Kathy Bates Scary Dependents - Part Two

This is Part Two of Kathy Bates Scary Dependents Blog post.

The second issue with this commercial relates to moving expenses.  If you move and find out a house is haunted and decide to move to the house down the street that isn’t haunted, the IRS won’t be too happy if you attempt to deduct those moving expenses. These moving expenses would need to directly relate to starting a new job or job relocation.  The IRS welcomes you to deduct moving costs if you meet the following requirements:

Distance – You cannot deduct the move within the same town.  The distance between your new job and your former home must be at least 50 miles farther than your previous employer is from that home. For example, if your previous commute to work was ten miles each way, then the distance from your new job location to your old home must be at least 60 miles.

Time -  You must work full time for at least 39 weeks during the first 12-month period after your move.  Basically, you can’t move and take a year off and then start a new job, you need to have work lined up or know you will find a new job soon.

If you did not meet the time test and have already claimed the deduction in the year of the return, you must re-claim some of that deduction.  Deductible expenses include costs to move your household goods and personal affects, as well as travel and lodging to your new home.  Meals are not included.

The Skinny: Yes. Moving expenses can be deductible, but not when you are moving because of the ghosts living in your home.

If I didn't answer your question, I'd be happy to help further. I am available by appointment, phone, or email. You can reach me at neil@bleishcpa.com or 913.669.3515.

Kathy Bates Scary Dependents - Part One

Turbo Tax has been running some commercials with the general tax statements I'd like to discuss. There are two issues with this commercial and this is part one of a two part blog.

First, what is a dependent?  Most people think a dependent is only a son or daughter that lives with you, however that is not the case.   For you to receive a dependent exemption the dependent in question needs to be a qualifying child or qualifying relative.

A qualifying child needs to meet the following criteria:

  • Relation—your son, daughter, stepchild, adopted child, foster child, brother, sister, stepbrother, stepsister, or a descendant of any of them (your grandchild, niece, nephew, etc).

  • Age—the child must be under age 19 on December 31st, or under age 24 if a full-time student for at least five months of the year, or any age if permanently and totally disabled at any time during the year.

  • Support—did not pay for over half of his or her own support during the year.

  • Residency—Lives with you for more than half of the year or falls within special rules for children of parents who are divorced, separated, or living apart (not explained in this post)

  • U.S. citizen or resident—a U.S. citizen, U.S. national, or resident of the United States, Canada, or Mexico for some part of the year.

If the person does not meet the above qualifications, there is another set of qualifications they may meet that qualifies them as a dependent called the qualifying relative test

  • Relation- your child (biological or legally adopted), stepchild, eligible foster child, or a descendant of any of them (for example, your grandchild), brother, sister, half-brother, half-sister, stepbrother, or stepsister your father, mother, grandparent, or other direct ancestor, but not foster parent your stepfather or stepmother a son or daughter of your brother or sister a brother or sister of your father or mother, or your son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law.  If the person in question still isn’t on that exhaustive list, any person that lives with you can qualify meet this hurdle.

  • Gross income – dependent's Adjusted Gross Income (AGI) needs to be below $4,050 in 2016.

  • Support – you must provide over half the person’s support during the year

The Skinny: No. The creepy ghosts living in your home do not qualify as dependents. But if you are paying over half the expenses for someone living in your household and they don’t earn more than $4,050 for the year, it is possible you qualify for a deduction.

Still confused? I am available by appointment, phone, or email to help with any tax issue or questions. You can reach me at neil@bleishcpa.com or 913.669.3515.

"I completely understand my taxes!" - said no one ever.

What is a tax filing status?  Why is it important?  Everyone is entitled to what is called a standard deduction. The amount of the deduction you receive is dependent on your filing status.  It is important to note that your filing status is determined on December 31st. Here are the tax filing statuses currently in effect, along with the standard deductions that apply:

  1. Single - $6,300 deduction - Single filing status generally applies if you've never been married or are divorced or separated per state law.

  2. Married Filing Jointly - $12,600 -  If you're married, you and your spouse can file a joint tax return. This filing status is used by most married couples because it offers more tax breaks than the other married filing option (see #3) allows.  When you file jointly, both spouse’s income is included on the same return and each party can be held responsible for any tax bill that the IRS might determine is due. This situation, known as joint and several liability, applies even if only one spouse earned all the income.

  3. Married Filing Separately - $6,300 - Rather than file jointly, a married couple can choose for each spouse to file a separate tax return. This may benefit you if it results in one spouse owing less tax than if you file a joint tax return. This could be the case where one spouse had high medical expenses, but the couple's combined income set a 10 percent deduction threshold that was too high to meet.  Married couples should prepare their return both ways to see which is more beneficial to them.

  4. Head of Household - $9,300 - This filing status applies in most cases to people who are not married and take care of the needs of dependents. To qualify you must pay more than half the cost of keeping up a home for yourself and a qualifying dependent. In some cases, married persons who have not lived with their spouses may qualify for Head of Household status.

  5. Qualifying Widow/er - $12,600 - This status may apply to you if you recently lost your spouse and you have a dependent child. As noted in joint filing (#2), you can still file a joint return for the tax year in which your spouse died. After that, if you are taking care of a dependent child you might be eligible to file as a qualifying widow or widower, which provides the same benefits as the married joint filing status. The care rule is that your dependent child lived with you for the full tax year, during which you paid more than half the cost of keeping up the home. 

    And remember... you could be married for 364 days and divorced on December 31st or single for 364 days and married on December 31st.  Whatever your status is on December 31st, the IRS counts that as your status for the whole year.

If I didn't answer your question, I'd be happy to help further. I am available by appointment, phone, or email. You can reach me at neil@bleishcpa.com or 913.669.3515.