Unit 2 - Determining Filing Status & Residency Flashcards
RDPs
Registered domestic partners
Not allowed to file a joint return
Common law marriages in states are recognized!!!!
Filing status determines…
Filing requirements
Standard deductions
Eligibility for certain credits
The amounts of tax owed
What are the filing statuses?
Single
Married filing jointly
Married filing separately
Head of household
Qualifying surviving spouse
How is marital status determined
Generally determined on the last day of the year.
Filing status of a widowed taxpayer
May use the married filing jointly status and file jointly with the deceased spouse, if the taxpayers spouse died during the year, and the taxpayer has not remarried as of the end of the year
Filing a return with a nonresident alien spouse
A US citizen married to a non-resident alien can elect to file a joint return as long as both agreed to be taxed on their worldwide income
And election statement must be attached to the joint return
Non-resident alien needs to apply for an ITIN
Required to file a joint return the first year, but can file joint or separate returns for later years
Why would someone choose married filing separately?
May benefit taxpayer who wants to be responsible only for their own tax, and not responsible for spouse tax liability
Or could result in less tax than filing a joint return
But typically a married couple will pay more tax on a combined basis when filing separately
Good examples…
Medical expense deduction If not qualified for injured spouse, or state doesn’t recognize, it protects you from delinquent child support, student loans, or prev. Tax liability
Downfalls to filing married filing separately
Tax rates are higher generally at the same levels of taxable income
The exemption amount for the AMT is half allowed on a joint return
Various credits are not allowed or more limited
Capital loss deduction is limited to 1500, which is half of what is allowable on a joint return
Standard deduction is half allowed on a joint return, and cannot be claimed if the taxpayers spouse itemizes deductions (or claim standard deduction of 0)
Neither spouse can deduct student loan interest
Amending a filing status
You can only change or amend a tax return from a joint to filing separately before the unexpected due date which is April 15
Example, file a joint return on February 1, and file amended returns using the married filing separately filing status before April 15
Exception for deceased tax pay - A personal representative for a deceased taxpayer can change a joint return to a separately filed return up to a year after the filing deadline
Amending a return from separate to a joint return, file form 1040 X, within three years from the due date, not including extensions
Head of household requirements
Must be single, divorced, legally separated, or considered unmarried on the last day of the year
Pay more than half the cost of keeping up a home for the year
Must have had a qualifying person living in the home for more than half the year
Exceptions for temp absences, qualifying parent, hospital stays, nursing homes… must be reasonable to assume the absent person will return to the home
Temporary absences according to the IRS
Going to college
Vacation
Business
Medical care
Hospitalization
Military service
Summer camp
Detention in a juvenile facility
HOH - what qualifies as paying more than half cost of maintaining a home
Valid household expenses used to calculate whether a taxpayer is paying more than half the cost of maintaining a home include:
Rent, mortgage, interest, property taxes
Home insurance, repairs, and utilities
Food eaten in the home
HOH qualifying person
Generally be related to the taxpayer either by blood adoption or marriage. A foster child qualifies if legally placed in the home by an agency.
A qualifying child (under 19, or under 24 if full time student)
A married child who can be claimed as a dependent
A dependent parent
A qualifying relative that meets certain relationship test
Can be child, step child, sibling, step-sibling or descendants (niece, nephew, granddaughter…)
Head of household, deemed exemption amount amount
The qualifying relative cannot earn more than the deemed exemption amount of $4700
Qualifying child has no limit
HOH - divorced and non-custodial parents
A taxpayer can qualify as head of household, even though they may not claim a qualifying child as their dependent.
HOH - considered unmarried
To be considered unmarried, you must meet all of the
File a separate return from the spouse
Pay more than half the cost of keeping up a home for qualifying person for more than half the year
Not live with spouse in the home during the last six months of the year
Be able to claim an exemption for the child
HOH - dependent parents
You can file as head of household, even if the parents don’t live with the taxpayer
Taxpayer must pay more than half the cost of keeping up a home that was the parents main home for the entire year
This also applies to a parent in a retirement home
A qualifying parent may be a parent, in law, or grandparent who is related by blood, marriage, or adoption
HOH - married to a nonresident alien spouse
Taxpayer can elect to file as head of household by disregarding the non-resident alien spouse.
Must also have a qualifying child or other qualifying, dependent such as a parent to qualify for head of household status
Qualifying surviving spouse
Only applies if the surviving spouse remains unmarried and has a qualifying child (child, adopted, or step - not foster) and provide over half cost child’s home
First year can file married, filing jointly or separately
Next two years can file as qualifying, surviving spouse
If you remarry the same year, the spouse dies, the spouse is return must be filed married filing separately
Amended tax return statute of limitations
Three years from the date, you file your return
or two years from the date you pay your taxes due. Whichever is later.
Resident alien
Non US citizen that lives in the US. Typically taxed on all of their income worldwide similar to US citizens.
Can file a joint return for tax purposes
Non resident alien
A non-US citizen that lives outside of the country.
Only tax on income earned within the US and certain income related to conducting business in the country
Two non-resident aliens married cannot file a married filing jointly return. They must file married filing separately.
Dual status alien
Both non-resident and resident alien statuses during the same year.
Different rules apply for the parts of year where they were a US resident and nonresident.
Common dual status years are the year of arrival and the year of departure from the US
Taxpayers status on the last day of the year terminates whether a person is resident or nonresident for the tax year
For the part of the year, they are a resident alien – taxpayer is tax on their worldwide income received, regardless of when it was earned
Tax residency test
Determining if an alien is a resident or non-resident
Taxpayer is considered a nonresident alien for tax purposes unless he or she meets one of the two test
Green card test
Substantial presence test
Green card test
Automatically considered a resident if they are lawful permanent residence with a green card.
Start date is the first day during the calendar year, which the alien is physically present in the United States lawfully
May opt to be treated as a resident alien for the entire calendar year
Substantial presence test
Must be physically present in the United States for at least
31 days during the current tax year
And 183 days during the three-year period which includes the current year and the two years immediately proceeding the current year
Previous year only counts 1/3 of the days present
Second previous year, only counts 1/6 of the days present
Required to then file a form 1040 not a 1040 – NR
Substantial presence test – exemptions
Regularly commutes to work in the US
In the US as a crewmember of a foreign vessel
Unable to leave because of medical condition
Professional athlete in the US to compete
Foreign government official
Teacher on temporary visa
Foreign students on temporary visa
International students and scholars – residency status
Temporarily in the US on an F, J, M, or Q visa
Exempt from the substantial presence test for the first five years they are in the US, but don’t have to be consecutive
F – 1 and J - 1 Visa do not have to pay Social Security or Medicare tax during those five years
Closer connection
Non-resident aliens may use form 8840 to claim the closer connection to a foreign country exception to the substantial presence.
Taxpayer must have maintained more significant contacts with a foreign country other than the US
