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

2. 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 NTTC Training 2013 2

3. TAX-AIDE References ● Pub 4012, Tab B ● Pub 4491, Part 1, pg 25 ● Pub 17, Chapter 2 NTTC Training 2013 3

4. 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 NTTC Training 2013 4 Pub 17 Ch 2

5. TAX-AIDE Five Choices for Filing Status ● Single ● Married filing jointly (MFJ) ● Married filing separately (MFS) ● Head of household (HH) ● Qualified widow(er) (QW) NTTC Training 2013 5 Pub 4012 Tab B

6. TAX-AIDE Form 1040 NTTC Training 2013 6

7. TAX-AIDE Where to Start ? Interview NTTC Training 2013 7 Check Part II entries on Intake Form Ask questions – Verify

8. 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 NTTC Training 2013 8

9. 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 NTTC Training 2013 9

10. TAX-AIDE Filing Status – Need to File a Return? NTTC Training 2013 10

11. TAX-AIDE Filing Status – Standard Deduction NTTC Training 2013 11

12. TAX-AIDE Filing Status – Tax Rate NTTC Training 2013 12

13. TAX-AIDE Single ● Not married as of December 31st ● Married, but legally separated ● No related dependents NTTC Training 2013 13

14. 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 NTTC Training 2013 14

15. 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 NTTC Training 2013 15

16. 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 NTTC Training 2013 16

17. 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 NTTC Training 2013 17

18. 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 NTTC Training 2013 18

19. TAX-AIDE Head of Household ● Key advantages Higher standard deduction than Single or MFS Advantageous tax rate structure NTTC Training 2013 19

20. 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 NTTC Training 2013 20

21. TAX-AIDE Qualifying Widow(er) ● Advantages Standard Deduction – same as MFJ Use MFJ Tax Rates NTTC Training 2013 21

22. TAX-AIDE TaxWise – Main Information Sheet NTTC Training 2013 22 Enter name and SSN only if child not also dependent

23. 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 NTTC Training 2013 23

24. 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 NTTC Training 2013 24

25. 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 NTTC Training 2013 25

26. 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? NTTC Training 2013 26 MFJ or MFS (both must use same status)

27. 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 NTTC Training 2013 27

28. TAX-AIDE Filing Status NTTC Training 2013 28 Questions? Comments?