TAX-AIDE Filing Status Married, Single, and More NTTC Training 2013 1.

TAX-AIDE

TAX-AIDE

Filing Status

Married, Single, and More

NTTC Training 2013 1

TAX-AIDE

Objectives

● Define allowable filing status

● List requirements

● Discuss key interview points

● Define importance of filing status in process

● Review highlights of each status

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TAX-AIDE

References

● Pub 4012, Tab B

● Pub 4491, Part 1, pg 25

● Pub 17, Chapter 2

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TAX-AIDE

Filing Status

● Two criteria: Marital status on last day of tax year

Federal definition – “married” ● Legal marriage under laws of any state

or country● Does not include civil unions or

registered domestic partners Type of dependents, if any

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Pub 17 Ch 2

TAX-AIDE

Five Choices for Filing Status

● Single

● Married filing jointly (MFJ)

● Married filing separately (MFS)

● Head of household (HH)

● Qualified widow(er) (QW)

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Pub 4012 Tab B

TAX-AIDE

Form 1040

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TAX-AIDE

Where to Start ? Interview

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Check Part II entries on Intake Form

Ask questions – Verify

TAX-AIDE

Living Situation Analysis

● Marital status as of 12/31

● Others living in home, if any Their relationship/dependency Who paid upkeep

● If widow(er) Date of death of spouse Any dependents

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TAX-AIDE

Filing Status Importance

● Many tax items affected by filing status Necessity to file a return Standard deduction Eligibility for certain deductions or

credits Tax rate brackets

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TAX-AIDE

Filing Status – Need to File a Return?

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TAX-AIDE

Filing Status – Standard Deduction

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TAX-AIDE

Filing Status – Tax Rate

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TAX-AIDE

Single

● Not married as of December 31st

● Married, but legally separated

● No related dependents

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TAX-AIDE

Married Filing Jointly

● Married on last day of year Includes common law marriage Includes same-sex married couples

● Spouse died during current year/not remarried

● Generally most advantageous filing status

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TAX-AIDE

Married Filing Separately

● Taxpayer chooses to file MFS

● Spouse has already filed MFS

● Married but separated

● Rare cases – more advantageous Generally, no children in home

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TAX-AIDE

MFS Disadvantages

● Highest tax rate/lower standard deduction

● Cannot claim most tax credits

● Cannot deduct student loan interest, tuition and fees adjustment, education credits

● Capital loss limit $1,500 (not $3,000)

● Most of Social Security benefits can become taxable

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TAX-AIDE

Head of Household – Unmarried

● Provided home for qualified child May not be dependent due to divorce

● Provided home for related dependent

● Provided more than half the cost of maintaining home for dependent parents living elsewhere

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TAX-AIDE

Head of Household – Married

● Lived apart all of last six months of year

● Provided home for your child, stepchild, or eligible foster child for over six months

● No other relatives qualify

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TAX-AIDE

Head of Household

● Key advantages Higher standard deduction than Single or

MFS Advantageous tax rate structure

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TAX-AIDE

Qualifying Widow(er)

● Spouse died in one of two past years Has dependent child or stepchild Grandchild not eligible

● Maintained home for child >50% of cost

● Can file QW for two years only

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TAX-AIDE

Qualifying Widow(er)

● Advantages Standard Deduction – same as MFJ Use MFJ Tax Rates

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TAX-AIDE

TaxWise – Main Information Sheet

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Enter name and SSN only if child not also

dependent

TAX-AIDE

Quality Review

● Review prior year’s status

● Verify current year filing status with data on Intake Sheet

● Discuss options with taxpayer Ensure best option selected

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TAX-AIDE

Problem #1

● Mr Buck provides total support for his two children. His wife died in 2010, and he has not remarried.

● What is the best filing status for Mr Buck?

Head of Household

● What would have been best in TY2012?

Qualifying Widower

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TAX-AIDE

Problem #2

● Ralph and Betty’s divorce became final during 2013. Betty has full custody of their two children and will claim them as her dependents. Ralph pays $500 per month child support.

● What is Ralph’s Filing Status?

Single

● What is Betty’s Filing Status?

Head of Household

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TAX-AIDE

Problem #3

● Luke and Linda are still married, but chose to live apart for most of the year

● Their two children lived with Linda all year

● In July, Luke was out of a job so he moved back in the house for just that month

● What filing status can they each choose?

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MFJ or MFS (both must use same status)

TAX-AIDE

Problem #4

● Dick and Jane are married, lived apart all year and are filing separate returns

● Their 23-year-old daughter Jody lived with Jane all year while attending school full-time

● Jody earned $2,500 during the summer

● What is Jane’s best filing status?

Head of Household

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TAX-AIDE

Filing Status

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Questions?

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