Question on IRS filing status

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kath2016
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Question on IRS filing status

Post by kath2016 » Fri Jul 29, 2016 6:09 pm

Just found out my "very" elderly mother fell prey to three years worth of an HR Block error. She is married. However, previously filed "married, filing separately" when she took her taxes to a professional CPA. This past week she received a letter from the IRS indicating income from a "Qualified Dividend" was not reported on her 2014 tax return. In reviewing her return; indeed, the dividend was left off. Therein, is when I also noticed HR Block reported her filing status as single. She will now be filing amendments for the past three years. I'd appreciate any help with what to anticipate regarding taxes owed. Her income is entirely from Qualified Dividends and Social Security. Earnings are about 275,000 annually. Is she going to be hit with a huge tax burden due to her income bracket?

pshonore
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Re: Question on IRS filing status

Post by pshonore » Fri Jul 29, 2016 6:30 pm

Block usually stands behind their returns and will pay any penalties and interest resulting from their mistake. They will also pay the additional tax resulting (up to a certain limit) if she bought their additional guarantee. (Peace of Mind). I think the Single and MFS rates aren't very different so her additional tax may not be a lot if all her income was reported. She may lose a credit but most elderly folks don't qualify for credits anyway.

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Epsilon Delta
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Re: Question on IRS filing status

Post by Epsilon Delta » Fri Jul 29, 2016 6:44 pm

Since you mention your mother but not her spouse it is possible that they are legally separate. In some cases that could allow her to file "single".

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kath2016
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Re: Question on IRS filing status

Post by kath2016 » Fri Jul 29, 2016 7:08 pm

Mother still lives with her spouse. He has continued to file "married filing separately". He continues to use a CPA who reports his return with accuracy. Marriage has been about a 15 year union. They chose to not co-mingle income.

trueblueky
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Re: Question on IRS filing status

Post by trueblueky » Fri Jul 29, 2016 7:20 pm

For a Single filer, SS is only taxed when half of it plus other income exceeds $25,000.
For MFS, 85% of SS is taxed.

At her income level, it may not make a difference.

kaneohe
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Re: Question on IRS filing status

Post by kaneohe » Fri Jul 29, 2016 7:22 pm

You might want to use a tax calculator http://www.hrblock.com/get-answers/tax- ... e/aboutYou
to estimate results. Both this one and Taxcaster suggest there is a significant difference between MFS and Single........w/ Single better.
MFS is about 30% higher so in addition to the tax on the unreported income (perhaps 18.8%) , there will be the filing status change,
and interest penalties.

kaneohe
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Re: Question on IRS filing status

Post by kaneohe » Fri Jul 29, 2016 7:36 pm

kath2016 wrote:Mother still lives with her spouse. He has continued to file "married filing separately". He continues to use a CPA who reports his return with accuracy. Marriage has been about a 15 year union. They chose to not co-mingle income.
Why not "co-mingle" income on paper only to reduce taxes (MFJ) and then split the savings proportionately?

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HueyLD
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Re: Question on IRS filing status

Post by HueyLD » Fri Jul 29, 2016 8:03 pm

kaneohe wrote:
kath2016 wrote:Mother still lives with her spouse. He has continued to file "married filing separately". He continues to use a CPA who reports his return with accuracy. Marriage has been about a 15 year union. They chose to not co-mingle income.
Why not "co-mingle" income on paper only to reduce taxes (MFJ) and then split the savings proportionately?
They may not want to be subject to "joint and several liability" from MFJ.

neilpilot
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Re: Question on IRS filing status

Post by neilpilot » Sat Jul 30, 2016 7:03 am

HueyLD wrote: They may not want to be subject to "joint and several liability" from MFJ.
Since they are married, aren't they subject regardless of their filing status?

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desertbandit442
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Re: Question on IRS filing status

Post by desertbandit442 » Sat Jul 30, 2016 8:19 am

If one spouse files married filing separately the other spouse must also. Also can't just file single when legal status is married as of December 31st of the tax year, even though some people do.

pshonore
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Re: Question on IRS filing status

Post by pshonore » Sat Jul 30, 2016 8:49 am

desertbandit442 wrote:If one spouse files married filing separately the other spouse must also. Also can't just file single when legal status is married as of December 31st of the tax year, even though some people do.
If you check Pub 17, the other spouse can file Head of Household if they meet the requirements. Almost certainly not applicable in this case however, but fairly common for folks with kids who split (and won't file MFJ for whatever reason), and where one parent stays in the house with kid(s) and the other parent (who will file MFS) is not in the house for last six months of tax year.
Last edited by pshonore on Sat Jul 30, 2016 9:04 am, edited 1 time in total.

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desertbandit442
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Re: Question on IRS filing status

Post by desertbandit442 » Sat Jul 30, 2016 9:03 am

pshonore wrote:
desertbandit442 wrote:If one spouse files married filing separately the other spouse must also. Also can't just file single when legal status is married as of December 31st of the tax year, even though some people do.
If you check Pub 17, the other spouse can file Head of Household if they meet the requirements. Almost certainly not applicable in this case however.
Yes, if you lived apart from your spouse, which didn't seem to be the case here--as you said.

spectec
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Re: Question on IRS filing status

Post by spectec » Sat Jul 30, 2016 9:15 am

I know of no circumstance under which a person who is married at the end of the year can file as Single. This is true regardless of whether the spouses live together or apart.

There are certain exceptions carved out allowing one of the parties to use Head of Household status if there are dependents and some other tests are met, but in any case it remains that Single filing status is never available to a married person.
Don't gamble; take all your savings and buy some good stock and hold it till it goes up, then sell it. If it don't go up, don't buy it. - Will Rogers

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HueyLD
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Re: Question on IRS filing status

Post by HueyLD » Sat Jul 30, 2016 9:50 am

neilpilot wrote:
HueyLD wrote: They may not want to be subject to "joint and several liability" from MFJ.
Since they are married, aren't they subject regardless of their filing status?
No, that's what MFS is for unless they live in a community property state.

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Epsilon Delta
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Re: Question on IRS filing status

Post by Epsilon Delta » Sat Jul 30, 2016 11:20 am

spectec wrote:I know of no circumstance under which a person who is married at the end of the year can file as Single. This is true regardless of whether the spouses live together or apart.

There are certain exceptions carved out allowing one of the parties to use Head of Household status if there are dependents and some other tests are met, but in any case it remains that Single filing status is never available to a married person.
You can get a decree of separate maintenance, which is not quite a divorce, but allows both parties to file as single. Technically the two parties are still married (and so can't remarry) but the IRS treats them as single. This might be done by people who have objections to divorce, or by people who split up in a country where divorce was not an option.

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desertbandit442
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Re: Question on IRS filing status

Post by desertbandit442 » Sat Jul 30, 2016 1:13 pm

kath2016 wrote:Just found out my "very" elderly mother fell prey to three years worth of an HR Block error. She is married. However, previously filed "married, filing separately" when she took her taxes to a professional CPA. This past week she received a letter from the IRS indicating income from a "Qualified Dividend" was not reported on her 2014 tax return. In reviewing her return; indeed, the dividend was left off. Therein, is when I also noticed HR Block reported her filing status as single. She will now be filing amendments for the past three years. I'd appreciate any help with what to anticipate regarding taxes owed. Her income is entirely from Qualified Dividends and Social Security. Earnings are about 275,000 annually. Is she going to be hit with a huge tax burden due to her income bracket?
Also need to know how spouse took deductions when he filed, married filing separately. If he itemized, then your mother has to itemize and can't take the standard deduction. Likewise if he took standard deduction for MFS, then your mother has to take the standard deduction for MFS.

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dodecahedron
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Re: Question on IRS filing status

Post by dodecahedron » Sat Jul 30, 2016 2:09 pm

desertbandit442 wrote: Also need to know how spouse took deductions when he filed, married filing separately. If he itemized, then your mother has to itemize and can't take the standard deduction. Likewise if he took standard deduction for MFS, then your mother has to take the standard deduction for MFS.
Actually, if he took standard deduction, she can itemize, but if she itemizes, he will then be forced to itemize (or the IRS will reduce his standard deduction to zero.)
IRS wrote: If you and your spouse file separate returns and one of you itemizes deductions, the other spouse will have a standard deduction of zero. In this situation, the other spouse should also itemize his or her deductions.
Source: IRS FAQ

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desertbandit442
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Re: Question on IRS filing status

Post by desertbandit442 » Sat Jul 30, 2016 3:57 pm

dodecahedron wrote:
desertbandit442 wrote: Also need to know how spouse took deductions when he filed, married filing separately. If he itemized, then your mother has to itemize and can't take the standard deduction. Likewise if he took standard deduction for MFS, then your mother has to take the standard deduction for MFS.
Actually, if he took standard deduction, she can itemize, but if she itemizes, he will then be forced to itemize (or the IRS will reduce his standard deduction to zero.)
IRS wrote: If you and your spouse file separate returns and one of you itemizes deductions, the other spouse will have a standard deduction of zero. In this situation, the other spouse should also itemize his or her deductions.
Source: IRS FAQ
True. Since she would be filing an amended return, I was just writing it in a way so her spouse wouldn't be forced to file an amended return.

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