Aca1 Task 2

In: Business and Management

Submitted By davidallison80
Words 2110
Pages 9
ACA1 Task 2
A: Recommendation for tax filing status
It is my recommendation that this couple file as Married Filing Jointly. The IRS allows for five different filing statuses, which are Single, Married Filing Separately, Married Filing Jointly, Head of Household or Qualifying Widow or Widower with dependent child. Since the couple is married and both are still alive they will have to file as Married Filing Separately or Married Filing Jointly. The couple has 3 children which will allow for 3 dependency exemptions and they qualify for 2 personal exemptions. The children are all under the age of 19 so they are able to claim all 3 children. They do take care of Spouse B’s mother but are not able to claim her as a dependent because Spouse B’s mother pays the couple $7,920 per year from her social security income. The couple only pays $7,000 a year for her food, rent and other expenses.
A1: Recommendation Explained
It is recommended that they file as Married Filing Jointly because this allows for more exclusions, credits and deductions which are not allowed if they would file separately. The couple would have only been able to deduct $250,000 of the income from selling their home if they would have filed separately. If the couple would have filed separately the tax rates are higher as well.

A2a. Taxable and Non-Taxable Income
The IRS says that most income that you receive is taxable and that income has to be reported on your federal income tax return. The IRS does have a list of items that are not taxable, which are * Adoption expense reimbursements for qualifying expenses * Child Support Payments * Gifts, bequests and inheritance * Workers’ Compensation benefits (with some exceptions) * Meals and lodging for the convenience of your employer * Compensatory damages awarded for physical injury or physical sickness * Welfare…...

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