• What is the best filing status for my needs?

This is the first question to be answered before filling for your income tax return. Your filing requirements, correct tax and standard deductions depends on the filing status you choose. There are a total of five filing statuses allowed by the law.

  • Single (S)

You are qualified to file as single if you are unmarried or legally by the last day of the year. Also as per the 2016 tax reform, the standard deduction for this filing status is $6,300.

  • Married filing jointly (MFJ)

You can choose this filing status if you are married and both you and your spouse agree to file a joint return. Per 2016 tax year, the standard deduction is $12,600.

  • Married filing separately (MFS)

You qualify for this filing status if you are married and but file a separate return from your spouse. There are special rules attached to this filing option. With this filing status, you will usually pay more tax than any other filing status to which you qualify. This status may be beneficial if you want to be responsible for your own tax, resulting in a lower tax obligation than a joint return. Per the 2016 tax year, the standard deduction for this filing status is $6,300.

  • Head of Household (HOH)

You may be able to file HOH if you meet the following requirements:

  • You are single on the last day of the year.
  • You paid more than half the cost of maintaining a home in the year you are filing for.
  • A qualifying person must have lived with you in the home for more than half the year, except for temporary absences, or when the person is out of the home for a period of time but intends to return.
  • If you paid more than half of the cost of maintaining a home that was the primary home of your dependent parent, then that parent is a qualifying person even if him or her does not live with you. Per 2016 tax year, standard deduction is $9,300

For tax purposes, you are considered unmarried on the last day of the tax year if you meet all of the following tests:

  • You file a separate return.
  • More than half the cost of maintaining your home for the tax year was paid by you.
  • During the last 6 months of the tax year, your spouse did NOT live in your home. Your spouse is considered to live in your home even if he/or she is temporarily absent due to special circumstances, such as being on a business trip, in the hospital or being deployed with the military.
  • For more than half the year, your home was the main home of your child, stepchild, or eligible foster child.
  • You must be able to claim an exemption for the child. You can still meet this test if you cannot claim the exemption only because the noncustodial parent is allowed to claim the exemption for the child.
  • Qualifying Widow(er) with Dependent Child (QW)
    • If you have lost a spouse, have a dependent child, and meet other conditions, this status may apply to you.
  • More than half the cost of maintaining a primary home for you and your child for the entire year, except for temporary absences must have been paid by you.
  • You can use this as your filing status for 2 years following the death of your spouse If you have not remarried. With this, you get the benefit of using the highest standard deduction amount and the joint filing rates.
  • If you spouse died during the tax year, you may file a joint tax return using MFJ.
  • The MFJ standard deduction may apply for the 2016 tax year.
  • Who can I claim as a dependent on my tax return?

This is another serious question many people have with regards to filing their income tax returns. Properly identifying your dependents can significantly impact your return. Your dependent can either be a “qualifying child” or “qualifying relative”.

Below are guidelines that will elaborately help you to identify your dependent.

  • Qualifying Child
  • The qualifying child can be a son, daughter, stepchild, adopted child, foster child, grandchild, a sibling, stepsibling, niece or nephew.
  • The child must be below 19years old at the end of the year and younger than you. The child must also be younger than your spouse if filing jointly. If the child is a full-time student, he or she must be below 24years old and younger than you (or your spouse if filing jointly), or any age if permanently and totally disabled.
  • The child must have lived with you for more than half of the year.
  • You must have provided more than half of the child’s support for the year.
  • The child cannot file a joint return.  A joint return can only be filed by the child and his or her spouse for the sole purpose of receiving a refund of income tax withheld or estimated tax paid.
  • If it is determined that the child can be a qualifying dependent for more than one person, tiebreaker rules will apply. In that case, you must be entitled to claim the child according to IRS standards, which can be found on the IRS website.

 

  • Qualifying Relative
  • The qualifying relative cannot be the qualifying child of you or another taxpayer.
  • The qualifying relative must have either live with you for the entire year as a member of your household or be related to you. This qualifying relative can be a parent, grandparent, aunt, uncle, or in-law, or someone unrelated to you that is a member of your household. This can also be a child that does not meet the conditions of a qualifying child.
  • The gross annual income for the qualifying child must be less than $3,950.
  • You must have provided more than half of the relatives total support during the tax filing year.
  • How does my individual Retirement Arrangement Impact my Income Tax Return

 

 

  • How do family changes such as marriage, children, divorce and death impact my income tax return?

Within the course of the year families and individuals experience a lot of life changes that can significantly impact their income tax returns. Some of these changes include: a new job, go to school, get married, start a business, change jobs, have children, send children to college, buy or sell a home, get divorced, contribute to a retirement plan, or withdraw money from a retirement plan. Below is information on how your tax return is impacted by these changes.

Your Filing Status

Changes such as marriage or divorce will impact your tax returns in the area of your filing status. Whether you get married or got divorced, you can only choose one family status. An Early Bird Tax associate can help you choose the best filing status for your needs.

 

  • Single (S)

You are qualified to file as single if you are unmarried or legally by the last day of the year. Also as per the 2016 tax reform, the standard deduction for this filing status is $6,300.

  • Married filing jointly (MFJ)

You can choose this filing status if you are married and both you and your spouse agree to file a joint return. Per 2016 tax year, the standard deduction is $12,600.

  • Married filing separately (MFS)

You qualify for this filing status if you are married and but file a separate return from your spouse. There are special rules attached to this filing option. With this filing status, you will usually pay more tax than any other filing status to which you qualify. This status may be beneficial if you want to be responsible for your own tax, resulting in a lower tax obligation than a joint return. Per the 2013 tax year, the standard deduction for this filing status is $6,300.

  • Head of Household (HOH)

You may be able to file HOH if you meet the following requirements:

  • You are single on the last day of the year.
  • You paid more than half the cost of maintaining a home in the year you are filing for.
  • A qualifying person must have lived with you in the home for more than half the year, except for temporary absences, or when the person is out of the home for a period of time but intends to return.
  • If you paid more than half of the cost of maintaining a home that was the primary home of your dependent parent, then that parent is a qualifying person even if him or her does not live with you. Per 2016 tax year, the standard deduction is $9,300.
  • For tax purposes, you are considered unmarried on the last day of the tax year if you meet all of the following tests:
    • You file a separate return.
    • More than half the cost of maintaining your home for the tax year was paid by you.
    • During the last 6 months of the tax year, your spouse did NOT live in your home. Your spouse is considered to live in your home even if he/or she is temporarily absent due to special circumstances, such as being on a business trip, in the hospital or being deployed with the military.
    • For more than half the year, your home was the main home of your child, stepchild, or eligible foster child.
    • You must be able to claim an exemption for the child. You can still meet this test if you cannot claim the exemption only because the noncustodial parent is allowed to claim the exemption for the child.
  • Qualifying Widow(er) with Dependent Child (QW)
    • If you have lost a spouse, have a dependent child, and meet other conditions, this status may apply to you.
  • More than half the cost of maintaining a primary home for you and your child for the entire year, except for temporary absences must have been paid by you.
  • You can use this as your filing status for 2 years following the death of your spouse If you have not remarried. With this, you get the benefit of using the highest standard deduction amount and the joint filing rates.
  • If you spouse died during the tax year, you may file a joint tax return using MFJ.
  • The MFJ standard deduction may apply for the 2016 tax year.

Children

Children bring many big tax breaks.

  • Irrespective of when in the year a child is born, he or she is assumed to have lived with you the entire year.
  • You are eligible to claim a dependent's exemption for each qualifying child.
  • For each qualifying child under the age of 17, you may be eligible for up to a $1,000 child tax credit or additional child tax credits.
  • You may be eligible for the nonrefundable child and dependent care credit for children under age 13 or for a disabled child of any age, if you and your spouse are working or are looking for work, or if one of you is in school or disabled. You may also be eligible to take a tax credit for qualifying expenses to adopt an eligible child.
  • If one of your children start working, he or she cannot claim his or her own exemption if they qualify to be claimed as a dependent on your tax return as a parent.

 

 

Death

The same filing requirements that apply to individuals determine if a final income tax return must be filed for the decedent. The personal representative must file the final income tax return of the decedent for the year of death and any returns not filed for preceding years. The surviving spouse can file married filing jointly for the tax year in which the spouse has died. The surviving spouse may file as a qualifying widow(er) for 2 years following the death of the spouse if unmarried and have a dependent child.

An estate tax return may also need to be filed.