Frequently Asked Questions
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Filing Requirements
1. I am divorced with one dependent child. This year my ex-spouse will claim the child as an exemption. Does this mean I cannot qualify as head of household?
You can file as head of household even though you do not claim your unmarried dependent child as an exemption if you meet all of the following requirements:
- You are unmarried or considered unmarried on the last day of the year.
- You paid more than half the cost of keeping up a home for the year.
- A qualifying person must live with you in the home for more than half the year (except for temporary absences such as school).
2. How do you claim a child if you agree with your ex-spouse to claim him 6 months and he claims him the other 6 months of the year.
The dependency exemption can not be split. Generally, the child is treated as the qualifying child or qualifying relative of the custodial parent. This parent is usually allowed to claim the exemption for the child if the other exemption tests are met. However, the child may be treated as the qualifying child or qualifying relative of the noncustodial parent if certain conditions are met.
The custodial parent signs a Form 8322, Release of Claim to Exemption for Child of Divorced or Separated Parents, or a substantially similar statement, and provides it to the non-custodial parent who attaches ti to his or her return. Please beware that if the custodial parent releases the exception, the custodial parent may not claim the Child Tax Credit.
3. If I claim my daughter as a dependent because she is a full-time college student, can she claim herself as a dependent when she files her return?
If you claim your daughter as a dependent on your income tax return, she cannot claim herself on her income tax return.
If an individual is filing his or her own tax return, and the individual can be claimed as a dependent on someone else's return, the individual cannot claim his or her own personal exemption. In this case, your daughter should check the box on her return indicating that someone else can claim her as a dependent.
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Itemized Deductions
1. My university required each incoming freshman to come to school with their own computer. Is thereany way to dedcut the cost of the computer from my tax liability?
The cost of a personal computer is generally a personal expense that is not deductible. However, if the school includes the cost of school-suppplied computers as part of the cost of tuition or as a fee required for attendance or enrollment, and bill students for computer software that students cannot obtain elsewhere, your expenses may quality as an expense towards either the Lifetime Learning Credit or Hope Credit.
2. My university requried each incoming freshman to come to school with their own compuater. Is there any way to deduct the cost of the computer from my tax liability?
Deductible educational expenses include amounts spent for tuition, books, supplies, laboratory fees and similoar items. They also include the cost of correspondence courses, as well as formal training and research you do as part of an educational program. Transportation and travel expenses to attend qualified eductional activities may also be deductible.
3. What are the limits for deducting interest paid on a student loan?
The maximum deductible interest on a qualified student loan is $2,500 per return.
There is no deduction if you file as married filing separately, if you are claimed as a dependent, or if the loan is from a related party or a qualified eimployer plan. There are limits based on your filing status and adjusted gross income.
4. My spouse and I are filing separate returns. How can we split our itemized deductions?
If you and your spouse file separate returns and one of you itemizes deductions, the other spouse will have a standard deduction of zero. Therefore, the other spouse should also itemize deductions.
You may be able to claim itemized deductions on a separate return for certain expenses that you paid separately or jointly with your spouse. Deductible expenses that are paid out of separate funds, such as medical expenses, are deductible by the spouse who pays out of separate funds, such as medical expenses, are deductible by the spouse who pays them. If these expenses are paid from community funds, the deduction may depend on whether or not you live in a community property state. In a community property state the deduction is, generally, dividied equally between you and your spouse.
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Business Related Tax Questions
1. Can a husband and wife run a business as a sole proprietor or do they need to be a partnership?
It is possible for either the husband or the wife to be the owner fo the sole proprietor business. When only one spouse is the owner, the other spouse can work in the business as an employee. If a married couple who file a joint tax return elect to conduct their business activities as a qualified joint venture, (a trade or business in which the husband and wife materially participate in sch venture), the spouses must divide the items of income, gain, loss, deduction, credit and expenses in accordance with their respective interests in such venture.
2. I recently formed a limited liability company (LLC). The LLC has no employees. Do I need a separate Federal Tax ID number for the LLC?
No, you will not need a separate Federal Tax ID number for the LLC if you are the sole owner of the LLC and the LLC has no employees. If you are the sole owner of the LLC and the LLC has employees, you will need to get a separate Federal Tax ID number, if you choose to have the LLC report and pay employment taxes with respect to employees of the LLC. If you are not the sole owner of the LLC, you will need a separate Federal Tax ID number for the LLC.
3. For IRS purposes, how do I classify a limited liability company? Is it a sole proprietorship, partnership or a corporation?
A limited liability company (LLC) is an entity formed under state law by filing articles of organization as an LLC. Unlike a portnership, none of the members of a LLC are personally liable for its debts. An LLC may be classified for Federal income tax purposes as if it were a sole proprietorship (referred to as an entity disregarded as separate from its owner), a partnership, or a corporation. If the LLC has only one owner, it will automatically be treated as if it were a sole proprietorship (a disregarded entity), unless an election is made for it to be treated as a corporation.
4. Must a partnership or corporation file a tax form even though it had no income for the year?
A domestic partnership must file an income tax form unless it neither receives gross income nor pays or incurs any amount treated as a deduction or credit for federal tax purposes.
A domestic corporation must file an income tax form whether it has taxable income or not.
5. What is the difference between a Form W-2 and a Form 1099-MISC?
Both of these forms are called information returns. The Form W-2 is used by employers to report wages, tips and other compensation paid to an employee. The form also reports the employee's income tax and Social Security taxes withheld and any advanced earned income credit payments. The Form W-2 is provided by the employer to the employee and the Social Security Adminstration. A Form 2099-MISC is used to report payments made in the course of a trade or business to another person or business who is not an employee. The form is required among other thngs, when payments of $10 or more in gross royalities or $600 or more in rents or compensation are paid. The form is provided by the payer to the IRS and the person or business that received the payment.
6. What is the due date for business returns?
Some forms and entities have due dates other than the well-known April 15th due date. The instructions for the each type of form used will have the appropriate due date(s) noted. In general, sole proprietor's schedule of income and expenses is attached to the tax form 1040. Therefore, the due date is the same as the tax form 1040.
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Electronic Filing
1. What is IRS e-file?
IRS e-file is an electronic tax-filing service available to individuals, partnerships and coporations. It is the fastest way to file taxes and get your refund. Many state returns (including Ohio) can be filed this way too, at the same time.
2. Why would I want to e-file?
It is fast and easy filing, which translates into faster refunds. There are no trips to the post office and standing in line, or wondering how much postage to use. No worries as to whether the IRS actually received your return. When your return is transmitted to the IRS, they send electrong proof it has been accepted usually within 48-hours.
3. Do I really get my refund faster?
If you e-file and direct deposit, you'll get your federal refund in as little as ten days, and your Ohio refund in about three days. If you file your tax return the traditional way, (i.e. paper filing via mail delivery), it will take an extra week, plus mailing time and your refund can typically take four to six weeks.
4. What if I owe taxes can I still e-file?
As long as you pay what you owe by April 15, you can file now, pay later, and beat the last-minute rush. If you are filing near the due date, you will at least have the benefit of knowing that the IRS has received your filing by providing electronic proof of acceptance, which can add some peace of mind.
5. How does the e-file process work?
I prepare your returns on the computer as I do with all tax returns. Instead of printing out a paper copy for you to mail to the IRS, we simply send your return electronically straight from our computer to theirs. Before we do that, you still need to review the return to make sure it's right.
6. What about my signature?
You sign a one-page signature document (Form 8879) which gives authorization to enter a PIN #(Personal Identification Number) on your return.
7. What if I e-file, but I need a copy of my return for the bank lender?
You will receive a paper copy of the return for your records which will look the same as the traditional returns and it will contain the same information sent to the IRS.
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