Tax Treatments For Individual Returns

1821 Words8 Pages
ACA1 Tax Treatments for Individual Returns (task 302.2.3) A. Recommended Tax Filing Status The IRS has five tax filing statuses for taxpayers to choose from: Single Married Filing Jointly Married Filing Separately Qualifying Widow(er) with Dependent Child Head of Household The couple should choose to file their taxes as Married Filing Jointly. Spouse A and Spouse B can claim 3 dependent exemptions for their 3 children since they are under the age of 19 (a 10 year old, a high school Junior, and an 18-year old live at home college student) and live at home and they can claim 2 personal exemptions (one for Spouse A and one for Spouse B). Spouse A and Spouse B cannot claim an exemption for Spouse B’s mother. Spouse B’s mother gives the…show more content…
The income from the sale of the couple’s home can be excluded. “Your sale qualifies for exclusion of $250,000 gain ($500.000 if married filing jointly),” (Selling Your Home, 2014). Since the couple sold their home for $430,000 they fell within the $500,000 range. If they filed Married Separately they would only be able to deduct the $250,000 of that sale’s income. A2a. Taxable and Non-Taxable Income Income is considered to be taxable and non-taxable income of the taxpayers. Spouse A and Spouse B’s taxable income would be: • $142,000 from Spouse A’s Fan Company A partnership • $96,000 from Spouse B’s Controller Job ($8,000 a month for 12 months) • $2,000 from Spouse A’s part time soccer referee job from the city park district • -$5,000 from the loss Spouse B incurred from the one day trading when Spouse B was unemployed • The quarterly dividends Spouse A receives from the investment in Company E stock from 11 years ago. Spouse A would be paid 4 quarterly dividends from the stock for this year. Non-taxable income would include: • $900 in interest payments received on the Municipal Bond, interest from municipal bonds are tax exempt ($5,000 bond multiplied by 9% interest = $450 semi-annually = $900) • $2,400 in child support received from Spouse B’s ex-husband, the child support is supposed to be used in the care of the child. ($200 a month for 12 months) • $296,000 from the sale of their home • Health care premiums that are paid are not considered
Open Document