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standard deduction

What You Need To Know About Tax Exemptions And Dependents

By //  by Khaleef Crumbley

Some tax laws and guidelines affect every person who may have to file a return – this includes rules governing tax exemptions and dependents. Ever since I became involved in preparing taxes, I have noticed a lot of confusion regarding exemptions and dependents.

Apparently, so has the IRS. Therefore, they have released a bulletin outlining six facts regarding tax exemptions and dependents that will help you when you file a tax return:

Tax Exemptions And Dependents:

  1. Exemptions reduce your taxable income. There are two types of exemptions: personal exemptions and exemptions for dependents. For each exemption you can deduct $3,650 on your 2010 return.

  2. Your spouse is never considered your dependent. On a joint return, you may claim one exemption for yourself and one for your spouse. If you’re filing a separate return, you may claim the exemption for your spouse only if they had no gross income, are not filing a joint return, and were not the dependent of another taxpayer.

  3. Exemptions for dependents. You generally can take an exemption for each of your dependents. A dependent is your qualifying child or qualifying relative. You must list the social security number of any dependent for whom you claim an exemption.

  4. If someone else claims you as a dependent, you may still be required to file your own return. Whether you must file a return depends on several factors including the amount of your unearned, earned or gross income, your marital status, any special taxes you owe and any advance Earned Income Tax Credit payments you received. [Find out if you need to file an income tax return]

  5. If you are a dependent, you may not claim an exemption. If someone else – such as your parent – claims you as a dependent, you may not claim your personal exemption on your own return.

  6. Some people cannot be claimed as your dependent. Generally, you may not claim a married person as a dependent if they file a joint return with their spouse. Also, to claim someone as a dependent, that person must be a U.S. citizen, U.S. resident alien, U.S. national or resident of Canada or Mexico for some part of the year. There is an exception to this rule for certain adopted children. See IRS Publication 501 (opens a PDF),  Exemptions, Standard Deduction, and Filing Information for additional tests to determine who can be claimed as a dependent.

Hopefully, these guidelines have helped you to develop a better understanding of exemptions and dependents. If you need more assistance, visit out tax help page. There you will find guides, articles, and other reference material related to this and other subjects!

Once you are ready to prepare a return, be sure to contact us to set up an appointment for tax preparation. If you decide to file your own taxes, we recommend using TurboTax to do so.

Be sure you are aware of the tax filing delay, as well as the fact that the tax filing deadline has been extended this year. To get the most out of your financial situation in 2011, you should know the IRA Contribution Limits, 401k Contribution Limits, and the Income Tax Rates for 2011!

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Filed Under: Taxes Tagged With: dependents, earned income tax credit, economy of the united states, exemptions, finance, gross income, income tax in the united states, income tax returns, internal revenue service, irs tax forms, personal exemption, publication 501, standard deduction, tax, tax exemption, tax exemptions, taxable income, taxation in the united states

How Do I Know Which Filing Status To Use On My Tax Return?

By //  by Khaleef Crumbley

Since tax filing season is upon us (after waiting for the tax filing delay to be over), many people will have questions regarding which filing status to use when completing a tax return. Because of that, the IRS has given use several tips/facts that can help us to choose the proper status:

Tax Filing Status For Married Taxpayers:

  • Your marital status on the last day of the year determines your marital status for the entire year.
  • A married couple may file a joint return together. The couple’s filing status would be Married Filing Jointly.
  • A married couple may elect to file their returns separately. Each person’s filing status would generally be Married Filing Separately.

Filing Status Options For Unmarried Taxpayers:

  • “Single” generally applies to anyone who is unmarried, divorced or legally separated according to state law.
  • Head of Household generally applies to taxpayers who are unmarried. You must also have paid more than half the cost of maintaining a home for you and a qualifying person to qualify for this filing status.

Filing Status Options For Widow(er)s:

  • If your spouse died during the year and you did not remarry during 2010, you may still file a joint return with that spouse for the year of death, provided the joint return election is not revoked by a personal representative for the deceased spouse.
  • You may be able to choose Qualifying Widow(er) with Dependent Child as your filing status if your spouse died during 2008 or 2009, you have a dependent child and you meet certain other conditions.

As you can see, there are a few options available for each type of taxpayer. If you find that there is more than one option that applies to your situation, you are free to choose the one that gives you the lowest tax obligation!

If you still require more clarification, you can read more about determining your status in IRS Publication 501 (opens a PDF).

If you decide to file your own taxes, we recommend using TurboTax to do so. If you have already filed a return, you can check your tax refund status.

Be sure you are aware of the tax filing delay, as well as the fact that the tax filing deadline has been extended this year. To get the most out of your tax situation in 2011, you should know the IRA Contribution Limits, 401k Contribution Limits, and the Income Tax Rates for 2011!

photo by Arvind Balaraman

This article was featured in the following carnivals:

Tax Carnival #82: The Tax Awards

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Filed Under: Taxes Tagged With: filing, filing status, government, head of household, income tax in the united states, internal revenue service, IRS, married filing jointly, married filing separately, rate schedule, return, standard deduction, tax filing status, tax preparation, tax return, tax returns, taxation in the united states, Taxes, taxpayer, turbotax

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