Part 1: Filing status and exemptions
Mar 08 '00
Note: All line numbers are on form 1040. As anyone can file a form 1040 (except non-resident aliens who must file a 1040-NR), I will not discuss the relevant lines on form 1040A or 1040EZ.
Line 0: Get the name right.
If you misspell your name or misenter your social security number (SSN), your refund will be delayed. (If you are not elegible for a SSN, you need to get an Individual Taxpayer Identification Number (ITIN) from the IRS.) Also, if you are married, be sure to put your spouse's SSN or ITIN in the appropriate space.
Lines 1-5: Filing status
Married or Single?: Yes, even this can be a complicated question. Generally, your status at midnight at the end of the tax year defines your status. If you are divorced or legally separated, you are considered not to be married. If your spouse died during the year, and you did not remarry, you are still considered "married" to the same spouse. Furthermore, if your spouse died within the past 2 years (1997 or 1998 as I write this in 2000), and you have a dependent child living with, you may be able to use checkbox 5 (Qualifying widow(er)), which has the same tax rates (and most tax attributes) as if you were married.
Also, the IRS can ignore "sham" marriages. The annual trip to Bermuda for a divorce on December 30 and remarriage on January 2 doesn't work; you're still married.
Single? You can either file as single (checkbox 1), or Head of household (see below). The latter is almost certainly better, if you qualify.
Married? The only reason to file Married filing separate return (MFS, checkbox 3) is if you don't trust or can't find your spouse. There may be some exceptions in states such as Ohio which, for state tax purposes, have the same exemptions for single, MFS, and MFJ, and require you to use the same status on the state as on the Federal return. It's possible, in some (very rare) circumstances, that you might pay less total tax as MFS than MFJ. Also, if you lived apart from your spouse for the last 6 months of the year, you may be able to file as Head of Household (or, in some rare cases, single).
Head of household (checkbox 4)? If you paid over half the cost of the household of a qualifying person, you may be able to claim HoH status. Qualifying persons include children living with you for at least 6 months of the year, foster children living with you for the entire year, and parents for whom you maintain a household for 6 months of the year, whether or not they live with you.
In general, the lowest tax comes from checkbox 2 or 5, then 4, then 1, then 3.
Line 6: Exemptions.
Line 6a: Yourself. Claim yourself has an exemption unless someone else can claim you as a dependant (see line 6c below).
Line 6b: Spouse. Claim your spouse on a joint return, or on a separate return if your spouse has no income and is not filing a return; unless someone else can claim your spouse as a dependant.
Line 6c: Dependants. All dependants must meet the following 6 requirements.
0. The person must be a person. Dogs, cats, birds, hamsters, etc., do not qualify.
1. The person must have a SSN, ITIN, or ATIN (Adoption Taxpayer Identification Number); or be a child who was born and died in the tax year (1999, as I write this).
2. The person must either be a relative, or have legally lived with you as a family member for the full year.
3. If the person was married, and filed a joint return, it must be the case that neither the person nor their spouse would have any tax liability if they had filed separate returns.
4. The person must be US citizen, or resident of the US, Canada, or Mexico.
5. The person's gross income must be less than the exemption amount ($2,750 for 1999); unless he/she is under 19, or under 24 and a full-time student for 5 months of the year.
6. You must supply over half of the person's total support in 1999. If the person is a child of divorced or separated parents, then the custodial parent almost always gets the exemption, unless released to the other parent on form 8332. (There are many exceptions if the divorce or separation agreement was before 1985, and few if the divorce or separation agreement was after 1984. In most cases, if the divorce was before 1985, the children should be out of the house, but, who knows?) If more than one taxpayer could take the person as a dependant under rules 0-5; individually, supply over 10% of the person's support; and, together, they provide more than half the person's support, then those people can chose among them who is to get the deduction on form 2120.
Children may also qualify you for the Credit for child and dependent care expenses (line 41), Child tax credit (line 43), Adoption credit (line 45), and/or Earned income credit (line 59), which I will deal with in another Epinion.
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