Exemptions and Dependents 101

Exemptions and Dependents 101

When preparing your federal 2009 tax return for filing, make sure to know the basic rules about exemptions and dependents. Understand what happens when someone claims you as a dependent or how exemptions affect your return. Your refund will be affected by all these conditions.

To begin with, when someone claims you as a dependent you may still need to file a return. Depending on your income, your filing status, special tax situations, or Advanced Earned Income you will need to file a return to the IRS. Check Publication 501 for exact details about … Read the rest

Exemptions and Dependents 101

When preparing your federal 2009 tax return for filing, make sure to know the basic rules about exemptions and dependents. Understand what happens when someone claims you as a dependent or how exemptions affect your return. Your refund will be affected by all these conditions.

To begin with, when someone claims you as a dependent you may still need to file a return. Depending on your income, your filing status, special tax situations, or Advanced Earned Income you will need to file a return to the IRS. Check Publication 501 for exact details about when you must file.

Exemptions are yourself and your dependents and they reduce your tax bill. The standard exemption is $3,650 but can be phased out when your income reaches certain levels. Now if you are being claimed as a dependent by someone else and you discover that you need to file a return, you cannot take the personal exemption.

Your spouse’s exemption will be claimed on your joint filing and could be claimed on your Married Filing Separate return. If your spouse did not earn any income during the tax year and is not claimed as a dependent by their parents, you can claim them on your separate return.

Other groups that cannot be claimed on your return include non US citizens, resident aliens, and residents of Mexico and Canada. The only exception is for an adopted child where you should consult your tax professional to see if they qualify.

Getting your Filing Status Correct

Getting your Filing Status Correct

Selecting the right filling status makes a great difference in your refund ultimately and is quite important. Your standard deduction and the amount of tax your owe varies based on whether you are single, married, or head of household. The IRS wants you to make the right selection and therefore is providing some useful tips.

If you have gotten married or gotten a divorce during the tax year, your filing status is your status on the last day of the year. And maybe more than one status applies to you. For instance, you are both … Read the rest

Getting your Filing Status Correct

Selecting the right filling status makes a great difference in your refund ultimately and is quite important. Your standard deduction and the amount of tax your owe varies based on whether you are single, married, or head of household. The IRS wants you to make the right selection and therefore is providing some useful tips.

If you have gotten married or gotten a divorce during the tax year, your filing status is your status on the last day of the year. And maybe more than one status applies to you. For instance, you are both single and Head of Household. Select Head of Household as the tax your owe will be less.

Married couples have the unique ability to file jointly or separately. Often this selection is made based on the overall tax consequences of the filing status. State taxes can be reduced be filing separately in states like Ohio, make this selection attractive.

If your spouse passed away during 2009, you can file jointly for this one year only with your deceased spouse. And if your spouse died during either 2007 or 2008 and you have a dependent child, filing Widow(er) with Dependent Child can improve your tax return if you meet certain conditions. (Check Publication 501)

Head of Household implies that you are single, have paid more that 50% of the cost of your home, and have a qualified dependent in the home. This status was often claimed incorrectly but has recently been looked at closely but IRS auditors for misapplication.