Chapter 9: Is a Current Year IRA Deduction the Best Long-term Tax Strategy?

This project requires students to analyze and make a client recommendation for the most tax-effective saving option, comparing a traditional individual retirement account (IRA) versus Roth IRA. Students analyze the two alternatives and track growth as well as projected tax liability over the life of the client to determine the strategy that generates the best outcome for the client. The project emphasizes principles of tax planning to illustrate that the solution with the smallest tax liability in the short term is not necessarily the most beneficial option over the long term, as well as how this often is in conflict with a client’s expectations and tax preparer tactics utilized to attract new clients. Students will demonstrate critical thinking skills through the analysis of two options for a client, and the communication of the findings with a recommendation through a client letter.