From dependent credit to filing jointly, WalletPop experts take on your questions
Jan 29th 2010 12:00PM
Updated Jan 29th 2010 2:24PM
I have been filing single with one dependent. I make less than $17,000 a year. My daughter is single, 19 years old and graduated high school May of 2009. She has worked and probably made less than $10,000 last year. I really need to claim her on my taxes if I can. She lived with me for over six months last year. I am getting conflicting advice. Some say that I can claim her all year and she can claim zero on her taxes. Some say that I can only claim her for six months, but I am not sure how that works -- how does she claim herself on her taxes?
--Elizabeth Weber, 43, Marana, AZ
Answer from Ralph Hymans, CPA based in Charleston, SC
With the facts presented, you should file your return as the head of household with one dependent. Your daughter must file her own return as a single because of her income in 2009, and she cannot take an individual deduction for herself.
You are allowed to do this because she is a dependent; your daughter is under the age of 19. Filing as head of household gives you your greatest tax benefit. The fact that your daughter lived with you for less than 12 months in 2009 is not relevant to the issue. The key issues are your daughter's status as single and her age of 19.
My husband and I filed Chapter 13 to save our home, and it was approved in August 2009. Our taxes now have to be submitted through our attorney's office. Once our Chapter 13 was approved, our attorney's assistant said we could no longer owe the IRS. Well, we always owe the IRS, and we usually get a small refund from the state. Because of what the assistant said, I am having anxiety, for our tax appointment is approaching. Will there be problems if we owe the IRS because we filed Chapter 13? Are we eligible for a payment plan to IRS to pay what's owed before 2010 ends?
--Cathy Lewis, 51, Lancaster, CA
Answer from Barbara Weltman of the J.K. Lasser Institute
Filing Chapter 13 in bankruptcy means you pay the debts you owe under a repayment plan over five or more years. If you owe back taxes, some may be dischargeable (forgiven in bankruptcy); others remain an outstanding debt to be repaid. Whether you can retain a tax refund owed to you depends on whether you have any outstanding tax bill and if you've filed all your tax returns on time. If you owe taxes and/or have not filed on time, your refund may be applied toward this debt or retained by the bankruptcy trustee for other purposes. You can learn about what happens to federal income taxes in bankruptcy in IRS Publication 908, Bankruptcy Tax Guide.
If you owe taxes, you may be able to work out an arrangement to pay less than the full amount owed. This is called an offer in compromise. Find more information about this from the IRS.
I just started a new job this year working road construction. The job is 18 months at this location then will move to another. Can I deduct my commute to and from this location?
Answer from Bob Meighan, CPA and vice president of TurboTax
This is a good question and one with some ambiguity. Nevertheless, I believe your commuting costs are not deductible.
The general rule for deducting commuting costs for temporary work locations is this: If you have one or more regular work locations away from your home and you commute to a temporary work location, you can deduct the expenses of the daily round-trip transportation between your home and the temporary location, regardless of distance. However, temporary is generally defined as employment that is realistically expected to last for one year or less. In your case, you have an expectation that it will last significantly longer than a year.
There are some rules for those who have no regular place of work, but the IRS again denies the costs of commuting when the employment at the remote location exceeds one year.
However, not all is lost. If your temporary work location is beyond the general area of your regular place of work and you stay overnight, you are traveling away from home. You may have deductible travel expenses.
I have always filed married filing jointly. This year, my wife started receiving Social Security. No taxes are taken out, so this puts me in a higher bracket. I usually pretty much break even but fear this may cause me to owe money. Could we file married filing separately, and if so, what are the pitfalls or do's and don'ts when filing this way?
--Thomas Price, Bunker Hill, West VA
Answer from Scott Testa, professor of business administration at Cabrini College in Philadelphia
In some cases, filing separate returns can reduce the combined taxes. However, in most cases, filing a joint return results in lower taxes, because the rate on the combined income will be lower than the individual rates when filing separately. In addition, some credits -- such as educational, earned income, and child care -- are not available unless you file jointly. The best approach is to try doing the tax returns jointly and separately to see which results in lower taxes. You also may have additional tax preparation expense for doing two versus one tax return.