Liberty Tax Service Basic Income Tax Course Lesson 3

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Liberty Tax Service Liberty Tax Service Basic Income Tax CourseBasic Income Tax Course

Lesson 3Lesson 3

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HOMEWORK (CLASSWORK 2)HOMEWORK (CLASSWORK 2)CLASSWORK 2: True or False. CLASSWORK 2: True or False.

(1) The custodial parent can sign an agreement allowing the noncustodial (1) The custodial parent can sign an agreement allowing the noncustodial parent to claim an exemption for their child. parent to claim an exemption for their child. T T

(2) The support test for qualifying child states that the child (2) The support test for qualifying child states that the child cannot have cannot have provided over half of his/her own support. provided over half of his/her own support. TT

(3) Every person claimed as a dependent must have a social security number (3) Every person claimed as a dependent must have a social security number or other valid taxpayer identification number. or other valid taxpayer identification number. TT

(4) You can never take an exemption for your dependent if he/she files a joint (4) You can never take an exemption for your dependent if he/she files a joint return. return. FF

(5) The custodial parent can sign a statement releasing the child’s exemption (5) The custodial parent can sign a statement releasing the child’s exemption to the noncustodial parent. The written declaration can only release the to the noncustodial parent. The written declaration can only release the exemption for one year.exemption for one year. FF

(6) A technical school does not meet the school definition for the age test for (6) A technical school does not meet the school definition for the age test for qualifying child. qualifying child. FF

(7) If your filing status is MFS, you can always claim an exemption for yourself (7) If your filing status is MFS, you can always claim an exemption for yourself and one for your wife. and one for your wife. FF

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EXEMPTIONS AND DEPENDENTSEXEMPTIONS AND DEPENDENTSCLASSWORK 2: CLASSWORK 2: True or False.True or False.

(8) Temporary absences due to special circumstances do not prohibit someone (8) Temporary absences due to special circumstances do not prohibit someone from being a member of your household. from being a member of your household. TT

(9) (9) If your spouse died during the year, you cannot claim their exemption. If your spouse died during the year, you cannot claim their exemption. FF

(10) The custodial parent is the parent with whom the child lived the greater part (10) The custodial parent is the parent with whom the child lived the greater part of the year. of the year. TT

(11) An eligible foster child meets the relationship test for qualifying child. (11) An eligible foster child meets the relationship test for qualifying child. TT

(12) If two people together contribute more than half an individual’s support, (12) If two people together contribute more than half an individual’s support, they both can claim the exemption. they both can claim the exemption. FF

(13) You can use entertainment costs in calculating total support for a person. (13) You can use entertainment costs in calculating total support for a person. TT

(14) A person must live with you over half the year as a member of your (14) A person must live with you over half the year as a member of your household or be related to you in one of the ways listed in “relatives who do household or be related to you in one of the ways listed in “relatives who do not have to live with You all year”, to meet the member of household or not have to live with You all year”, to meet the member of household or relationship test for qualifying relative. relationship test for qualifying relative. FF

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EXEMPTIONS AND DEPENDENTSEXEMPTIONS AND DEPENDENTSCLASSWORK 2: CLASSWORK 2: True or False. True or False.

(15) To meet the citizenship test, a person must be a U.S. citizen for the (15) To meet the citizenship test, a person must be a U.S. citizen for the entire year. entire year. FF

(16) A household member who dies during the year meets the (16) A household member who dies during the year meets the member of member of household test for qualify relative. household test for qualify relative. TT

(17) Gross income includes money, property, tax-exempt income, and (17) Gross income includes money, property, tax-exempt income, and services. services. FF

(18) A person related to your spouse is not considered to meet the (18) A person related to your spouse is not considered to meet the relationship test for you once you are divorced. relationship test for you once you are divorced. FF

(19) If your child is 24 years old and a full-time student with a (19) If your child is 24 years old and a full-time student with a gross income gross income of $3,650, you cannot claim an exemption for of $3,650, you cannot claim an exemption for that child. that child. TT

(20) To qualify for the gross income test for a qualifying relative, your 27-(20) To qualify for the gross income test for a qualifying relative, your 27-year-old child must earn less than $3,650. year-old child must earn less than $3,650. TT

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HOMEWORK CHAPTER 2HOMEWORK CHAPTER 2

Robert R. (SSN 211-22-3344) and Shirley M. Peters (SSN 210-21-2121) have three children that live with them, Keith, Martha, and Jude. Robert’s mother, Lucy Peters (SSN 045-66-5465), also lives with them at 45 Deer Park Run, Allen Park, MI 48101. Robert and Shirley are filing jointly.

Keith (born 4/2/2002, SSN 377-41-6857) is their youngest. He was adopted in 2008 from a legal agency in Columbia. Martha (SSN 318-22-9857) is 18 years old and worked at a department store where she earned $3,400. Jude (SSN 379-37-5964) is 22 years old and a full-time college student. He works part-time during school and full-time during the summer. He earned $3,750 in 2009 and lives at home.

Lucy Peters is a widow. She received $5,100 in social security payments in 2009. Her savings account of $5,500 earned $220 of interest, which she left in the account. The rest she spent on herself.

The fair rental value of their house is $1,050 per month. The Peters paid $850 per month for food and $300 per month for utilities and phone. Lucy’s other expenses for the year are as follows:

Spending MoneySpending Money $600$600ClothingClothing 850850Beauty SalonBeauty Salon 780780CosmeticsCosmetics 140140Medical ExpensesMedical Expenses 900900EntertainmentEntertainment 300300GiftsGifts 300300TransportationTransportation 350350

Which, if any, of the Peters’ children can be claimed as dependents?

Keith, Martha and Jude. Fill out the dependency support sheet for Lucy

Peters. Does she qualify as a dependant? No.

Fill in the heading, filing status, and exemption sections of Form 1040 for Robert and Shirley.

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Questions & AnswersQuestions & Answers

REMINDERSREMINDERS

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OPEN BOOK –> OPEN NOTES –> OPEN BOOK –> OPEN NOTES –> CLOSED MOUTHCLOSED MOUTHQUIZ - 15 MINS. TO ANSWER (AVG.10 ?S)QUIZ - 15 MINS. TO ANSWER (AVG.10 ?S)10 MINUTES TO REVIEW THE QUIZ10 MINUTES TO REVIEW THE QUIZFOLLOWED BY…FOLLOWED BY…A BREAKA BREAKREVIEW NEXT CHAPTERREVIEW NEXT CHAPTERKEEPS US ON TRACKKEEPS US ON TRACKALLOWS COMPUTER TIMEALLOWS COMPUTER TIME

QUIZQUIZ

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BREAK – 10 MINSBREAK – 10 MINS

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Chapter 3: FILING STATUSChapter 3: FILING STATUS

Chapter ContentChapter Content

Purpose of Filing StatusPurpose of Filing Status Filing Status (1): SingleFiling Status (1): Single Filing Status (2): Married Filing JointFiling Status (2): Married Filing Joint Filing Status (3): Married Filing SeparateFiling Status (3): Married Filing Separate Filing Status (4): Head of HouseholdFiling Status (4): Head of Household Filing Status (5): Qualifying Widow(er) with Dependent Filing Status (5): Qualifying Widow(er) with Dependent

ChildChild Key IdeasKey Ideas

ObjectivesObjectives

Understand the Five Filing StatusesUnderstand the Five Filing Statuses Determine the Filing Status of an IndividualDetermine the Filing Status of an Individual

B.A.M.B.A.M.Great startGreat startMust have a thourough understanding of the Must have a thourough understanding of the filing statusesfiling statusesB.A.M Stands for:B.A.M Stands for:BBRAINSRAINSAANDNDMMOTIVATIONOTIVATIONAPPLY THEM HERE AND YOU’LL SUCCEED!APPLY THEM HERE AND YOU’LL SUCCEED!

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FILING STATUSFILING STATUS What is your filing status used in determining?What is your filing status used in determining?

– Filing requirements.Filing requirements.– Tax rateTax rate– Standard deduction.Standard deduction.

Also plays a role in determining which tax form to use Also plays a role in determining which tax form to use when preparing the returnwhen preparing the return..

Depends on your marital status and family situation. Depends on your marital status and family situation. For tax purposes, you are considered married or For tax purposes, you are considered married or unmarried. unmarried.

When are you considered unmarried for tax purposes?When are you considered unmarried for tax purposes?

You are considered unmarried for the whole year if, on You are considered unmarried for the whole year if, on the last day of your tax year, you are unmarried or the last day of your tax year, you are unmarried or legally separated from your spouse under a divorce legally separated from your spouse under a divorce or separate maintenance agreement. State law or separate maintenance agreement. State law governs whether you are married or legally separated governs whether you are married or legally separated under a divorce or separate maintenance decreeunder a divorce or separate maintenance decree

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FILING STATUSFILING STATUSWhat are the five filing statuses?What are the five filing statuses?

1.1. Single (S)Single (S)2.2. Married Filing Jointly (MFJ)Married Filing Jointly (MFJ)3.3. Married Filing Separately (MFS)Married Filing Separately (MFS)4.4. Head of Household (H/H)Head of Household (H/H)5.5. Qualifying Widow(er) with Dependent Child (Q/W).Qualifying Widow(er) with Dependent Child (Q/W).

Which two filing statuses have the same tax Which two filing statuses have the same tax rate?rate?

Married filing jointly and qualifying widow(er) Married filing jointly and qualifying widow(er) with dependent child have the same tax rate with dependent child have the same tax rate and it is generally the lowest tax rate. and it is generally the lowest tax rate. Married filing separately usually has the Married filing separately usually has the highest tax rate. highest tax rate.

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FILING STATUSFILING STATUS

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FILING STATUSFILING STATUS

Form 1040 page 1Form 1040 page 1

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SINGLE (1)SINGLE (1)

Who qualifies to use SINGLE (S) as their filing status?Who qualifies to use SINGLE (S) as their filing status?– You were never married.You were never married.– You were legally separated from your spouse under a You were legally separated from your spouse under a

divorce or separate maintenance decree.divorce or separate maintenance decree.– You were widowed before January 1, 2009 and did not You were widowed before January 1, 2009 and did not

remarry in 2009.remarry in 2009.

Your filing status is SINGLE if you do not qualify for Your filing status is SINGLE if you do not qualify for another filing status. If you are unmarried, or are another filing status. If you are unmarried, or are married but lived apart from your spouse, check the married but lived apart from your spouse, check the requirements for head of household or qualifying requirements for head of household or qualifying widow(er).widow(er).

FILING STATUSFILING STATUSTed MacNamara is unmarried and a part-time Ted MacNamara is unmarried and a part-time

student. He rents an apartment and works at student. He rents an apartment and works at Wal-Mart. Wal-Mart.

SINGLESINGLEJudy Vasquez lost her husband two years ago. Judy Vasquez lost her husband two years ago.

She lives alone in a retirement home. She lives alone in a retirement home. SINGLESINGLE

Rita is 20 years old and unmarried. She lives with her boyfriend, Ali, who is a full-time student and does not work. She works at the campus bookstore and provides all of the cost of maintaining the home. SINGLE

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FILING STATUSFILING STATUSDavid Astelle pays the full cost of the home in which he

and his 23 year old daughter live. She is not a full time student or disabled. His daughter earns $3,600 and does not qualify as his dependent. His wife died in 2007.

SINGLE

Shilo Cruise is unmarried and lived all year with her boyfriend, Sweeny Todd, and Sweeny’s 10-year-old son, Johnny. Sweeny does not know how to locate Johnny’s mother. Sweeny was a bouncer and earned $5,000. He will file a return only to get his withholding back. Shilo is a lawyer and provides over half of the support of both Sweeny and Johnny and more than half of the cost of keeping up the home. Shilo meets the test to claim Johnny as a qualifying relative.

SINGLE2020

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MARRIED FILING JOINTLYMARRIED FILING JOINTLY (2)(2)

To use To use MARRIED FILING JOINTLYMARRIED FILING JOINTLY (MFJ) as your filing (MFJ) as your filing status, what must be status, what must be TRUE?TRUE?

You were married on the last day of the tax year You were married on the last day of the tax year even if you did not live with your spouse.even if you did not live with your spouse.

Your spouse died during the tax year and you did Your spouse died during the tax year and you did not remarry during the year.not remarry during the year.

You are living together in a common law marriage You are living together in a common law marriage that is recognized in the state where you now live that is recognized in the state where you now live or in the state where the common law marriage or in the state where the common law marriage began.began.

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MARRIED FILING JOINTLYMARRIED FILING JOINTLY (2)(2) Do both individuals have to have income to us MFJ?Do both individuals have to have income to us MFJ?No. Both individuals do not need to have income. However you No. Both individuals do not need to have income. However you

must include all income of both spouses. You must also deduct must include all income of both spouses. You must also deduct your combined allowable expenses. You are both responsible your combined allowable expenses. You are both responsible for the return and you must both sign the return. Filing a joint for the return and you must both sign the return. Filing a joint return may give you a lower tax rate than any other filing status.return may give you a lower tax rate than any other filing status.

What if you are divorced during the year?What if you are divorced during the year?If you are divorced under a final decree by the last day of the year, If you are divorced under a final decree by the last day of the year,

and have not remarried, you are considered unmarried for the and have not remarried, you are considered unmarried for the whole year and cannot choose MFJ as your filing status.whole year and cannot choose MFJ as your filing status.

My spouse is a non resident alien. Can we still use MFJ?My spouse is a non resident alien. Can we still use MFJ?If at any time during the tax year your spouse was a nonresident If at any time during the tax year your spouse was a nonresident

alien, you may file a joint return alien, you may file a joint return onlyonly if your spouse reports all if your spouse reports all income (domestic and foreign) on the return.income (domestic and foreign) on the return.

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MARRIED FILING JOINTLYMARRIED FILING JOINTLY (2)(2)

Fred Williams died on September 1, 2009. His wife, Fred Williams died on September 1, 2009. His wife, Marlene, did not work. They had filed MFJ in Marlene, did not work. They had filed MFJ in previous years. They had no dependents and previous years. They had no dependents and Marlene has not remarried. May Marlene file a joint Marlene has not remarried. May Marlene file a joint return for 2009?return for 2009?

YesYes

Even though Marlene was not married on December Even though Marlene was not married on December 31, 2009, she may file a joint return for 2009. 31, 2009, she may file a joint return for 2009.

FILING STATUSFILING STATUSJoe and Mary Smith are married. Joe works as a Joe and Mary Smith are married. Joe works as a computer technician. Mary stays home with their computer technician. Mary stays home with their baby and has no income. baby and has no income.

MFJMFJ

Mike and Cathy Cato are married and they both are truck drivers. They only lived together for three months of 2009. They have no dependents.

MFJMFJ

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MARRIED FILING SEPARATELY (3)MARRIED FILING SEPARATELY (3)

To use MARRIED FILING SEPARATELY (MFS) as your filing To use MARRIED FILING SEPARATELY (MFS) as your filing status, any of the following may be TRUE:status, any of the following may be TRUE: You want to be responsible for only your own tax.You want to be responsible for only your own tax. You and your spouse do not agree to file a joint return.You and your spouse do not agree to file a joint return.

When filing as MFS, you generally report only your own When filing as MFS, you generally report only your own income, exemptions, credits, and deductions. Married filing income, exemptions, credits, and deductions. Married filing separate usually means paying more tax than if you file a separate usually means paying more tax than if you file a joint return. You should figure your tax both ways and chose joint return. You should figure your tax both ways and chose the method that produces the least tax. the method that produces the least tax.

When using MFS, you must write your spouse’s full name on When using MFS, you must write your spouse’s full name on line 3 of Form 1040 and enter the spouse’s social security line 3 of Form 1040 and enter the spouse’s social security number in the heading section.number in the heading section.

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MMARRIED ARRIED FFILING ILING SSEPARATELY (3)EPARATELY (3)

((MMY Y FFAVORITE AVORITE SSTATUS)TATUS)Married filing separate status disqualifies you from certain Married filing separate status disqualifies you from certain tax benefits. Give me some examples: tax benefits. Give me some examples: 1.1. You cannot claim the earned income credit.You cannot claim the earned income credit.2.2. You cannot take the credit for adoption expenses.You cannot take the credit for adoption expenses.3.3. You cannot claim the standard deduction if your spouse You cannot claim the standard deduction if your spouse

itemizes deductions.itemizes deductions.4.4. You cannot claim the credit for child and dependent care You cannot claim the credit for child and dependent care

expenses in most instances.expenses in most instances.5.5. You cannot deduct interest paid on a qualified student loan.You cannot deduct interest paid on a qualified student loan.6.6. You cannot claim education credits.You cannot claim education credits.7.7. If you lived with your spouse at any time during the tax year: If you lived with your spouse at any time during the tax year:

a.a. You cannot take the credit for the elderly or the disabled.You cannot take the credit for the elderly or the disabled.b.b. You cannot roll over amounts from a traditional IRA into a You cannot roll over amounts from a traditional IRA into a

Roth IRA. Roth IRA. c.c. You may have to include in income more of your social You may have to include in income more of your social

security benefits.security benefits.

MARRIED FILING SEPARATELY MARRIED FILING SEPARATELY (MFS)(MFS)

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MY FAVORITE STATUS

MMARRIED ARRIED FFILING ILING SSTUPID(LY)TUPID(LY)SPECIAL HAT SPECIAL HAT FOR THEMFOR THEM

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Jack and Joan were married on December 12, 2009. Jack and Joan were married on December 12, 2009. They both have major investments and they want They both have major investments and they want to be responsible only for their own tax. How to be responsible only for their own tax. How should they file?should they file?

MFSMFS

When filing as MFS, you generally report only your own When filing as MFS, you generally report only your own income, exemptions, credits, and deductions.income, exemptions, credits, and deductions.

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Tim P. (SSN 321-66-8181) and Tina A. Halloway are Tim P. (SSN 321-66-8181) and Tina A. Halloway are filing as MFS. Tina’s social security number is 051-filing as MFS. Tina’s social security number is 051-33-9839. How would they fill out their 1040?33-9839. How would they fill out their 1040?

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Tim P. (SSN 321-66-8181) and Tina A. Halloway are filing Tim P. (SSN 321-66-8181) and Tina A. Halloway are filing as MFS. Tina’s social security number is 051-33-9839. as MFS. Tina’s social security number is 051-33-9839.

When using MFS, you must write your spouse’s full name When using MFS, you must write your spouse’s full name on line 3 of Form 1040 and enter the spouse’s social on line 3 of Form 1040 and enter the spouse’s social security number in the heading section.security number in the heading section.

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HEAD OF HOUSEHOLD: (4)HEAD OF HOUSEHOLD: (4)

What are the rules for claiming H of H?What are the rules for claiming H of H?

To use To use HEAD OF HOUSEHOLDHEAD OF HOUSEHOLD (H/H) as your (H/H) as your filing status, you must be filing status, you must be unmarriedunmarried or or considered unmarriedconsidered unmarried as of the last day of as of the last day of the tax yearthe tax year ANDAND::Have paid more than half the cost of keeping up a Have paid more than half the cost of keeping up a

home for the tax year; home for the tax year; andand, in most cases,, in most cases,A qualifying person generally must have lived with A qualifying person generally must have lived with

you in the home for more than half the tax year you in the home for more than half the tax year

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In determining the cost of keeping up a home:In determining the cost of keeping up a home:

1.1. Include amounts you paid for rent, mortgage interest, Include amounts you paid for rent, mortgage interest, real estate taxes, home insurance, repairs, utilities, real estate taxes, home insurance, repairs, utilities, and food eaten in the homeand food eaten in the home

2.2. Do not include amounts you paid for clothing, Do not include amounts you paid for clothing, education, medical treatment, vacations, life education, medical treatment, vacations, life insurance, and transportation or the rental value of insurance, and transportation or the rental value of home you ownhome you own

3.3. Exclude payments from public assistance programs as Exclude payments from public assistance programs as amounts you paid. Include these amounts in the total amounts you paid. Include these amounts in the total cost of keeping up a home in determining whether you cost of keeping up a home in determining whether you paid over half the costpaid over half the cost

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Who can be a qualifying person for H of H? Who can be a qualifying person for H of H? – An unmarried child including child, grandchild, An unmarried child including child, grandchild,

stepchild, or foster child (The child does not have to be stepchild, or foster child (The child does not have to be your dependent.)your dependent.)

– A married child including child, grandchild, stepchild, A married child including child, grandchild, stepchild, or foster child (In most cases the child must be your or foster child (In most cases the child must be your dependent)dependent)

– A qualifying relative who is your dependent; a A qualifying relative who is your dependent; a qualifying relative includes your child who is not a qualifying relative includes your child who is not a qualifying child, parent, grandparent, brother, sister, qualifying child, parent, grandparent, brother, sister, stepbrother, stepsister, half brother, or half sister (or stepbrother, stepsister, half brother, or half sister (or descendant of these such as a niece or nephew)descendant of these such as a niece or nephew)

A parent not living with you if you paid more than half A parent not living with you if you paid more than half the cost of keeping up a home that was the parent’s the cost of keeping up a home that was the parent’s main home for the entire year. (The parent must be main home for the entire year. (The parent must be your dependent.) your dependent.)

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Megan A. Taft lived all year with her mother, Alise. Megan A. Taft lived all year with her mother, Alise. Alise pays all of the cost of the household Alise pays all of the cost of the household expenses. Megan’s father claims her as his expenses. Megan’s father claims her as his dependent. May Alise file as H/H? dependent. May Alise file as H/H?

YesYes

Alise may file H/H with Megan as the qualifying Alise may file H/H with Megan as the qualifying child.child.

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Megan A. Taft lived all year with her mother, Alise. Megan A. Taft lived all year with her mother, Alise. Alise pays all of the cost of the household Alise pays all of the cost of the household expenses. Megan’s father claims her as his expenses. Megan’s father claims her as his dependent. How would the 1040 be filled out?dependent. How would the 1040 be filled out?

Alise would check box 4 under Filing Status on Alise would check box 4 under Filing Status on Form 1040 and enter Megan’s name on the line Form 1040 and enter Megan’s name on the line provided.provided.

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John’s girlfriend, Jane, lives with him all year. He John’s girlfriend, Jane, lives with him all year. He maintains the home and totally supports her. maintains the home and totally supports her. She does not work. He can claim H/H. She does not work. He can claim H/H.

NoNo

He cannot claim H/H because she even if she can He cannot claim H/H because she even if she can be claimed as a qualifying relative she is not a be claimed as a qualifying relative she is not a qualifying person for H/H. qualifying person for H/H.

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Peggy Purcell maintains a home and is unmarried. Her Peggy Purcell maintains a home and is unmarried. Her daughter, Kelly, is a 20-year-old full-time student at daughter, Kelly, is a 20-year-old full-time student at Erie College. Kelly stayed in the dormitory for all of Erie College. Kelly stayed in the dormitory for all of last year. She did come home to visit during term last year. She did come home to visit during term breaks. Can Peggy may file as H/H.breaks. Can Peggy may file as H/H.

YesYes

Kelly’s absence from the home for education purposes Kelly’s absence from the home for education purposes is considered temporary and Peggy may file as H/H.is considered temporary and Peggy may file as H/H.

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What is the special rule for married taxpayers What is the special rule for married taxpayers for H of H filing status?for H of H filing status?

If you are married but living apart from your spouse, If you are married but living apart from your spouse, you may be considered unmarried for tax purposes you may be considered unmarried for tax purposes and qualify for H/H if ALL the following tests are and qualify for H/H if ALL the following tests are met:met:1.1. You file a separate return.You file a separate return.2.2. You paid more than half the cost of keeping up your You paid more than half the cost of keeping up your

home for the tax year.home for the tax year.3.3. Your spouse did not live in your home at any time Your spouse did not live in your home at any time

during the during the Last 6 MonthsLast 6 Months of the tax year. Your spouse is of the tax year. Your spouse is considered to live in your home even if they were considered to live in your home even if they were temporarily absent due to special circumstances.temporarily absent due to special circumstances.

4.4. Your home was the main home of your child, stepchild, Your home was the main home of your child, stepchild, or eligible foster child for more than half the year.or eligible foster child for more than half the year.

5.5. You must be able to claim an exemption for the child. You must be able to claim an exemption for the child. However, you can still meet the test if you cannot claim However, you can still meet the test if you cannot claim the exemption only because the non-custodial parent is the exemption only because the non-custodial parent is allowed to claim the exemption for the child. allowed to claim the exemption for the child.

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Jason and Joan Jutt have been separated since January 31, Jason and Joan Jutt have been separated since January 31, 2009. Josie, their daughter, lives with Joan and Joan 2009. Josie, their daughter, lives with Joan and Joan supplies over half the cost of keeping up the home. Joan is supplies over half the cost of keeping up the home. Joan is legally still married to Jason but may be treated as legally still married to Jason but may be treated as considered unmarried and may be eligible to file as head of considered unmarried and may be eligible to file as head of household. household.

If Jason did not move out of the house until August 8, 2009, If Jason did not move out of the house until August 8, 2009, Can she file as H/H?Can she file as H/H?

NoNo

Joan would still be considered married for tax purposes and Joan would still be considered married for tax purposes and must file as MFJ or MFS. She cannot claim head of must file as MFJ or MFS. She cannot claim head of household because she does not meet the considered household because she does not meet the considered unmarried requirement since Jason and Joan lived together unmarried requirement since Jason and Joan lived together during the last 6 months of the tax year.during the last 6 months of the tax year.

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QuestionQuestion

Debra Johnson is legally Debra Johnson is legally separated from her husband. separated from her husband. She pays over half the cost of She pays over half the cost of maintaining her home. Her ten-maintaining her home. Her ten-year-old son lives with her and is year-old son lives with her and is claimed by her estranged claimed by her estranged husband as his dependent.husband as his dependent. H/HH/H

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QUALIFYING WIDOW(ER) QUALIFYING WIDOW(ER) WITH DEPENDENT CHILD (5)WITH DEPENDENT CHILD (5)

To use To use QUALIFYING WIDOW(ER) QUALIFYING WIDOW(ER) WITH DEPENDENT CHILDWITH DEPENDENT CHILD (Q/W) as your filing status for 2009,(Q/W) as your filing status for 2009, what requirements must be what requirements must be met?met?

1.1. You could have filed a joint return for the tax You could have filed a joint return for the tax year your spouse died.year your spouse died.

2.2. Your spouse died in 2007 or 2008 and you did Your spouse died in 2007 or 2008 and you did not remarry before the end of 2009.not remarry before the end of 2009.

3.3. You have a child or stepchild who is your You have a child or stepchild who is your dependent.dependent.

4.4. You paid over half the cost of keeping up a You paid over half the cost of keeping up a home that is the main home for you and the home that is the main home for you and the dependent child for the entire year.dependent child for the entire year.

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Jeff Termack died in 2007. He is survived by his wife, Jeff Termack died in 2007. He is survived by his wife, Sue, and a daughter, Tracy. Sue has not remarried Sue, and a daughter, Tracy. Sue has not remarried and keeps up a home for Tracy. For 2007, Sue filed and keeps up a home for Tracy. For 2007, Sue filed as MFJ. Is her filing status for 2009 H/H? as MFJ. Is her filing status for 2009 H/H?

NoNo

In 2008 and 2009, she may use Qualifying Widow as In 2008 and 2009, she may use Qualifying Widow as her filing status. her filing status.

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How will her 2009 1040 be filled out?How will her 2009 1040 be filled out?

QuestionsQuestions

BREAKBREAK

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FILING STATUSFILING STATUSSUMMARYSUMMARYSingleSingle

– Unmarried as of December 31Unmarried as of December 31– Legally separated under a separate maintenance decreeLegally separated under a separate maintenance decree– Do not qualify for another filing statusDo not qualify for another filing status

Married Filing JointlyMarried Filing Jointly– Married as of December 31Married as of December 31– Include both incomesInclude both incomes– Both must signBoth must sign– Both responsible for payment of taxBoth responsible for payment of tax

Married Filing SeparatelyMarried Filing Separately– Married as of December 31Married as of December 31– Report only own incomeReport only own income– Provide name and SSN of spouseProvide name and SSN of spouse– If one itemizes, other spouse must alsoIf one itemizes, other spouse must also

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FILING STATUSFILING STATUSSUMMARYSUMMARYQualifying Widow(er) with dependent childQualifying Widow(er) with dependent child

– Must have a dependentMust have a dependent– Paid over half of household expensesPaid over half of household expenses– Did not remarryDid not remarry– May use this status for 2 years after year of death of spouseMay use this status for 2 years after year of death of spouse

Head of Household/SingleHead of Household/Single– Paid more than half of household expensesPaid more than half of household expenses– Maintained a home for more than 6 months for:Maintained a home for more than 6 months for:

Unmarried child need not be a dependentUnmarried child need not be a dependent*Married child must be a dependent*Married child must be a dependent**Qualifying relative must be your dependent**Qualifying relative must be your dependentParent must be a dependent, but does not have to live with taxpayerParent must be a dependent, but does not have to live with taxpayer

Head of Household/Considered UnmarriedHead of Household/Considered Unmarried– Lived apart from spouse last 6 months of the yearLived apart from spouse last 6 months of the year– Paid more than half household costs for dependent child that lives with Paid more than half household costs for dependent child that lives with

you more than 6 months (exception for divorced or separated parents you more than 6 months (exception for divorced or separated parents with court decree or other documentation). with court decree or other documentation).

**Includes grand, step, adopted, and eligible foster childIncludes grand, step, adopted, and eligible foster child**See exception for **See exception for married childmarried child earlier earlier

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FILING STATUSFILING STATUSDetermine the only filing status available or the Determine the only filing status available or the

most advantageous filing status for each of the most advantageous filing status for each of the followingfollowing::

Mark and Katie Sanders were married and they lived together with Mark and Katie Sanders were married and they lived together with their daughter, Abigail, age ten, until 2008 when Mark died. Abigail their daughter, Abigail, age ten, until 2008 when Mark died. Abigail attends a boarding school and comes home for the summer. attends a boarding school and comes home for the summer.

Q/WQ/W

Debra Johnson is legally separated from her husband. She pays over Debra Johnson is legally separated from her husband. She pays over half the cost of maintaining her home. Her ten-year-old son lives half the cost of maintaining her home. Her ten-year-old son lives with her and is claimed by her estranged husband as his with her and is claimed by her estranged husband as his dependent.dependent.

H/HH/H

Patrick Bartley’s wife died in April 2009. In November 2009, he Patrick Bartley’s wife died in April 2009. In November 2009, he married her sister, Jezebel. married her sister, Jezebel.

MFJ (new Spouse)MFJ (new Spouse)

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FILING STATUSFILING STATUSDetermine the only filing status available or the most

advantageous filing status for each of the following:

John and Stella Zuty are married and live together. Both are employed. John is very independent and does not want to file a joint return with Stella.

MFS

Matthew Moore is unmarried and lives alone. He works in a factory. He pays over half the cost of keeping his father, whom he claims as a dependent, in a home for the elderly.

H/H

Ken Demmer is a stockbroker. He divorced his wife, Phyllis, on December 30, 2009. Their two children live with Phyllis and she pays over half the cost of keeping up their home. What is Ken’s filing status?

S

Karen Karner is divorced and was providing the cost of raising her daughter until her daughter died suddenly in January of 2009. Karen maintained the home during the period her daughter was alive.

H/H

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FILING STATUSFILING STATUSCLASSWORK 2: True or False. CLASSWORK 2: True or False.

1.1. On a joint return, both individuals must have income. On a joint return, both individuals must have income. FF

2. Under the Head of Household filing status, a qualifying person must be a 2. Under the Head of Household filing status, a qualifying person must be a child. child.

FF

3.3. In general, filing status depends on whether you are married or unmarried. In general, filing status depends on whether you are married or unmarried. TT

4.4. If you were widowed during the tax year and did not remarry during the tax If you were widowed during the tax year and did not remarry during the tax year and you have no children, your filing status is Single. year and you have no children, your filing status is Single.

FF

5.5. A married couple living together must file Married Filing Jointly. A married couple living together must file Married Filing Jointly. FF

6.6. If you are married, you can never file as Head of Household. If you are married, you can never file as Head of Household. FF

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FILING STATUSFILING STATUSCLASSWORK 2: True or False. CLASSWORK 2: True or False.

7.7. The Single filing status generally has a higher tax rate than Head of Household. The Single filing status generally has a higher tax rate than Head of Household. TT

8.8. If more than one filing status applies to you, you must choose the one with the If more than one filing status applies to you, you must choose the one with the higher tax rate. higher tax rate.

FF

9.9. You are considered unmarried for the whole year if, on the last day of the tax You are considered unmarried for the whole year if, on the last day of the tax year, you are unmarried or legally separated. year, you are unmarried or legally separated.

TT

10.10. If your spouse died during the year, you are considered married for the whole If your spouse died during the year, you are considered married for the whole year for filing status purposes. year for filing status purposes.

TT11.11. Once you file a joint return, you cannot choose to file separate returns for that Once you file a joint return, you cannot choose to file separate returns for that

year after the due date of the return. year after the due date of the return. TT12.12. A dependent can qualify only one taxpayer to use Head of Household for any A dependent can qualify only one taxpayer to use Head of Household for any

tax year. tax year. TT

Questions Questions

HOMEWORK – Chapter 3HOMEWORK – Chapter 3Homework 1 (Fill in the Heading and Filing Homework 1 (Fill in the Heading and Filing Status sections of Form 1040)Status sections of Form 1040)Homework 2 – Fill in the Filing Status Homework 2 – Fill in the Filing Status Section of Form 1040.Section of Form 1040.Use the forms in your workbookUse the forms in your workbookRead Chapter 4 (Wages, Salaries, Tips, Read Chapter 4 (Wages, Salaries, Tips, etc., and Withheld Taxes).etc., and Withheld Taxes).Computer Time – Starting Thursday.Computer Time – Starting Thursday.Email me if you want more filing status ?s Email me if you want more filing status ?s for practice.for practice.

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Liberty Tax Service Basic Income Tax Course Lesson 3

Documents

Transcript of Liberty Tax Service Basic Income Tax Course Lesson 3