Taxpayers and Dependents Flashcards
Member of household
Any person living with the taxpayer all year as a member of the household can be a qualifying relative (even if not a blood relative) for dependency purposes.
- The person must not be a qualifying child of any taxpayer.
- The taxpayer must provide over half the person’s total support during the year.
- The person’s 2020 gross income must be less than $4,300.
Multiple support agreement
Taxpayers can agree who claims dependent when a group provides more than half of the support.
- The person claiming must provide more than 10% of the total support for the qualifying individual, and no other person can pay over half of the total support.
- Each eligible person who pays over 10% of support must sign a statement agreeing not to claim the qualifying individual as a dependent.
- The taxpayer will file Form 2120, Multiple Support Declaration with their tax return attesting to the agreement.
Qualifying relative as dependent
-Dependent is not a qualifying child of any taxpayer.
Must provide over half the dependent’s total support.
-Dependent’s 2020 gross income must be less than $4,300.
-Must be either of the following:
-Any person living with the taxpayer all year as a member of the household, OR
-One of these relatives: a child (step, foster, adopted, grand, or in-law), brother or sister (half, step, or in-law), father or mother (step or in-law, but not foster), aunt, uncle, niece, nephew, grandparent (or direct ancestor
Qualifying child as dependent
To claim a child as a dependent, the child:
Must be a son, daughter, step-child, foster child, brother, sister, half-brother, half-sister, step-brother, step-sister, or a descendant of any of them.
Must be younger than the taxpayer (or spouse if filing jointly) and either under age 19, under age 24 and a full-time student, or any age if permanently and totally disabled (does not need to be younger than taxpayer).
Must live with taxpayer more than half of the year.
Must not provide over half of own support.
Married Filing Separately
- The standard deduction is half that allowed to joint filers. If one spouse itemizes deductions, the other cannot claim the standard deduction.
- The deduction limit for a capital loss is $1,500 (instead of $3,000 for joint returns).
- No earned income credit.
- No education credits or tuition and fees deduction.
- No exclusion for US savings bond interest.
- No exclusion or credit for adoption expenses in most cases.
- Most other benefits reduce at a level of income equal to one-half amount for joint filers.
Qualifying Widow(er)
-Surviving spouse files jointly in year of death, then QW for next 2 years.
-Tax rates and standard deduction same as joint return.
Cannot use if remarried.
-Must have a child or step-child (not a foster child) that can (or could if not for exception) be claimed as a dependent.
-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.
Head of household due diligence penalty
Any return preparer who fails to comply with due diligence requirements in 2020 shall pay a penalty of $540 for each failure.
Custodial parent
The custodial parent is the parent with whom the child lived for the greater number of nights during the year. Only the custodial parent is entitled to claim the child for head of household filing status, the credit for child and dependent care expenses, the exclusion for dependent care benefits, the earned income credit, and the health coverage tax credit.
The custodial parent can file form 8332 allowing the noncustodial parent to claim the child for the child tax credit, additional child tax credit, and the credit for other dependents.
Head of household
- Must be custodial parent. A qualifying person must live with the taxpayer for more than half the year.
- Must have a qualifying child or qualifying relative that is a member of the family.
- Must pay more than half the cost of keeping up a home.
- Must be 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.
When is marital status determined?
The IRS considers a taxpayer married (or unmarried) for the entire year based on marital status on the last day of the year.
Situations where taxpayer is required to file a return
-Net earnings from self-employment are $400 or more.
Church wages are $108.28 or more (from a church that is FICA exempt).
-The taxpayer (or spouse, if filing jointly) received HSA, Archer MSA, or Medicare Advantage MSA distributions.
-Advance payments of the premium tax credit or the health coverage tax credit were made for the taxpayer, spouse, or a dependent.
-The taxpayer owes special taxes (e.g. household employment taxes) or must recapture certain credits (e.g. first time homebuyer credit).
Single dependent gross income threshold for filing return
A single dependent (who may be claimed on the return of another taxpayer) must file a tax return if any of the following apply in 2020:
- Unearned income more than $1,100 (plus $1,650 for each occurrence of blindness or age 65 or older)
- Earned income more than $12,400 (plus $1,650 for each occurrence of blindness or age 65 or older)
- Gross income was more than the larger of $1,100 (plus $1,650 for each occurrence of blindness or age 65 or older) or earned income (up to $12,050) plus $350 (plus $1,650 for each occurrence of blindness or age 65 or older)
Gross income threshold for filing return
A taxpayer with gross income below the gross income threshold is not required to file a return. The applicable threshold depends on age and filing status. For 2020:
S $12,400 (plus $1,650 if age 65 or older)
HH $18,650 (plus $1,650 if age 65 or older)
MFJ $24,800 (plus $1,300 for each spouse age 65 or older)
QW $24,800 (plus $1,300 if age 65 or older)
MFS $5
Gross income
The total of earned and unearned income subject to tax. Gross income means all income you received in the form of money, goods, property, and services that isn’t exempt from tax, including any income from sources outside the United States or from the sale of your main home (even if you can exclude part or all of it).
Earned income
- Earned income includes wages, salaries, tips, union strike benefits, long-term disability benefits received prior to minimum retirement age, net earnings from self-employment, and non-taxable combat pay (only if elected and included in taxable income).
- Includes the amount of taxable scholarship or fellowship grant (only for purposes of filing requirements and the standard deduction).
- For IRA contributions, taxable alimony from divorces finalized before 2019
