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IRS Guidance Regarding Filing Status

Jan 9th, 2010
by Jim.
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filing statusThe IRS recently issued Tax Tip 2010-03, which provides taxpayers with guidance on determining filing status for 2009 tax returns.  For additional information, you can review IRS Publication 501.  The text of IRS Tax Tip 2010-03 follows.

Eight Facts About Filing Status

Everyone who files a federal tax return must determine which filing status applies to them. It’s important you choose your correct filing status as it determines your standard deduction, the amount of tax you owe and ultimately, any refund owed to you.

Here are eight facts about the five filing status options the IRS wants you to know in order to choose the correct filing status for your situation.

  1. Your marital status on the last day of the year determines your marital status for the entire year.
  2. If more than one filing status applies to you, choose the one that gives you the lowest tax obligation.
  3. Single filing status generally applies to anyone who is unmarried, divorced or legally separated according to state law.
  4. A married couple may file a joint return together. The couple’s filing status would be Married Filing Jointly.
  5. If your spouse died during the year and you did not remarry during 2009, you may still file a joint return with that spouse for the year of death, provided the joint return election is not revoked by a personal representative for the deceased spouse.
  6. A married couple may elect to file their returns separately. Each person’s filing status would generally be Married Filing Separately.
  7. Head of Household generally applies to taxpayers who are unmarried. You must also have paid more than half the cost of maintaining a home for you and a qualifying person to qualify for this filing status.
  8. You may be able to choose Qualifying Widow(er) with Dependent Child as your filing status if your spouse died during 2007 or 2008, you have a dependent child and you meet certain other conditions.

There’s much more information about determining your filing status in Publication 501, Exemptions, Standard Deduction, and Filing Information. Publication 501 is available on IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Real Estate Tax Standard Deduction Increase to Expire After 2009

Nov 30th, 2009
by Jim.
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bailout by woodleywonderworksYet another taxpayer-friendly provision in the tax code that will be expiring at the end of 2009 is the increase in standard deduction for real estate taxes paid.  (If you’ve been following these posts, you’ll realize that this is another “stealth increase” in taxes, beginning in 2010.)

In today’s tax law and until you’ve paid your taxes for 2009, this is how it works:  If you use the Standard Deduction – that is, if the total of your itemized deductions doesn’t exceed the Standard Deduction amounts – you are allowed to take an additional increase in your standard deduction for real estate taxes paid during the tax year.  This amount is the lesser of the actual amount that you paid in real estate taxes or $1,000 for a married couple filing jointly (MFJ).  The amount is $500 for single filers.

Beginning with tax year 2010, this increase goes away completely.  For many folks this can represent a direct increase in taxes – if you’re MFJ and in the 25% bracket, for example, this means you will pay an additional $250 in taxes.

Photo by woodleywonderworks

2009 IRA MAGI Limits for a Filing Status of Married Filing Jointly or Qualifying Widow(er)

Jan 1st, 2009
by Jim.
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joints-by-glencharnoch12009 IRA MAGI Limits for a Filing Status of Married Filing Jointly or Qualifying Widow(er)

Note: for the purposes of IRA MAGI qualification, a person filing as Married Filing Separately, who did not live with his or her spouse during the tax year, is considered Single and will use the information on that page to determine eligibility.

For a Traditional IRA (Filing Status Married Filing Jointly or Qualifying Widow(er)):

If you are not covered by a retirement plan at your job and your spouse is not covered by a retirement plan, there is no MAGI limitation on your deductible contributions.

If you are covered by a retirement plan at work, and your MAGI is $89,000 or less, there is also no limitation on your deductible contributions to a traditional IRA.

If you are covered by a retirement plan at your job and your MAGI is more than $89,000 but less than $109,000, you are entitled to a partial deduction, reduced by 25% for every dollar over the lower limit (or 30% if over age 50), and rounded up to the nearest $10. If the amount works out to less than $200, you are allowed to contribute at least $200.

If you are covered by a retirement plan at your job and your MAGI is more than $109,000, you are not entitled to deduct any of your traditional IRA contributions for tax year 2009. You are eligible to make non-deductible contributions, up the annual limit, and those contributions can benefit from the tax-free growth inherent in the IRA account.

If you are not covered by a retirement plan at your job, but your spouse IS covered by a retirement plan, and your MAGI is less than $166,000, you can deduct the full amount of your IRA contributions.

If you are not covered by a retirement plan but your spouse is, and your MAGI is greater than $166,000 but less than $176,000, you are entitled to a partial deduction, reduced by 50% for every dollar over the lower limit (or 60% if over age 50), and rounded up to the nearest $10. If the amount works out to less than $200, you are allowed to contribute at least $200.

Finally, if you are not covered by a retirement plan but your spouse is, and your MAGI is greater than $176,000, you are not entitled to deduct any of your traditional IRA contributions for tax year 2009. You are eligible to make non-deductible contributions, up the annual limit, and those contributions can benefit from the tax-free growth inherent in the IRA account.

For a Roth IRA (Filing Status of Married Filing Jointly or Qualifying Widow(er)):

If your MAGI is less than $166,000, you are eligible to contribute the entire amount to a Roth IRA.

If your MAGI is between $166,000 and $176,000, your contribution to a Roth IRA is reduced ratably by every dollar above the lower end of the range, rounded up to the nearest $10. If the amount works out to less than $200, you are allowed to contribute at least $200.

If your MAGI is $176,000 or more, you can not contribute to a Roth IRA.

2009 IRA MAGI Limits for a Filing Status of Single or Head of Household

Jan 1st, 2009
by Jim.
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03-girls-singles-by-coljay722009 IRA MAGI Limits for a Filing Status of Single or Head of Household

. Note: for the purposes of IRA MAGI qualification, a person filing as Married Filing Separately, who did not live with his or her spouse during the tax year, is considered Single and will use the information on this page to determine eligibility. .

For a Traditional IRA (Filing Status Single or Head of Household):

If you are not covered by a retirement plan at your job, there is no MAGI limitation on your deductible contributions.

If you are covered by a retirement plan at work, if your MAGI is $55,000 or less, there is also no limitation on your deductible contributions to a traditional IRA.

If you are covered by a retirement plan at your job and your MAGI is more than $55,000 but less than $65,000, you are entitled to a partial deduction, reduced by 50% for every dollar over the lower limit (or 60% if over age 50), and rounded up to the nearest $10. If the amount works out to less than $200, you are allowed to contribute at least $200.

If you are covered by a retirement plan at your job and your MAGI is more than $65,000, you are not entitled to deduct any of your traditional IRA contributions for tax year 2009. You are eligible to make non-deductible contributions, up the annual limit, and those contributions can benefit from the tax-free growth inherent in the IRA account.

For a Roth IRA (Filing Status Single or Head of Household):

If your MAGI is less than $105,000, you are eligible to contribute the entire amount to a Roth IRA.

If your MAGI is between $105,000 and $120,000, your contribution to a Roth IRA is reduced ratably by every dollar above the lower end of the range, rounded up to the nearest $10. If the amount works out to less than $200, you are allowed to contribute at least $200.

If your MAGI is $120,000 or more, you can not contribute to a Roth IRA.

2009 IRA MAGI Limits for a Filing Status of Married Filing Separately

Jan 1st, 2009
by Jim.
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separated-by-ikarl672009 IRA MAGI Limits for a Filing Status of Married Filing Separately

Note: for the purposes of IRA MAGI qualification, a person filing as Married Filing Separately, who did not live with his or her spouse during the tax year, is considered Single and will use the information on that page to determine eligibility.

For a Traditional IRA (Filing Status Married Filing Separately):

If you are not covered by a retirement plan at your job and your spouse is not covered by a retirement plan, there is no MAGI limitation on your deductible contributions.

If you are covered by a retirement plan at your job and your MAGI is less than $10,000, you are entitled to a partial deduction, reduced by 50% for every dollar (or 60% if over age 50), and rounded up to the nearest $10. If the amount works out to less than $200, you are allowed to contribute at least $200.

If you are covered by a retirement plan at your job and your MAGI is more than $10,000, you are not entitled to deduct any of your traditional IRA contributions for tax year 2009. You are eligible to make non-deductible contributions, up the annual limit, and those contributions can benefit from the tax-free growth inherent in the IRA account.

If you are not covered by a retirement plan but your spouse is, and your MAGI is less than $10,000, you are entitled to a partial deduction, reduced by 50% for every dollar over the lower limit (or 60% if over age 50), and rounded up to the nearest $10. If the amount works out to less than $200, you are allowed to contribute at least $200.

Finally, if you are not covered by a retirement plan but your spouse is, and your MAGI is greater than $10,000, you are not entitled to deduct any of your traditional IRA contributions for tax year 2009. You are eligible to make non-deductible contributions, up the annual limit, and those contributions can benefit from the tax-free growth inherent in the IRA account.

For a Roth IRA (Filing Status of Married Filing Separately):

If your MAGI is less than $10,000, your contribution to a Roth IRA is reduced ratably by every dollar, rounded up to the nearest $10. If the amount works out to less than $200, you are allowed to contribute at least $200.

If your MAGI is $10,000 or more, you can not contribute to a Roth IRA.