year. Early paying of income taxes enhances maximization of individuals deductions for federal taxes and hence enjoying maximum benefits of the same. However, an individual should approach this strategy with caution and consult experts in order to know if it will work for him/her as it may throw someone into an alternative minimum tax.
c) Utilization of strategies to reduce or avoid taxable income
Increasing an individuals contribution such as contribution to a retirement plan, deferment in compensation income or funding an FSA (Flexible funding account prevents the taxpayer from reaching a threshold that would lead to high tax deductions from an individuals adjusted gross income. Additionally, avoidance of transactions e.g. selling of high-value assets that would increase an individuals income such that it does not surpass the threshold of an individuals income for the 3.8% surcharge and the income phasing out of itemized deductions would enhance maximum benefit from itemized deductions.
Q2. What are two techniques you have used to persuade someone and why did you choose those techniques?
a) Use of Social Proof
I used the social proof technique to convince customers to buy my products having noticed they did not have sufficient information about the products. I highlighted the use of the products to the customers and mentioned to them how the products were widely used in the world and sighted big companies that were using the products. This technique worked for me as most of the customers bought the product as they were to be associated with the others and companies that had bought the same products.
b) Commitment and consistency
I employed this technique to very loyal and committed customers who always buy products from me. I took the opportunity to introduce new products to them, as it was easy for them to trust my products based on the consistency and frequency of using the products.
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