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Proof That Our Tax System is Complicated
By JLP | September 14, 2005
Following are two problems from my tax class:
The instructions are to answer “yes” or “no” as to whether the people in the questions must file an income tax return.
1. Unmarried dependent, age 16, of another taxpayer, gross income $900 ($750 wages plus $150 interest).
2. Unmarried dependent, age 16, of another taxpayer, gross income $900 ($550 wages plus $350 interest).
According to Publication 17, a dependent must file if they meet the following criteria (here’s the actual page from the IRS website):
If your parents (or someone else) can claim you as a dependent, and any of the situations below apply to you, you must file a return. (See Table 1-3 for other situations when you must file.)
In this table, earned income includes salaries, wages, tips, and professional fees. It also includes taxable scholarship and fellowship grants. (See Scholarship and Fellowship Grants in chapter 13.) Unearned income includes investment-type income such as taxable interest, ordinary dividends, and capital gain distributions. It also includes unemployment compensation, taxable social security benefits, pensions, annuities, and distributions of unearned income from a trust. Gross income is the total of your earned and unearned income.
Caution: If your gross income was $3,100 or more, you generally cannot be claimed as a dependent unless you were under age 19 or a full-time student under age 24. For details, see Gross Income Test in chapter 3.
Single dependents—Were you either age 65 or older or blind?
□ No. You must file a return if any of the following apply.
• Your unearned income was more than $800.
• Your earned income was more than $4,850.
• Your gross income was more than the larger of:
• $800, or
• Your earned income (up to $4,600) plus $250.
□ Yes. You must file a return if any of the following apply.
• Your unearned income was more than $2,000 ($3,200 if 65 or older and blind).
• Your earned income was more than $6,050 ($7,250 if 65 or older and blind).
• Your gross income was more than $1,200 ($2,400 if 65 or older and blind)
plus the larger of:
• $800, or
• Your earned income (up to $4,600) plus $250.
Married dependents—Were you either age 65 or older or blind?
□ No. You must file a return if any of the following apply.
• Your unearned income was more than $800.
• Your earned income was more than $4,850.
• Your gross income was at least $5 and your spouse files a separate return and itemizes deductions.
• Your gross income was more than the larger of:
• $800, or
• Your earned income (up to $4,600) plus $250.
□ Yes. You must file a return if any of the following apply.
• Your unearned income was more than $1,750 ($2,700 if 65 or older and blind).
• Your earned income was more than $5,800 ($6,750 if 65 or older and blind).
• Your gross income was at least $5 and your spouse files a separate return and itemizes deductions.
• Your gross income was more than $950 ($1,900 if 65 or older and blind)
plus the larger of:
• $800, or
• Your earned income (up to $4,600) plus $250.
I’ll publish the answers in the morning.
Topics: Taxes | 1 Comment »
September 16th, 2005 at 11:12 am
#1 doesn’t have to file a return – though they’ll probably want to so they can recover any tax they paid in.
#2 has to file – mainly because they have over $250 in unearned income