Taxes: Filing Status

Question 1

Taxes:
Filing Status
Married Filing Jointly

Answer 1

Married Filing Jointly

• marital status is determined on last day of the year
• innocent spouse: had no reason to know of other income not reported
• abandoned spouse: married but filing as head of house if:
  
  • spouse has not lived at home for last 6 months
  • taxpayer provides more than 1/2 cost of dependent child
• there is an election for nonresident alien spouses to still elect married filing jointly

Question 2

Taxes:
Filing Status
Married Filing Separate

Answer 2

Married Filing Separate

• divide income and expenses according to ownership
• special rules for benefit of filing separately:
  
  • if one itemizes, both must
  • neither gets earned income credit
  • neither child and dependent care credit
  • neither get education credit
  • expense or credit not allowed for adoption expenses
  • deduction for Net Capital Loss limited to $1,500

Question 3

Taxes:
Filing Status
Surviving Spouse

Answer 3

Surviving Spouse

• aka qualifying widower
• may used married filing jointly rates for 2 years
• must provide more than 1/2 cost of maintaining household for a dependent child (child lives with taxpayer)

Question 4

Taxes:
Filing Status
Head of Household

Answer 4

Head of Household
- must provide more than 1/2 cost of maintaining household for a qualifying child (child lives with taxpayer) or relative (non-relatives don’t qualify)
Exceptions
- qualifying child: unmarried child, even if do not qualify as dependent if custodial parent.
- qualifying relative = parent. Parent need not live with taxpayer but taxpayer must provide 50% support

Question 5

Taxes:
Filing Status
Single

Answer 5

Single

• everyone else
• Key: a taxpayer who resides with a dependent child will get some sort of tax benefit

Question 6

Taxes:
Filing Status
Standard Deduction

Answer 6

Standard Deduction
- automatic deduction of standard amount
- Key: for taxpayer filing married separately, divide by 2
Special Adjustments
- if taxpayer is blind or age 65
1. increase by $1250 if married or surviving spouse. $1,550 if not married. (1 deduction for blind and 1 for over age 65)
- not applied to dependents

Question 7

Taxes:
Filing Status
Special Rules for Dependents on Another Return

Answer 7

Special Rules for Dependents on Another Return
- taxpayer claimed as dependent on another return gets a ‘mini’ standard deduction of $1,050
Deduction = greater of:
1. mini standard deduction $1,050 or
2. earned income + $350

Question 8

Taxes:
Filing Status
Kiddie Tax

Answer 8

Kiddie Tax

• discourage taxpayers from giving income generating assets to children in order to have it taxed at childs low rates
• all children under 18, + 19-23 if full time student if EI does not exceed 50% of total support for the year
• TI divided into net unearned income (parent’s rate) and OI (child’s rate)
• parent can elect to report child’s income if:
  
  • age test
  • only from interest, dividends, or capital gains
  • gross income