INDIANA:How do I file Taxes

[LiviaJmz]

What is the name of your state?What is the name of your state?What is the name of your state? State: INDIANA :

Tax season is coming up and need to know Indiana Tax Law? My husband and I have been separated since February 2005. He filed for child custody and divorce in March. There has been no divorce and I have temporary child custody of my children with him having visiting rights every other week. He has child support but lately has not paid cause of no job, has been laid off and on unemployment. Also, he has been paying the house mortgage that is on his name only. The home is his temporary by court order till everything closes. I have been living with my parents since our separation with my two children. I haven't been employed much this year. We did the taxes for 2004 and he got all the refund, about 2k. This year I would like to get ahead of the game, so to speak, before he does. I would not want for him to get all the refund like before. He has not lived with the children. These laws are so confusing to me and need your help.

Do I file married jointly or married separately?
Can I claim my kids although he is paying some child support?
Can I file head of household since I am living with my parents?
(I do not pay rent or utilities with them at this time; my parents do)
Do I get , is it child credit, or something like that?

My-Pre-Thanks



I

 

[abezon]

You cannot file head of household because you did not pay over 1/2 the cost of maintaining your home. Your choices are married joint & married separate. If you file separately, you get to claim the kids, since they lived with you longer than with him. If he itemizes to claim mortgage interest, etc., you must also itemize. Since you didn't work much, you might "sell" him the exemptions. If you file jointly, be sure to get an agreement in writing as to how the refund will be split before signing any return.

Alternatively, your parents could claim the kids as their dependents.

 

[LdiJ]

You cannot file head of household because you did not pay over 1/2 the cost of maintaining your home. Your choices are married joint & married separate. If you file separately, you get to claim the kids, since they lived with you longer than with him. If he itemizes to claim mortgage interest, etc., you must also itemize. Since you didn't work much, you might "sell" him the exemptions. If you file jointly, be sure to get an agreement in writing as to how the refund will be split before signing any return.

Alternatively, your parents could claim the kids as their dependents.

I have to disagree with that answer. Since they have been separated since February she is entitled to tax treatment as if she were unmarried. Therefore, she can file single. She is not required to file married.

She can claim the children as they have primarily resided with her. Her parents cannot claim the children without the agreement of both mom AND dad, due to the tie-breaker rules. The only way the grandparents could overcome that would be if they could demonstrate that the two parents combined provided less than 50% of the children's support. (which could maybe be possible in this instance...but its not necessarily easy to do)

 

[LiviaJmz]

INDIANA: Confused Some

INDIANA here:

Thank you for your reply. I try to understand as much as possible at my young age of 21. Times are hard especially this Xmas.

Since I can't file head of household because I didn't pay half the cost to maintain it, he can file? Confusing again.

Do I file married but separated and claim kids? Can he get ahead and claim them? If I file single is that to my kids benefit?

I know he will itemize to claim mortgage interest..etc...how is it that we can both itemize? Doesn't that means filing jointly? Don't know how I could get mtg. interest claim if I do not have paperwork. What now?

How do I sell him the exemptions, don't understand this part?

For sure I would get him to sign an agreement before signing the return if we file together but I doubt it.

As for my parents, I know that they have provided food and shelter over my head along with my kids since Feb. I did not get child support money till June or July. Child support is suppose to be $127 a week but now less cause being unemployed. You say they can't claim the grandchildren and me as dependents.What proof would they need for IRS?

Forgive me for being so illerate in these laws. Your help is so much appreciated.
Thanks Again


XXXX Merry Christmas XXXX

 

[LdiJ]

INDIANA here:

Thank you for your reply. I try to understand as much as possible at my young age of 21. Times are hard especially this Xmas.

Since I can't file head of household because I didn't pay half the cost to maintain it, he can file? Confusing again.

Do I file married but separated and claim kids? Can he get ahead and claim them? If I file single is that to my kids benefit?

I know he will itemize to claim mortgage interest..etc...how is it that we can both itemize? Doesn't that means filing jointly? Don't know how I could get mtg. interest claim if I do not have paperwork. What now?

How do I sell him the exemptions, don't understand this part?

For sure I would get him to sign an agreement before signing the return if we file together but I doubt it.

As for my parents, I know that they have provided food and shelter over my head along with my kids since Feb. I did not get child support money till June or July. Child support is suppose to be $127 a week but now less cause being unemployed. You say they can't claim the grandchildren and me as dependents.What proof would they need for IRS?

Forgive me for being so illerate in these laws. Your help is so much appreciated.
Thanks Again


XXXX Merry Christmas XXXX

The fact that you can't claim head of household has nothing to do with your husband. It has to do with your parents. You live in your parent's home and therefore are not the head of the household.

You may file single, you do not have to file married. The reason why you may do this is because you have been separated from your husband for more than the last six months of the year.

Your husband cannot file head of household because the children do not live with him primarily. However, that has nothing to do with your return. Its possible that both you and your husband might claim your children. If that happens, then you will both receive your refunds, but the IRS would investigate later to see who really should get the exemptions. In this case its you because the children primarily live with you.

Your parents might be able to claim you as a dependent, if you made less than 3200.00 all year. However, they may not be able to claim your children, because if your children are the qualifying children of either you or your husband, then your parents could not claim them. The only way that your parents could claim them is if they could definitely prove that you and your husband, combined, did not provide more than 50% of the children's support.

 

[abezon]

The fact that you can't claim head of household has nothing to do with your husband. It has to do with your parents. You live in your parent's home and therefore are not the head of the household.

You may file single, you do not have to file married. The reason why you may do this is because you have been separated from your husband for more than the last six months of the year.

Your parents might be able to claim you as a dependent, if you made less than 3200.00 all year. However, they may not be able to claim your children, because if your children are the qualifying children of either you or your husband, then your parents could not claim them. The only way that your parents could claim them is if they could definitely prove that you and your husband, combined, did not provide more than 50% of the children's support.

She can't file single unless she has a decree of legal separation from a court. A de facto separation where 1 spouse leaves is not sufficient. A temporary custody & support order is not sufficient. I saw nothing in the poster's facts that indicated she is legally separated. It appears that they are simply living apart while divorcing.

Without the legal separation decree, the poster is limited to married joint or married separate filing statuses. She does not qualify to be treated as unmarried for tax purposes because she did not pay over 1/2 the cost of maintaining a home for herself & her child. Living apart for the last 6 months is one requirement, but maintaining the home for a child is the rest of the test.

The new qualifying child law states that a QC is a descendent related by blood, marriage or adoption, who is under 19 (or under 24 & a full-time student), and who lived with the taxpayer for over 6 months during the year. The same child can be a QC for lots of people when you have multiple generations living in the same home. Thus, the poster's kids are QCs for their mother AND for their grandparents.

The tie-breaker rules apply only when 2 or more taxpayers have the same QC and both claim the child on their return. In that case, the IRS will favor a parent over a non-parent. However, if everyone who shares the QC agrees who will claim the kid, the IRS will not get involved. This is why it will be vital this year for tax professionals to look at everyone's circumstances before advising their clients as to who should claim the kid(s). It may be that Mom's EIC is less than the dependency exemption/child tax credit the grandparents will get.

If a child is a QC for one or more taxpayers, that child cannot be a qualifying relative for anyone else & thus cannot be claimed as a dependent by anyone else. The only exception is the divorced/separated parents law. This law is not combined with the tie-breaker rules. The divorced parents law allows a noncustodial parent (a person for whom the child is probably NOT a QC) to claim the child as if it were a QC. The NCP can claim the kids if the parents together provided over 1/2 the kids' support (doubtful here) AND the CP signs a waiver of exemption or a court order allows the NCP to claim the kids. Absent a waiver or court order, the NCP can't claim the kids.

Furthermore, the NCP cannot prevent the CP & grandparents from deciding amongst themselves who will claim the kids. The only person who can prevent the grandparents from claiming the kids is mom. Dad has no right to claim the kids & no veto power under these circumstances.

 

[abezon]

INDIANA here:

Do I file married but separated and claim kids? Can he get ahead and claim them? If I file single is that to my kids benefit?

I know he will itemize to claim mortgage interest..etc...how is it that we can both itemize? Doesn't that means filing jointly? Don't know how I could get mtg. interest claim if I do not have paperwork. What now?

How do I sell him the exemptions, don't understand this part?
[/B]

He can try to file earlier, but the IRS will eventually change his return & make him pay back the extra money. I doubt you can file single -- see above posting.

If you file married separate, you & your husband have a choice -- you can split the standard deduction for a married joint couple (about $5,000 each), or you can split the itemized deductions. You can't claim the standard $5,000 deduction if he itemizes & claims over $5,000 of mortgage interest/taxes/etc. That would be double-dipping. If you file jointly, you get a total of $10,000 deduction. If he claims $8,000 by itemizing & you claim the $5,000 standard deduction, the total deduction is $13,000. Because of this, if he itemizes, you are required by law to itemize also.

You sell the exemptions by having him write you a check for $xxx, then you give him the signed waiver form. Make him pay cash up front; you'll never see the money otherwise.

If you file jointly, the IRS will issue the check to both of you & the bank should require both signatures to cash it. You go to the bank together & split the money at the window.

 

[LdiJ]

I am not going to argue with you about whether or not she can file single.....however I would suggest reading some case law.

However, if the grandparents claim the child, and so does dad, the IRS is going to rule in favor of dad...unless the grandparents can prove that the two parents combined did not provide at least 50% of the child's support.

 

[abezon]

No, the IRS will rule in favor of the grandparents, because the child is a qualifying child for them & only a qualifying relative for the dad. The IRS would rule for mom & both she & the grandparents claimed the kids.



Be careful which cases you read. The tax code controls, & courts do not deviate from it unless the code is unclear. The actual tax code regarding whether a married person can file as single or head of household states:


§ 7703. Determination of marital status

Release date: 2005-08-31

(a) General rule
For purposes of part V of subchapter B of chapter 1 and those provisions of this title which refer to this subsection—
(1) the determination of whether an individual is married shall be made as of the close of his taxable year; except that if his spouse dies during his taxable year such determination shall be made as of the time of such death; and
(2) an individual legally separated from his spouse under a decree of divorce or of separate maintenance shall not be considered as married.

(b) Certain married individuals living apart
For purposes of those provisions of this title which refer to this subsection, if—
(1) an individual who is married (within the meaning of subsection (a)) and who files a separate return maintains as his home a household which constitutes for more than one-half of the taxable year the principal place of abode of a child (within the meaning of section 151 (c)(3)) with respect to whom such individual is entitled to a deduction for the taxable year under section 151 (or would be so entitled but for paragraph (2) or (4) of section 152 (e)),
(2) such individual furnishes over one-half of the cost of maintaining such household during the taxable year, and
(3) during the last 6 months of the taxable year, such individual’s spouse is not a member of such household,
such individual shall not be considered as married.

 

[LdiJ]

I am sorry...but a person's minor child is NEVER their qualifying relative. They are always their qualifying child. Only adult children can end up as qualifying relatives. You are misinterpreting things.


Let me try to explain this differently. I am sitting here in my office with several other enrolled agents and myself. We all understand it as follows.

The child is dad's qualifying child. (not relative)

If both dad and the grandparents took the deduction, dad would prevail due to the tiebreaker rules. A parent trumps a grandparent.....UNLESS the grandparents can prove (and the burden of proof would be on the grandparents) that dad's somewhat sporatic child support, plus mom's part time salary, was not enough for the parents combined, to have provided 50% of the child's support. Dad does not have to provide 50% alone, the PARENTS have to provide 50% combined.

Therefore, unless both dad and mom agree not to take the exemption, it could be difficult for grandparents to prevail in this scenario. Mom can't unilaterally give the exemption to the grandparents. Therefore its not possible to state that the grandparents would prevail.

 

[abezon]

I'm sorry, but you're just plain wrong about this. If you don't want to plow through the new statute (& believe me it's even more convoluted than most tax statutes), I suggest you all consult the new Pub 501. http://www.irs.gov/publications/p501/ar02.html#d0e3290

The relationship test for a qualifying relative include immediate family. There is no requirement that the relative be *over* 18. Minors can be QRs. The reason most minors will not be a QR is because the first element of the QR test is "not a qualifying child of another taxpayer" & most minors live with family for over half the year, making them QCs of someone.


Pub 501 gives an example of how a minor child can be a QR.
"Example 4.

Your 13-year-old grandson lived with his mother for 3 months, with his uncle for 4 months, and with you for 5 months during the year. He is not your qualifying child because he does not meet the residency test. He may be your qualifying relative if the gross income test and the support test are met."



Also, the situation the poster described is listed as an example in Pub 501:
"Example 1—child lived with parent and grandparent.

You and your 3-year-old daughter Jade lived with your mother all year. You are 25 years old and earned $9,000 for the year. Jade is a qualifying child of both you and your mother because she meets the relationship, age, residency, and support tests for both you and your mother. However, only one of you can claim her. You agree to let your mother claim Jade. This means she can claim Jade as a dependent and can claim her as a qualifying child for the child tax credit, head of household filing status, credit for child and dependent care expenses, and the earned income credit, if she qualifies for each of those tax benefits."


Pub 501 also gives an example in which grandparents prevail over a noncustodial parent:
Not a Qualifying Child Test
A child is not your qualifying relative if the child is your qualifying child or the qualifying child of anyone else.

Example 2.

Your 2-year-old son lives with your parents and meets all the tests to be their qualifying child. He is not your qualifying relative.



Finally, the divorced or separated parents rules do not apply in this case! Pub 501 states:
"Children of divorced or separated parents. A child will be treated as the qualifying child of his or her noncustodial parent if all of the following apply.
The parents:
Are divorced or legally separated under a decree of divorce or separate maintenance,
Are separated under a written separation agreement, or
Lived apart at all times during the last 6 months of the year.

The child received over half of his or her support for the year from the parents.

The child is in the custody of one or both parents for more than half of the year.

A decree of divorce or separate maintenance or written separation agreement that applies to 2005 provides that the noncustodial parent can claim the child as a dependent (and, in the case of a pre-1985 agreement, the noncustodial parent provides at least $600 for the support of the child during the year) or the custodial parent signs a written declaration that he or she will not claim the child as a dependent for the year."

Here, there is no decree of divorce or separate maintainance allowing dad to claim the kids & mom has not signed any waiver. Therfore, the divorced or separated parents rule does not apply & the child cannot be treated as a QC by dad.

Now, if Mom signs a waiver, dad can treat the kid(s) as qualifying children, but until mom does so, dad can't claim the kids. If mom chooses not to sign a waiver, then the kids can only be claimed by someone for whom they are qualifying children -- mom & grandparents. If mom lets the grandparents claim the kids, there's nothing dad can do to prevent this other than go to court & ask the judge to assign him the exemptions.

You're taking the view that the divorced parents rules are mandatory. They are mandatory only when a court has entered an order stating that the NCP gets to claim the child and the parents together meet the other requirements of the rule. Where there is no court order, the NCP cannot legally claim the child as a depoendent and cannot prevent someone else from claiming their kid as a qualifying child.

 

[Snipes5]

I have been watching this thread with great interest...

Ok, just to be a little difficult...

Please explain why the child is NOT a QC for the Dad in this case.

Is it residency?

I think that is where the crux of this disagreement lies.

If the child is a QC for Mom, Dad, and Grandma, then LdiJ has a very valid point, because Dad will trump Grandma in tiebreaker.

This stuff is still giving me a headache, and the tax season hasn't even started.

Snipes

 

[abezon]

I have been watching this thread with great interest...

Ok, just to be a little difficult...

Be difficult at your own peril, my friend. I know where you live!

Please explain why the child is NOT a QC for the Dad in this case.

Is it residency?

Snipes

Yes, it's the residency requirement. A QC must live with the relative (lineal ancestor or aunt/uncle) for over 6 months. When a child does not live with the NCP for over 6 months, the child is not a QC for the NCP. The child would probably be the NCP's qualifying relative EXCEPT for the fact that the first QR test is that the kid not be a QC for anyone else & most kids are QCs for their custodial parents.

The divorced or separated parents rule allows a NCP for whom the child is not a QC to treat the child as if the child lived with him/her for over half the year, making the kid a QC of the NCP. Think of this as an exception to the 'over half the year' residency requirement.

However, the divorced/separeted parents exception also has requirements that the parents together provide over 1/2 the kid's support, and that the NCP be assigned the exemption by a court order or that the CP waive the exemption voluntarily. Without the order/waiver, the kid could only be the NCP's qualifying relative. Since the first element of the QR test is 'not a QC of anyone else', a NCP can't claim the kid at all if the kid is a QC for the CP or any other relative, such as a grandparent.

The tie-breaker rules only apply when two or more taxpayers claim the same qualifying child. They do not apply between taxpayers when one claims little Robin as a qualifying child & the other claims little Robin as a qualifying relative. The qualifying child taxpayer will always prevail over the qualifying relative taxpayer.

Thus, if the divorced/separated parents rule does not allow the NCP to treat the kid as a QC, the NCP cannot invoke the tie-breaker rules at all. In this situation, the grandparents would prevail against the NCP (QC beats QR), but not against the CP (QC-parent beats QC-non-parent).

 

[LiviaJmz]

!!WOW!!! I did all these

INDIANA

!! Wow!!...did I get you all into this mess? Sorry. I've been reading but that's it. It is more difficult then I thought. First of all I want to thank everyone for all the info I've been reading. You all must really know your profession quiet well to have all these back and forth discussions.

Anyway. for now let's forget my parents claiming my children or me. I think I will probably file MARRIED SEPARATE if that is the best thing for me and my family. I'll see when the time comes up.

I know I did not make over $5000, maybe not even $3200 this year. Again, I and my two children, 2 and 5 yrs, lived with my parents for almost total support since Febrary 2005 when my husband and I separated. I now understand that I can't claim of HEAD of HOUSEHOLD, correct?

If he itemizes , does that mean I have to do it too? I don't know what his income for the year is on mortgage interest. He'll probably do the most that he can, I'm sure.

Who can I get in contact with here locally regarding this.I do not want to mess up and get any bad consequences after wards.

Again, thanks to all GREAT jOB

 

[abezon]

Ooooooooh, tax fight.

You can talk to your local H&R Block if you like. I'd make sure to ask for an EA or senior preparer. Take a print out of these posts if you like.

If he files separate & itemizes, you must itemize too. For you, you're probably limited to charitable donations & state taxes paid.

If you earned $5000, claiming the kids will save you about $180 in taxes (10% of your taxable income with no kids). You cannot claim EIC if you file married separate.

If your parents claim the kids, they will save about $1500/kid, assuming they are in the 15% tax bracket. $1700/kid if they're in the 25% bracket. It will probably be best if they claim the kids & give you the $180 you lose by not claiming the kids. Hence the reason it is vital all 3 of you go to the same preparer together. This will allow your preparer to maximize the $$ coming into the house.