INDIVIDUAL - TAXPAYERS and DEPENDENTS

Question 1

After the death of a spouse, the widow(er) can no longer file Married filing jointly. True or False?

Answer 1

False.

When a married taxpayer dies during the year, the filing status for that year is determined as of the date of death. If the couple was married when he died, the surviving spouse can file a joint tax return for the year of death.

For the subsequent 2 years the widow(er) can file as a Qualifying Widow(er) if they have dependent children, and then Head Of Household after that as long as there are qualifying child Dependents.

Question 2

A divorced couple can file Married in the year they divorced as long as they were married for more than half the year. True or False?

Answer 2

False.

If a couple has divorced or received a legal separation (decree of divorce or separate maintenance), by the end of the tax year, they cannot file as married.

Question 3

Couples who get married in the year they are filing taxes are allowed to still file Single or Head of Household for that year only. True or False?

Answer 3

False

Filing status is determined as of December 31 of the tax year in question. IF you are married on any date during the year for which you are filing your taxes, you are required to file Married, either filing jointly or filing separate.

They may no longer file single or as head of household. Head of household is for single filers (or wither legally separated or considered unmarried) who maintain a home for an unmarried child or dependent relative.

Question 4

When a spouse dies, the widower may no longer file Married Filing Jointly. True or False?

Answer 4

False

If a spouse dies during the tax year, the filing status at that time holds (unless a change occurs subsequently such as a remarriage).

Question 5

Form 8867

Answer 5

Form 8867 is used to document if a taxpayer is eligible to file as Head Of Household.

Form 8867 is the Paid Preparer’s Due Diligence Checklist

Question 6

Married Filing Separately Rules

Answer 6

1. The standard deduction is half that allowed to joint filers.
2. If one spouse itemizes deductions, the other cannot claim the standard deduction.

Also:
1. The deduction limit for a capital loss is $1,500 (instead of $3,000 for joint returns).

2. No earned income credit.
3. No education credits or tuition and fees deduction.
4. No exclusion for US savings bond interest.
5. No exclusion or credit for adoption expenses in most cases.
6. Most other benefits reduce at a level of income equal to one-half amount for joint filers.

Question 7

Qualifying Widow(er)

Answer 7

Surviving spouse files jointly in year of death, then QW for next 2 years.

Tax rates and standard deduction same as a MFJ return.

Must have a child or step-child (not a foster child) that can (or could if not for exception) be claimed as a dependent.

A QW can not be claimed should the taxpayer remarry.

Child must live with taxpayer all year, except for temporary absences.

Taxpayer (and deceased spouse) must pay more than half the cost of maintaining home.

Question 8

Describe the Head Of Household due diligence penalty for a Tax Preparer.

Answer 8

Any Tax Preparer who fails to comply with due diligence requirements in 2019 shall pay a penalty of $530 for each failure.

Form 8867 must be completed when filing as HOH.

Question 9

Custodial Parent defined:

Answer 9

The custodial parent is the parent with whom the child lived for the greater number of nights during the year.

Question 10

Head Of Household - 4 requirements:

Answer 10

1. Is a Custodial Parent - A qualifying person must live with the taxpayer for more than half the year.
2. A Qualifying Child or Relative is a member of the family.
3. Pays > half the cost of keeping up a home.
4. Unmarried or Considered Unmarried (file a separate return and spouse did not live in the home the last 6 months of the tax year).

EXCEPTION: A qualifying person can be mother or father even if not living with the taxpayer if paying more than half the cost of maintaining the parent’s home.

Question 11

When is marital status determined?

Answer 11

The IRS considers a taxpayer married (or unmarried) for the entire year based on marital status on the last day of the year.

Question 12

A widower can file as a Qualifying Widower in the 2 subsequent years following her husbands year of death as long as a dependent relative lives with her during those years. True or False?

Answer 12

False.

She can only file as a Qualifying Widower if she has a qualifying child.

However she is able to file using the Head Of Household status so long as a dependent relative lives with her for those 2 years.

Question 13

If a couple has divorced or received a legal separation (decree of divorce or separate maintenance) by the end of the tax year, they cannot file as married. True or False?

Answer 13

True.

That said, it is possible that a separated taxpayer might qualify as head of household, for example if (s)he has maintained a home for a dependent parent.

Question 14

Taxpayers who are married as of the end of the year and do not have a separate maintenance agreement must file either a joint return or each file as married filing separately. True or False?

Answer 14

True.

For individual income tax purposes, filing status is determined by examining the taxpayer’s marital status as of December 31 of the tax year.

However, a taxpayer would be able to file as Head Of Household if they had not lived with their spouse during the last six months of the year under the Abandoned Spouse Rule.

Question 15

Once a couple files Married Filing Joint, they are required to continue filing MFJ. True of False?

Answer 15

False.

Selecting a filing status for one year, either jointly or separately, does not affect the selection of a filing status for a future year.

Note: Taxpayers can figure their tax both on a joint return and on separate returns (using the filing status of married filing separately) and choose the method that gives them the lower combined tax.

Question 16

How is filing status determined?

Answer 16

Filing status is determined as of December 31 of the tax year in question.

Question 17

What are the optimal filing statuses for a widow(er) for the year of the spouses death and years moving forward?

Answer 17

In the year of death, a widow(er) files a MARRIED FILING JOINT return as long as they would have been able to file a joint return at the time of their spouses death.

If there are qualifying children, the widow(er) can then file as a QUALIFYING WIDOW(ER) for the next 2 years.

After that time, (s)he can file as HEAD OF HOUSEHOLD as long as one or both children are dependents or unmarried and continue to live with her.

After that, the widow(er) would file SINGLE if remaining unmarried.

Question 18

A taxpayer who meets the Qualifying Widow(er) requirements may choose to file as Head Of Household for greater tax breaks. True or False?

Answer 18

False.

Taxpayers who meet the requirements for qualifying widow(er) have no reason to file as head of household because that status has fewer tax breaks.

Question 19

Head of Household is taxed at a lower effective tax rate than Single filers but at a higher effective tax rate than Married Joint filers. True or False?

Answer 19

True.

Question 20

Single taxpayers pay the highest effective tax rate of the three (Single, Head Of Household, or joint filers) and have the lowest standard deduction.

Answer 20

True.

Question 21

Form 8332, when filed by the noncustodial parent, allows them to claim their child for the child tax credit, additional child tax credit, and credits for other dependents. True or False?

Answer 21

False.

It is the Custodial Parent, not the noncustodial parent, that must file form 8332 in order to allow the noncustodial parent to claim the child for the child tax credit, additional child tax credit, and the credit for other dependents.

Question 22

Wilson Metalis is trying to determine whether a particular person qualifies as a dependent on his individual income tax return for this year. To qualify, a dependent must be either a qualifying relative or a qualifying child. Which of the following would not be considered a qualifying relative in making the determination as to whether a person is a qualifying dependent?

1. Taxpayer’s cousin who has lived in the taxpayer’s household for 9.2 months
2. Taxpayer’s mother-in-law who lives in the taxpayer’s guest house free of charge
3. Taxpayer’s grandmother who lived in a nursing home this year
4. Taxpayer’s brother-in-law who lived in the household all year

Answer 22

1. Taxpayer’s cousin who has lived in the taxpayer’s household for 9.2 months

Explanation:
Qualifying relatives include parent, grandparents, siblings, children, grandchild, aunts, uncles, nephews, nieces, and in-laws, or anyone else who lived in the taxpayer’s household for the entire year. Cousins are not considered to be qualifying relatives because of the relationship with the taxpayer, and the cousin in this problem did not live in the taxpayer’s household for the entire year.

Question 23

Holly and Harp Oaks were divorced in 20X1. The divorce decree was silent regarding who is entitled to claim their 12-year-old daughter June as a dependent. Holly has legal custody of her daughter and did not sign a statement stating that she won’t claim June as a dependent. Holly earned $8,000 and Harp earned $80,000. June had a paper route and earned $3,000. In 20X2, June lived with Harp 4 months of the year and with Holly 8 months. Who is entitled to claim June as a dependent in 20X2?

1. June may, since she had gross income over $3,000 and files her own return.
2. Since June lived with both Holly and Harp during the year, they both may claim her as a dependent.
3. Holly may, since she has legal custody and physical custody for more than half the year.
4. Harp may, since he earned more than Holly and, therefore, is presumed to have provided more than 50% of June’s support.

Answer 23

3. Holly may, since she has legal custody and physical custody for more than half the year.

Explanation:
In the case of a child of divorced or separated parents, either parent may claim the child as a dependent provided the child is in the custody one or both parents for more than 1/2 the year and the parents provide over 1/2 of the child’s support. The divorce decree makes no special statement as to who claims June as a dependent, and there is no indication that Holly signed a written declaration allowing for Harp to claim June. Under the rules for the support test, Holly claims June due to the fact that June lived with Holly more than half the year during 20X1.

Question 24

Abbey and Ben have several people who lived with them during the latest tax year. Which of the following individuals qualifies as their dependent?

1. The 19 year old daughter of a friend who lives with the taxpayers while attending college from September through May. She lives free of charge and pays no expenses.
2. The taxpayer’s 24 year old son who only lives with the taxpayers during the summer months and holidays. The rest of the year he is a college student and makes $12,000 per year in salary.
3. The taxpayer’s 20 year old married daughter who’s husband is away on military duty. The daughter will file a joint return with her husband to pay tax due.
4. The taxpayer’s 12 year old daughter who attends boarding school during the year.

Answer 24

4. The taxpayer’s 12 year old daughter who attends boarding school during the year.

Explanation:
The daughter of the friend is not a dependent because she is not a blood relative and she did not live with the taxpayer for the entire year. The 24-year-old son made too much money even if he is a student because he is 24 or older. The 20-year-old daughter is married and will file a joint return with her husband; this precludes her from being a dependent on her parent’s tax return. The 12-year-old daughter is a blood relative who is considered to have lived with her parents for the entire year even though she attends boarding school.

Question 25

John and Joanne are the sole supporters of the following individuals, all U.S. citizens, none of whom lives with them. None of these individuals file a joint return or have any gross income.

Jennie, John’s mother
Julie, Joanne’s stepmother
Jonathan, father of John’s first wife

How many dependents may John and Joanne claim on their joint return?

1. 3
2. 2
3. 1
4. 0

Answer 25

1. 3

Explanation:
A taxpayer cannot claim a person as a dependent unless providing more than half of the total annual support and that person is a qualifying child or qualifying relative. For these purposes, any person who is not your qualifying child or the qualifying child of another person can be your qualifying relative if they reside with you. A qualifying relative does not need to live with the taxpayer if related in one of several ways. Foster parents are not qualifying relatives.

All three individuals (Jennie, Julie, Jonathan) are qualifying relatives for whom they may claim as a dependent.

§1.152–2(d) - In the case of a joint return, it is not necessary that the prescribed relationship exist between the person claimed as a dependent and the spouse who furnishes the support; it is sufficient if the prescribed relationship exists with respect to either spouse. Thus, a husband and wife making a joint return may claim as a dependent a daughter of the wife’s brother (wife’s niece) even though the husband is the one who furnishes the chief support. The relationship of affinity once existing will not terminate by divorce or the death of a spouse. For example, a widower may continue to claim his deceased wife’s father (his father-in-law) as a dependent provided he meets the other requirements of section 151.

Question 26

All of the following are correct EXCEPT:

1. A brother-in-law must live with the taxpayer the entire year to be claimed as a dependent even if the other tests are met.
2. A son age 21 was a full-time student who earned $2,700 from his part-time job. The money was used to buy a car. Even though he earned $2,700, his parents can claim him as a dependent if the other tests were met.
3. For each person claimed as a dependent, the social security number, adoption taxpayer identification number, or individual taxpayer identification number must be listed.
4. A qualifying relative need not live with the taxpayer to be a dependent of the taxpayer.

Answer 26

1. A brother-in-law need not live with the taxpayer the entire year to be claimed as a dependent even if the other tests are met.

Explanation:
A qualifying relative need not live with the taxpayer provided they meet all other tests and are related in one of the following ways:

A child, stepchild, foster child, or a descendant of any of them (for example, a grandchild). (Treat a legally adopted child the same as a child.)
A brother, sister, half brother, half sister, stepbrother, or stepsister.
A father, mother, grandparent, or other direct ancestor, but not foster parent.
A stepfather or stepmother.
A son or daughter of the taxpayer’s brother or sister.
A brother or sister of the taxpayer’s father or mother.
A son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law.

TIP: When taking the exam, if you come across a question like this you are best served to focus on the most common application of the rule. A valid SS, ATIN, or ITIN is a requirement to claim a dependent. But there is an exception if a child is born and dies in the same year and a taxpayer did not receive a Social Security Number for the child. In that case, the taxpayer can claim the child as a dependent but must attach a copy of the child’s birth certificate, death certificate, or hospital records instead. Unfortunately, while exceptional circumstances may make this answer false, it is not the best answer as the best choice is always a false statement.

Question 27

Which of the following students might qualify as a qualifying child on their parents tax return?

1. Manuel, who on Dec 31 is age 20 and enrolled part-time at Rutgers
2. Patsy, who on Dec 31 is age 24 and enrolled full-time at Yale
3. Jules, who on Dec 31 is age 23. She was enrolled full-time for the first 6 months of the year at UCLA, but has since graduated
4. Jerimiah, who on Dec 31 is 20 and enrolled full-time at Florida State. Jerimiah provides his own support

Answer 27

3. Jules, who on Dec 31 is age 23. She was enrolled full-time for the first 6 months of the year at UCLA, but has since graduated

Explanation:
A full-time student must be enrolled at a school for the number of hours or classes that the school considers full-time. The student must have been a full-time student for some part of each of 5 calendar months during the year. The months need not be consecutive. The student must be under age 24 at the end of the year and cannot provide more than half of his own support.

Question 28

Income and deductions resulting from a trade or business run by a self-employed taxpayer are reported to the IRS on which of the following schedules?

1. Schedule D
2. Schedule C
3. Schedule SE
4. Schedule A

Answer 28

2. Schedule C

Explanation:
A self-employed taxpayer reports business income and expenses on Schedule C.

Question 29

Which of the following statements is NOT true?

1. The amount of a taxpayer’s standard deduction is subject to changes every year based on the amount of inflation in the economy.
2. A single taxpayer is thinking about getting married near the end of the year. For a couple filing a joint return, the standard deduction is twice the amount used by a single taxpayer.
3. The standard deduction for a married person filing a separate return is the same as for a single taxpayer.
4. The standard deduction for a qualifying widow(er) with a qualifying child is lower than for a married couple filing a joint return.

Answer 29

4. The standard deduction for a qualifying widow(er) with a qualifying child is lower than for a married couple filing a joint return.

Explanation:
Many taxpayers reduce their adjusted gross income by the amount of their standard deduction, a figure which changes over time based on the rate of inflation. Single taxpayers and married taxpayers who are filing separately are entitled to identical standard deductions. Their deduction is exactly half of the amount that can be taken by a couple filing a joint return as well as a qualifying widow(er) with a qualifying child. A person who files as head of household is allowed a standard deduction that falls between those two extremes. Elderly and blind taxpayers receive an additional amount on top of their normal standard deduction.

Question 30

Doug is 67 and single at the end of 2019. He is required to file a tax return if his gross income is:

1. at least $5
2. at least $12,200
3. at least $13,850
4. more than his amount of itemized deductions

Answer 30

3. at least $13,850

Explanation:
Single taxpayers who are age 65 or older must file a tax return if their 2019 gross income is at least $13,850.

Question 31

Which of the following schedules must be filed to report income and deductions resulting from a trade or business?

1. Schedule A
2. Schedule B
3. Schedule C
4. Schedule D

Answer 31

3. Schedule C

Explanation:
Certain taxpayers, such as statutory employees or those “self employed” must file Schedule C along with Form 1040 to report income and deductions resulting from a trade or business.

Question 32

Can you file Single if you’re Married but not living together for at least 6 months?

Answer 32

No, you cannot file as Single if you’re considered married, even if you and your spouse live in separate households. You must be legally divorced or legally separated (under the terms of a court order) on order to file Single.

Your marital status is defined as of the last day of the tax year, Dec 31.

You may however qualify for the head of household status.

Question 33

What (5) tax breaks is a Custodial Parent entitled to?

Answer 33

Only the Custodial Parent is entitled to:

1. Head of Household filing status,
2. the Child And Dependent Care Credit,
3. the Exclusion for Dependent Care Benefits from an employer up to $5,000
4. the EIC (Earned Income Credit) and
5. the HCTC (Health Coverage Tax Credit)

The custodial parent can file form 8332 allowing the noncustodial parent to claim the child for the child tax credit (CTC), additional child tax credit (ACTC), and the credit for other dependents (ODC).

Question 34

What constitutes a US Citizen?

Answer 34

1. An individual born in the United States
2. An individual whose parent is a US Citizen
3. A former alien who has been naturalized as a US Citizen
4. An individual born in Puerto Rico, Guam, or the US Virgin Islands

Question 35

Define “US National”

Answer 35

An individual who was born in the US possessions of America Samoa or the Northern Mariana Islands who is NOT a US Citizen.

Question 36

The Custodial Parent may claim a child as a qualifying person for HOH filing status even if the other parent claims the same child as a dependent for other benefits. True or False?

Answer 36

True.

Question 37

What can a Noncustodial Parent claim if the Custodial Parent signs the Form 8332?

Answer 37

With Form 8332 the Noncustodial Parent can claim:

1. the Child as a Dependent, and
2. the Child Tax Credit (CTC) for the qualifying child.

NOTE: The Noncustodial Parent can NOT claim

1. HOH filing status,
2. the credit for Child And Dependent Care expenses
3. the exclusion for Dependent Care Benefits
4. the EIC
5. the Health Coverage Tax Credit

Question 38

How does a Court Decree of Annulment that reverses a marriage affect previously filed MFJ tax returns?

Answer 38

Any previous MFJ returns must be ammended.

Question 39

What are the tests needing to be met to qualify as a QUALIFIED WIDOW(ER)?

Answer 39

1. Must be entitled to file a joint return with their spouse for the year the spouse died.
2. Must not remarry before the end of the year of death.
3. Must have a child or stepchild for whom he can claim as a dependent.
4. A child lived in the person’s home all year, except for temporary absences.
5. The taxpayer and the deceased spouse paid more than half of the cost of maintaining a home.

Question 40

What 3 things can exempt a child from being claimed as a dependent by a Qualified Widow(er)?

Answer 40

1. The child had gross income of $4,200 or more.
2. The child filed a joint return, or
3. The taxpayer could be claimed as a dependent on someone else’s return.

PRO TIP: The IRS no longer requires a taxpayer to claim a dependent on the tax return to file as a Qualifying Widow(er) provided the child would qualify as a dependent if it were not for one of these exceptions.

Question 41

Taxpayers are able to exempt a small amount of income from tax for themselves and qualified dependents. True or False?

Answer 41

False.

Beginning in 2018, and continuing through 2025, taxpayers can no longer deduct exemptions.

Question 42

Dependent Claim Tests (3)

Answer 42

1. The taxpayer cannot qualify as a dependent of another person.
2. A taxpayer cannot claim a married person who files a joint return dependent unless the married person files the return only as a claim for refund.
3. A dependent must be a US Citizen, US Resident Alien, US National, or a Resident of Canada or Mexico, for some part of the year.

Question 43

Dependent General Rule

Answer 43

In general, a taxpayer cannot claim a person as a dependent unless they provide more than half of the total annual support and that person is a qualifying child or qualifying relative.

A.K.A.

1. > 1/2 Annual Support
2. Qualifying Child or Qualifying Relative

Question 44

To be claimed as a Dependent, a qualifying relative by virtue of family lineage need not live with the taxpayer. True or False?

Answer 44

True

Question 45

Filing Requirements for Single Dependents ≥65 or blind.

Unearned Income:
Earned Income:
Gross Income:

Answer 45

1. Unearned Income more than $2,750 ($4,400 if blind in addition to being ≥65)
2. Earned Income more than $13,850 ($15,500 if blind in addition to being ≥65)
3. Gross Income was more than the larger of: $2,700 ($4,400 if blind in addition to being ≥65) or your earned income (up to $11,850) plus $2,000 ($3,600 if blind in addition to being ≥65)

Question 46

Filing Requirements for Single Dependents <65

Answer 46

1. Unearned Income more than $1,100
2. Earned Income more than $12,200
3. Gross Income was more than the larger of: $1,100 or your earned income (up to $11,850) plus $350.

Question 47

You must file a Tax return if any of these additional conditions apply.

Answer 47

1. net earnings from Self-Employment are at least $400.
2. Wages are $108.28 or more from a Church or qualified church controlled organization that is exempt from SS and Medicare taxes.
3. The taxpayer (or spouse when MFJ) receives HSA, Archer MSA, or Medicare Advantage MSA distributions.
4. Advance payments of the PREMIUM TAX CREDIT or the HEALTH COVERAGE TAX CREDIT were made for the taxpayer, spouse, or a dependent.
5. The taxpayer owes special taxes or must recapture certain credits.

Question 48

Filing Requirements for Single Dependents >64 years, or blind.

Answer 48

You must file if your federal gross income was $13,850 or more.

Add another $1650 for blindness

Question 49

How does the IRS categorize familial relationships that were established by marriage, in the event of a death or divorce?

Answer 49

Any relationships that are established by marriage, are not ended by death or divorce.

Question 50

Ann and Jim have been separated for two years as of December 31, 20X4 although they reconciled and lived together during the month of October 20X4. They have never obtained a separate maintenance agreement or filed for divorce. They have two children who live full time with Ann and qualify as her dependents. What filing status must Ann use for 20X4?

A. Head of household

B. Single

C. Married filing separately only

D. Married filing jointly or married filing separately at the taxpayers’ option

Answer 50

D. Married filing jointly or married filing separately at the taxpayers’ option

EXPLANATION:
For individual income tax purposes, filing status is determined by examining the taxpayer’s marital status as of December 31 of the tax year. Taxpayers who are married as of the end of the year and do not have a separate maintenance agreement must file either a joint return or each file as married filing separately. However, Ann would be able to file as head of household if she and Jim had not lived together during the last six months of the year under the abandoned spouse rule.

HOH is off the table since they have broken the 6 month apart rule.

Can a married couple living apart both claim HOH, when living apart for special circumstances? NO, for Federal Returns. Possibly OK at the State level.

Question 51

Bob Wilson died on October 1 of the current tax year. Bob was married to Rita. Bob’s two children (ages 6 and 8) lived with the couple full time. The children will continue to live with Rita. What filing status should Rita use in the year of death and subsequent years in which the unmarried children continue to live with her?

Answer 51

MFJ in year of death
QW for the next two years
HOH for subsequent years

Question 52

What are the first 3 tests that are required for a Taxpayer to claim a Dependent

Answer 52

1. The Dependent Taxpayer Test
2. The Joint Return Test
3. The Citizenship or Resident Test (A US Citizen, US Resident Alien, US National, or a citizen of either Canada or Mexico.)

And, the Taxpayer must provide more than half of the annual support for the dependent.

Note: the Taxpayer is the person who is listed FIRST on a Tax Return. The Spouse is listed second.

Question 53

What are the 4 additional tests required for a Taxpayer to claim a Child as a Dependent? (RARS)

Answer 53

1. Relationship Test
2. Age Test - must be younger than the Taxpayer or Spouse.

Must be under 19 by end of the year. = 18
Or under age 24 and enrolled full time in school. That is, what the school considers full-time.

3. Residency Test
4. Support test. The child can not provide more than 1/2 their support.

This is not a gross income test, like other qualifying relatives.

Question 54

What are the rules for a Taxpayer to claim a Qualifying Relative as a Dependent?

Answer 54

1. They cannot be a qualifying child
2. Support Test. - At leat 1/2 the support provided by the Taxpayer.
3. Gross Income Test (no gross income over $4200, in 2019).
4. Either 1 of 2 scenarios:
   - A Member of your household must live with the Taxpayer all year.
   - Relatives - don’t have to live with you all year.

Question 55

Jay and Vonda are married and file a joint tax return for 2019. They provide over half of the support for several children who are single. Their daughter Jane is 17 and made $9,000 during the current tax year but is not in school. Their son Theodore is 20 and made $9,000 and is not in school. Their daughter Nanci is 23 and made $9,000 and is in school full-time. Their son Franklin is 25 and made $9,000 and is in school full-time. How many of these four children qualify as dependents for income tax purposes?

Answer 55

The answer is 2.

Jane and Nanci.

Question 56

Custodial Parent Rules

Answer 56

1. Number of Nights (Child spent the most nights with)
2. Only custodial parent can claim:
   - HOH filing status
   - Credit for Child and Dependent Care Expenses
   - Exclusion for Dependent Care Benefits from an employer up to $5,000
   - EIC
   - Health Coverage Tax Credit (HCTC)

Form 8332 - allows CTC, ACTC, ODC, but NOT HOH benefits listed above.

Question 57

What are the parameters of a Multiple Support Agreement in order to Claim a Dependent

Answer 57

TP will file FORM 2120 (Multiple Support Declaration)

If 2 or more persons together provide more than half of the support they can agree that one will claim the dependent.

The claimant of the dependent must:

• provide more than 10% of total support
• No other person can pay more than 50%
• All eligible persons (claimants) who pay over 10% of support must provide the TP with a signed statement agreeing not to claim the qualifying individual as a dependent.

Question 58

If the tie-breaker rule is needed to determine what parent can claim a child as a dependent, should the time spent with each parent is equal, how is the rule enforced?

Answer 58

The parent with the higher income gets to claim the child, all other things being equal.

Question 59

Filing Threshold for Dependents (single and under 65 and not blind)

Answer 59

• Unearned income more than $1,100
• Earned income more than $12,200
• Gross income more than the larger of $1,100, or Earned income (up to $11,850) plus $350.

Question 60

Additional Filing Requirements for:

Self Employment Earnings Min?
Church Employee Earnings Min?
Medical Accounts?
Other Taxes?
Other Claims?

Answer 60

• Self-employment net earnings - $400
• Church employee wages - $108.28
• HSA, Archer MSA, Medicare Advantage MSA
• Premium tax credit
• Special taxes and recaptures
• Claims for refund and refundable credits.

MSA = Medical Savings Account

Question 61

Henry has two dependents, Mary and Lulu. Neither is over 65 or blind. Mary has earned income of $5,600 and $500 in dividends. Lulu has earned income of $4500 and $200 in dividends.

Do either have to file a return?

Answer 61

Only Mary must file.

Mary’s gross income of $6,100 ($5600 + $500) is more than $5,950 (gross income +$350).

Lulu’s gross income of $4,700 ($4,500 + $200) is less than $4850 (gross income +$350.

This is because Mary’s Gross Income was more than the larger of: $1,100 or your earned income (up to $11,850) plus $350.

Whereas lulu’s Gross Income was less than her Earned Income + $350.

Question 62

At the beginning of the current year, John Doe is single. However, during the year he marries Helen on January 23. The couple adopts two infant daughters from Russia on May 1 of that year. Unfortunately, during the year Helen dies in a car accident in November. John Doe does not remarry prior to the end of the year. The children do qualify as dependents. What tax status should John Doe use when filing his income tax return for this year?

A. Single
B. Head of household
C. Qualifying widow
D. Married filing jointly

Answer 62

D. Married filing jointly

EXPLANATION
If a spouse dies during the tax year, the filing status at that time holds (unless a change occurs subsequently such as a remarriage). In this particular case, on the date that Helen died, the couple could file a joint return. Despite her death, that status still applies for that tax year.

Question 63

Mr. and Mrs. Towler have been married since 20X1. His 30-year old brother lost his job and is living with them until he can find work. In 20X2, Mr. Towler died in an accident. Mrs. Towler does not remarry. Her brother-in-law continues to live with her all year and qualifies as her dependent. What filing status should she use when filing her income taxes for 20X3?

A. Single
B. Head of household
C. Qualifying widow(er)
D. Married filing jointly

Answer 63

B. Head of household

She can file using the head of household status in 20X3 because a dependent relative lived with her for the year. If she had a qualifying child, she could file as a qualifying widow in 20X3 and 20X4.

TIP: A joint return should have been filed for 20X2 since the couple was married at the date of death.

Question 64

Mr. and Mrs. Fry have been married for several years and have one child who lives at home and is their dependent. Mrs. Fry died suddenly during February of 20X1. Mr. Fry does not remarry prior to the end of 20X1. What filing status should he use when filing his income taxes for 20X1?

A. Single
B. Head of household
C. Qualifying widow(er)
D. Married filing jointly

Answer 64

D. Married filing jointly

EXPLANATION:
In the year of death, a married couple may use the filing status that was appropriate on the day of death. When Mrs. Fry died, they were married and, therefore, can still use that filing status for that year. Mr. Fry can, if he remains unmarried, file as a qualifying widow(er) in the two years following his wife’s death.

Question 65

Jon and Marlena were married several years ago and have lived together since that time. They have no children. On December 29 of the prior year, they were granted a decree of separate maintenance and they moved into two separate apartments. In January, Marlena came to you to advise her on filing her income tax return for the prior year. What filing status would you mostly likely advise her to take?

A. Single
B. Head of Household
C. Married Filing Jointly
D. Married Filing Separately

Answer 65

A. Single

EXPLANATION:
If a couple has divorced or received a legal separation (decree of divorce or separate maintenance), as is the case here, by the end of the tax year, they cannot file as married. There is no information to indicate that Marlena would qualify as head of household. Therefore, you will probably advise her that she will need to file as a single taxpayer. However, it is possible that she might qualify as head of household, especially if she has maintained a home for a dependent parent.

Question 66

In 20X1, Nancy’s husband died. They had three children, two of whom were still dependents. Nancy does not remarry and the two children remain as her dependents living with her until 20X5. What is her filing status for federal income tax purposes?

A. She is head of household for 20X1 through 20X4.

B. She is a qualifying widow (surviving spouse) for Years 20X1 through 20X4.

C. She is a qualifying widow (surviving spouse) for 20X2 and 20X3 and head of household for 20X4.

D. She is a qualifying widow (surviving spouse) for 20X1 and head of household for 20X2 through 20X4.

Answer 66

C. She is a qualifying widow (surviving spouse) for 20X2 and 20X3 and head of household for 20X4.

EXPLANATION:
In the year of death, the couple files a joint return as long as they would have been able to file a joint return at the time of death. Because of the qualifying children, she can then file as a qualifying widow for the next two years. After that time, she can file as head of household as long as the children are dependents or unmarried and continue to live with her.

Question 67

Qualified Relative Claim Tests (4)

Answer 67

1. Cannot be a qualifying child of any taxpayer.
2. A taxpayer generally must provide more than half of a person’s total support.
3. The person’s gross income for 2019 must be less than $4,200.
4. The person must live with the taxpayer all year as a member of the household, or must be related in one of the qualified ways.

Question 68

Define the Dependent Taxpayer Test

(Test 1 of 3 for determining a Dependent)

Answer 68

A taxpayer (or taxpayer’s spouse, if filing a joint return) who may be claimed as a dependent by another taxpayer MAY NOT claim anyone as a dependent on his or her own tax return.

Part I of the intake and interview sheet asks, “Can anyone claim you or your spouse as a dependent?” If taxpayers answer yes, they cannot claim a dependent.

Use your interview skills because some taxpayers, particularly students, might not be sure of the answer to this question.

An individual is not a dependent of a person if that person is not required to file an income tax return and either does not file an income tax return or files an income tax return solely to claim a refund of estimated or withheld taxes. If this is the situation, the taxpayer should answer “no” to “can anyone claim you as a dependent?”

Question 69

Define the Joint Return Test

(Test 2 of 3 for determining a Dependent)

Answer 69

A married person who files a joint return cannot be claimed as a dependent unless that joint return is filed only to claim a refund of withheld income tax or estimated tax paid.

Question 70

Define the Citizen or Resident Test

(Test 3 of 3 for determining a Dependent)

Answer 70

To be claimed as a dependent, a person must be a U.S. citizen, U.S. resident alien, U.S. national, or a
resident of Canada or Mexico.

• If a U.S. citizen or U.S. national legally ADOPTS a child who is not a U.S. citizen, U.S. resident alien, or
U.S. national, this test is met as long as the child lives with the taxpayer as a member of the household all year. If all other dependency tests are met, the child can be claimed as a dependent. This also applies if the child was lawfully placed with the taxpayer for legal adoption.

• Foreign Exchange Students generally are not U.S. residents and do not meet the citizen or resident test; they cannot be claimed as dependents.

Question 71

When does the HCTC expire?

Answer 71

The HCTC (Health Coverage Tax Credit) program will expire December 31, 2020.

Question 72

Who does NOT qualify for the HCTC?

Answer 72

You are NOT eligible for the HCTC (Health Coverage Tax Credit) if you:

1. Can be claimed as a dependent on another person’s federal income tax return; or
2. Are enrolled in Medicare, Medicaid, the Children’s Health Insurance Program, or the Federal Employees Health Benefits Program or are eligible to receive benefits under the U.S. military health system (TRICARE); or
3. Are enrolled in an Affordable Care Act Marketplace insurance.

Question 73

Considered Unmarried

Answer 73

To be considered unmarried at the end of a tax year, your spouse may not be a member of your household for the last 6 months of the tax year and you must meet other requirements.

Question 74

What are exceptions to the child income limit of $4,200 for 2019, that would still allow a couple to claim them as dependents for income tax purposes?

Answer 74

The income requirement does not apply to children if they are under 19 or if they are under 24 and in school full-time for at least five months of the year.

Otherwise, if dependents make over $4,200, they can not be claimed as dependents.

Question 75

What are the requirements for a student to be considered a Qualifying Child on their parents tax return?

Answer 75

• A full-time student must be enrolled at a school for the number of hours or classes that the school considers full-time.
• The student must have been a full-time student for some part of each of 5 calendar months during the year.
• The months need not be consecutive.
• The student must be under age 24 at the end of the year and cannot provide more than half of his own support.