Unit 2 - Determining Filing Status & Residency

Question 1

RDPs

Answer 1

Registered domestic partners

Not allowed to file a joint return

Common law marriages in states are recognized!!!!

Question 2

Filing status determines…

Answer 2

Filing requirements

Standard deductions

Eligibility for certain credits

The amounts of tax owed

Question 3

What are the filing statuses?

Answer 3

Single

Married filing jointly

Married filing separately

Head of household

Qualifying surviving spouse

Question 4

How is marital status determined

Answer 4

Generally determined on the last day of the year.

Question 5

Filing status of a widowed taxpayer

Answer 5

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

Question 6

Filing a return with a nonresident alien spouse

Answer 6

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

Question 7

Why would someone choose married filing separately?

Answer 7

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

Question 8

Downfalls to filing married filing separately

Answer 8

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

Question 9

Amending a filing status

Answer 9

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

Question 10

Head of household requirements

Answer 10

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

Question 11

Temporary absences according to the IRS

Answer 11

Going to college
Vacation
Business
Medical care
Hospitalization
Military service
Summer camp
Detention in a juvenile facility

Question 12

HOH - what qualifies as paying more than half cost of maintaining a home

Answer 12

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

Question 13

HOH qualifying person

Answer 13

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…)

Question 14

Head of household, deemed exemption amount amount

Answer 14

The qualifying relative cannot earn more than the deemed exemption amount of $4700

Qualifying child has no limit

Question 15

HOH - divorced and non-custodial parents

Answer 15

A taxpayer can qualify as head of household, even though they may not claim a qualifying child as their dependent.

Question 16

HOH - considered unmarried

Answer 16

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

Question 17

HOH - dependent parents

Answer 17

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

Question 18

HOH - married to a nonresident alien spouse

Answer 18

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

Question 19

Qualifying surviving spouse

Answer 19

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

Question 20

Amended tax return statute of limitations

Answer 20

Three years from the date, you file your return

or two years from the date you pay your taxes due. Whichever is later.

Question 21

Resident alien

Answer 21

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

Question 22

Non resident alien

Answer 22

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.

Question 23

Dual status alien

Answer 23

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

Question 24

Tax residency test

Answer 24

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

Question 25

Green card test

Answer 25

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

Question 26

Substantial presence test

Answer 26

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

Question 27

Substantial presence test – exemptions

Answer 27

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

Question 28

International students and scholars – residency status

Answer 28

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

Question 29

Closer connection

Answer 29

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