Quiz Of The Week: Filing Considerations and Determination Of Tax

1. Which of the following is not considered support for the dependent support test?

Clothing

Transportation

Rental value of lodging

Value of services rendered by the taxpayer for the dependent

The correct answer is D, value of services rendered by the taxpayer for the dependent. Support includes food, shelter (the rental value of lodging), clothing, transportation, medical and dental care, education, etc. (Publication 17, Personal Exemptions and Dependents).

Explanation

The correct answer is D, value of services rendered by the taxpayer for the dependent. Support includes food, shelter (the rental value of lodging), clothing, transportation, medical and dental care, education, etc. (Publication 17, Personal Exemptions and Dependents).

2. When a spouse dies, the surviving spouse, for the year of death:

Must file a tax return using single status

May file a married filing jointly return

Must file a tax return using surviving spouse filing status

May file a married filing jointly return only if the death occurred in the last half of the year

The correct answer is B, may file a married filing jointly return. A widow(er) can file a joint return for the year his or her spouse dies if the widow(er) does not remarry. Qualifying widow(er) status is available for the two tax years following the year of death if the widow(er), who pays over 50 percent of the household expenses for her home and that of a dependent child, has not remarried during that time. Single status is available if surviving spouse, head of household, and joint filing status are not available to the widow(er) (Publication 17, Filing Status).

Explanation

The correct answer is B, may file a married filing jointly return. A widow(er) can file a joint return for the year his or her spouse dies if the widow(er) does not remarry. Qualifying widow(er) status is available for the two tax years following the year of death if the widow(er), who pays over 50 percent of the household expenses for her home and that of a dependent child, has not remarried during that time. Single status is available if surviving spouse, head of household, and joint filing status are not available to the widow(er) (Publication 17, Filing Status).

3. One of the following items is out of order in the tax formula. Which one is it?

Gross income

Itemized deductions

Deductions for AGI

AGI

The correct answer is B, itemized deductions. The correct tax formula is income from whatever source derived minus exclusions equals gross income; minus deductions for AGI equals AGI; minus deductions from AGI (the dependency exemption and the greater of itemized deductions or the standard deduction) equals taxable income; times that tax rate equals the gross tax; minus credits and payments equals the net tax payable or the refund due. The tax formula is not directly addressed in IRS publications. However, it becomes readily apparent when reviewing the format of a Form 1040 tax return.

Explanation

The correct answer is B, itemized deductions. The correct tax formula is income from whatever source derived minus exclusions equals gross income; minus deductions for AGI equals AGI; minus deductions from AGI (the dependency exemption and the greater of itemized deductions or the standard deduction) equals taxable income; times that tax rate equals the gross tax; minus credits and payments equals the net tax payable or the refund due. The tax formula is not directly addressed in IRS publications. However, it becomes readily apparent when reviewing the format of a Form 1040 tax return.

4. Married individuals who choose to file separate returns file as:

Single taxpayers

Head of household

Married filing separately

Surviving spouses

. The correct answer is C, as married filing separately. While special exceptions to this rule exist, most of the time the best answer is married filing separately. An individual must have been widowed within the last two years and have a dependent child to file as a qualifying widow(er). Head of household requires special circumstance for filing when married (see number 6 above). Married individuals who divorce during the tax year can file as single when the decree of divorce or separate maintenance is final before the end of the tax year (Publication 17, Filing Status).

Explanation

. The correct answer is C, as married filing separately. While special exceptions to this rule exist, most of the time the best answer is married filing separately. An individual must have been widowed within the last two years and have a dependent child to file as a qualifying widow(er). Head of household requires special circumstance for filing when married (see number 6 above). Married individuals who divorce during the tax year can file as single when the decree of divorce or separate maintenance is final before the end of the tax year (Publication 17, Filing Status).

5. A married person who files a separate return can claim a personal exemption for his spouse if the spouse is not the dependent of another and has:

Gross income that is less than the personal exemption

AGI that is less than the personal exemption

No gross income

No taxable income

The correct answer is C, no gross income. When separate returns are filed, a married taxpayer cannot claim an exemption for his or her spouse unless the spouse has no gross income and is not claimed as a dependent of another taxpayer (Publication 17, Filing Status).

Explanation

The correct answer is C, no gross income. When separate returns are filed, a married taxpayer cannot claim an exemption for his or her spouse unless the spouse has no gross income and is not claimed as a dependent of another taxpayer (Publication 17, Filing Status).