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					EXERCISES
•Standard    deduction
•Filing   status
•Exemptions
STANDARD DEDUCTION
EXERCISE
   All of the following factors determine the amount
    of a taxpayer's standard deduction EXCEPT
    _____.
    a.   The taxpayer's filing status
    b.   The taxpayer's gross income
    c.   Whether the taxpayer is 65 or older, or blind
    d.   Whether the taxpayer can be claimed as a
         dependent
EXERCISE
   Michael is single, 22, cannot be claimed by
    another taxpayer, and has no itemized
    deductions. What is his standard deduction for
    the tax year?
    a.   $5,700
    b.   $7,850
    c.   $3,000
EXERCISE
   Nicole is 35, has two children, and qualifies for
    the Head of Household filing status. She will not
    itemize any deductions. What is her standard
    deduction for the tax year?
    a.   $5,700
    b.   $8,400
    c.   $11,150
EXAMPLE
   Janet is single, 22, a full-time student, and not
    blind. Her parents claimed her as a dependent .
    She has no itemized deductions, so she will take
    the standard deduction. She has interest income
    of $120, taxes withheld of $35, and wages of
    $780. Her standard deduction is $1,080
    ($780+$300).
FILING STATUS
EXERCISES
   Who may choose to file under either the Married
    Filing Jointly or the Married Filing Separately
    status?
    a.   A married taxpayer whose spouse who does not have
         income
    b.   A divorced taxpayer who itemizes deductions
    c.   Taxpayers who are legally separated and share child
         custody

   Tom and Judith Ballard want to file under the
    Married Filing Separately status. If Tom wants to
    itemize his casualty losses, then _____.
    a.   They will have to file jointly
    b.   Judith must take the standard deduction
    c.   Judith must either itemize her deductions or claim a zero
         standard deduction
    d.   None of the above
EXERCISES

   Samantha is divorced and provided over half the
    cost of keeping up a home. Her daughter, Pam,
    lived with her for seven months last year.
    Samantha has signed a written declaration
    allowing her ex-husband to claim the child as a
    dependent . Can she file as Head of Household?
EXERCISES
 Peggy's only source of income is welfare, but she
  manages to pay more than half the cost of
  keeping up a home for her niece Trina, a
  qualified dependent relative. Can Peggy file as
  Head of Household?
 Alexandra's 17 yr old unemployed brother, lived
  with friends from January-February. From
  March-July, he lived with Alexandra. On August
  1, he moved back in with his friends for the rest
  of the year. Alexandra gave him money every
  month. Assuming Alexandra had no other
  dependents, can she file as Head of Household for
  2009?
EXERCISES
   Which dependent relative may qualify a taxpayer for
    head of the household filing status?
     Daughter-in-law who lives across town
     A long time family friend who lives with the taxpayer
     Father who lives in his own home and not with the
      taxpayer
     Child who lived with taxpayer 3 months of the tax year

   Debbie has a child and separated from her husband
    during the tax year. Which of the following would
    prevent Debbie from filing Head of Household?
     Debbie has maintained a separate residence from her
      husband since April of the tax year
     The qualifying child's principal home is now with Debbie
     Debbie's parents assisted with 25% of the household costs
     The child lived with Debbie beginning in mid-July of the
      tax year
EXERCISES
   For the past two years, Hank has lived with his two
    dependent children, whom he supports, and apart
    from his wife, Tonya. If Hank and Tonya file a joint
    return, can Hank file as Head of Household?
   Ginger is single and paid more than half the cost of
    keeping up her home. Her grandfather, whom she
    claimed as a dependent, lived with her all year.
    Which filing status should Ginger use?
     a. Single
     b. Head of Household
   Franklin is single and lives alone. He paid more than
    half the cost of maintaining a home for his father for
    the entire year, but he does not claim his father as a
    dependent. Which filing status should Franklin use?
EXERCISES
   John Reed's wife died during the prior tax year. Which
    questions would help determine if he can file as a
    Qualifying Widow(er) with Dependent Children?
      Did John file a separate return the prior tax year
      What is John's source of income to maintain the home?
      Will John remarry in the next two years?
      Does John maintain a home for a dependent child?


   In 2004, Claudia and her husband Ray adopted Rachel.
    Although eligible to file jointly, Claudia and Ray always
    filed separately. In January 2008, Ray died. Claudia
    continued to support Rachel and did not remarry. Which
    filing status should Claudia use for 2008
      Qualifying Widow(er) With Dependent Child
      Either Married Filing Jointly or Married Filing
        Separately
      Head of Household
      Single
EXERCISES
   Martin and Rita got divorced in December, and
    neither has remarried. Martin supported Rita all
    year. Which of the following filing statuses might
    Martin be able to use?
     Single or Married Filing Separately
     Married Filing Jointly or Married Filing Separately
     Single
   Kathy, divorced with no children, lived with her
    unemployed roommate, Sandra, for the entire
    year. Kathy had to pay more than half of the cost
    of keeping up their apartment. Which filing
    status can Kathy use?
       Head of Household
       Married Filing Separately
       Single
EXERCISES
   Jack has lived apart from his wife for several years.
    Their children live with his wife, but Jack pays more
    than half of the children's support. Which filing
    status can Jack use?
     Head of Household
     Married Filing Separately or Married Filing Jointly
     Single
   Lily left her husband in August of the tax year. She
    took all her children with her, supported them the
    entire year, and claims them as dependents. She will
    not file a joint return with her husband. Which filing
    status should Lily use?
     Head of Household
     Married Filing Jointly
     Single
     Married Filing Separately
EXEMPTIONS
EXERCISES
   John is a 23-year-old single college student. His
    mother is entitled to claim him as a dependent on
    her tax return. Is John entitled to claim himself
    as a personal exemption on his own return?
EXERCISES
    Janice is 18 years old and a full-time student.
     She comes into the Volunteer Tax Office with
     some questions about her tax return. She says
     that she is claimed as a dependent on her
     parents' tax return. Over the summer, she
     worked full time in a clothing boutique. Janice
     wants to file Form 1040EZ to report this
     income. How many exemptions will you
     indicate for Janice on her tax return?
      Zero
      One
      Two
      Three
EXERCISES



    True or False? Jennifer Rawls, an eighteen-year-
     old single mother who can be claimed as a
     dependent by her parents, can claim her infant son
     as a dependent on her own tax return.
EXAMPLE
   Ruth, who had no income, got married in
    November of the tax year. Ruth's husband had
    $16,700 income and they claimed two personal
    exemptions on their return. Ruth's father
    supported her and paid for the wedding, but he
    cannot claim her as a dependent because she is
    filing a joint return with her husband. While they
    are filing a return just to claim a refund of taxes
    withheld, Ruth's husband would have tax
    liability if he filed a separate return.
EXERCISES
   Bob is 22 and a full-time student for the entire
    year. During the tax year, he lived at home with
    his parents for six months and lived in the dorm
    for the remaining six months. During the tax
    year, he worked part-time and earned $6,000, but
    that income did not amount to half of his total
    support. Does Bob pass the tests for a qualifying
    child
EXAMPLES
  Joe is 65 years old and lives with his son and
   daughter-in-law. In 2009, Joe's taxable pension
   income was $4,700. Can they claim Joe for
   dependency exemption?
  Sherrie's father received $2,700 from social
   security and investments, but he put $300 of it
   in a savings account and spent only $2,400 for
   his own support. Sherrie spent $2,600 of her
   income for his support. Is he a qualifying
   relative?
  What if all the facts were the same as in this
   example, except that Sherrie's father had spent
   all his income on himself?
EXAMPLES
   Jessica has been raising her son, Jim, alone since
    her husband died 5 years ago. In 2009, Jessica
    earned $25,000. Jim, who lives with Jessica, is
    single, and does not provide more than half of his
    own support. He was 19 years old on September
    17, 2009. Jim is not a full-time student and is not
    disabled. He worked for a short time at a fast food
    restaurant and made about $1,800. Jessica and
    Jim are both U.S. citizens and have SSNs. Is Jim
    the qualifying child or qualifying relative of
    Jessica?
       Jim meets the requirements for being Jessica's
        qualifying relative.
       Jim is Jessica’s qualifying child since he is her son.
EXERCISES

 Doris, who is 8 years old, has a small role in a
  television series. She made $60,000 during the tax
  year, but her parents put all the money in a trust
  fund to pay for college. She lived at home all year.
  Does she meet the support test?
 What if Doris, an 8-year-old actress, earned
  $60,000 during the tax year, but her parents used
  the money to defray household expenses: would
  she meet the support test?
EXAMPLE

    Bob and Judy live together, they are not married.
     They have one child together, Katie, who is 4 years
     old. Bob, Judy, and Katie are U.S. citizens and
     have SSNs. Katie did not provide her own support
     and lived with her parents all year. Bob’s AGI is
     $18,500 and Judy’s AGI is $14,000. Neither Bob
     nor Judy can be claimed as a dependent by any
     other taxpayer. They did not have any investment
     income. Bob pays for Katie's daycare so he and
     Judy can work. Bob pays over half of the costs of
     maintaining their home. Who may claim Katie as
     their qualifying child, and what can be claimed on
     the return.
EXAMPLE - OPTIONS
  Only Bob can claim Katie as a dependent.
  Only Judy can claim Katie as a dependent.
  Katie is a qualifying child for both Bob and Judy.
   They agree that Bob should claim Katie. He can
   claim the Head of Household filing status, the
   dependency exemption, the Child Tax Credit, the
   child and dependent care credit, and the Earned
   Income credit.
  Judy can claim the dependency exemption, Child Tax
   Credit, and Earned Income Credit for Katie, and Bob
   can claim the Head of Household filing status and the
   dependent care credit.
EXAMPLE

    Mary and Ralph were divorced in 2003. They have
     one child together, Amy, who lives with Mary. All
     are U.S. citizens and have SSNs. Mary and Ralph
     provide more than half of Amy’s support. Mary’s
     AGI is $31,000 and Ralph’s AGI is $39,000. Amy is
     12 years old. The divorce decree does not state who
     can claim the child. Who may claim Amy as a
     qualifying child along with the tax benefits?
EXAMPLE - OPTIONS
  Ralph can claim Amy as a dependent and the tax
   benefits.
  Ralph and Mary must choose who will claim Amy as
   a dependent and any other benefits.
  Mary signed Form 8332 to give the dependency
   exemption to Ralph. He can claim Amy as a
   dependent and he can claim the child tax credit.
   Mary can use the Head of Household filing status,
   and she can claim the Earned Income Credit and the
   child and dependent care credit as long as she meets
   the requirements for those specific benefits.
  Neither Ralph nor Mary can claim Amy as a
   dependent or any of the other benefits.
EXAMPLE

    Todd has lived all year with his girlfriend, Eva,
     and her two children, in his home. This
     cohabitation does not violate local laws. Eva is not
     required to file, and does not file, a tax return.
     Todd has provided more than half of their support
     for the entire year. Eva and her two children are
     Todd's qualifying relatives because they meet the
     member of household or relationship test, gross
     income test, and support test.
EXAMPLE 2

  What if all the facts were the same as in the
  previous example, except that Eva is required to
  file a tax return? She still meets all the tests to be
  Todd's qualifying relative; however, since Eva has
  a filing requirement—and her children meet the
  qualifying child tests to be her dependents—Todd
  could not claim the children as qualifying
  relatives. He could still claim Eva as a dependent,
  but then Eva could not claim herself or any
  dependents.
EXERCISE

  Since late in 2008, Sally has been supporting her
   friend, Ann, as well as Ann's young son, Bobby.
   Ann and Bobby lived with Sally all of 2008 and
   meet all the tests to be Sally's qualifying relatives.
   Ann worked part-time and made $3,100 in wages
   during 2009. Ann files a return only to have her
   withholding refunded. She does not claim her own
   exemption. Who can Sally claim as dependents?
  What if all the facts were the same as in the
   previous example, except that Ann also claims the
   Earned Income Credit?
EXERCISE - ANSWER
 Because Ann did not file her return simply to get
  a refund of her withholding, Bobby must now be
  considered Ann's qualifying child. Therefore,
  Sally cannot claim Bobby as a dependent, and
  Ann cannot claim Bobby as a dependent either,
  because she is a dependent herself.
 Ann can, however, use Bobby as a qualifying
  child for the Earned Income Credit (Earned
  Income Credit is covered in the Earned Income
  Credit lesson).

				
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