Assignment 2: Case Study
September 10, 2014
TAX MEMORANDUM
FROM:
SUBJECT: Brett and Kathy Engagement: Issues
Brett and Kathy’s filing status used to be married, filing jointly. Although both of Brett and Kathy want to get divorce, they have not divorced considering financial pressure and their three children. From 2014, Brett begins to contribute more than Kathy do to support the home and their children. Also they want to file income tax returns separately. Thus Brett believes he can claim head of household filing status.
Issues: Is Brett qualified as head of household? Can Brett and Kathy file tax income separately? What is the most appropriate filing status for Brett and Kathy?
Under code section §2(b)(1), a taxpayer is eligible for head of a household filing status “if, and only if, such individual is not married at the close of his taxable year”. Code section §2(b)(2)(A) provides that an individual who is not married must get a decree of divorce or separate maintenance and separate from his or her spouse. Based on the statement of …show more content…
If married person chooses to file separately, each person has to report his or her own income, exemptions, deductions, and credits and each must use tax rate table scheduled for taxpayers filing separately. Brett and Kathy are still married, so they can choose to file income tax separately.
Reg §1.3-1 provides that the when computing income tax, married persons filing separate and filing joint use different tax tables. From the perspective of standard deduction, in 2014, married persons filing joint can deduct $12,400, but married persons filing separate can only deduct $6,200. That is to say, if Brett and Kathy decide to change from married filing jointly status to married filing separately, they will lose $6,200 deduction per person per year. So married filing jointly is the most appreciate status for Brett and
TAX MEMORANDUM
FROM:
SUBJECT: Brett and Kathy Engagement: Issues
Brett and Kathy’s filing status used to be married, filing jointly. Although both of Brett and Kathy want to get divorce, they have not divorced considering financial pressure and their three children. From 2014, Brett begins to contribute more than Kathy do to support the home and their children. Also they want to file income tax returns separately. Thus Brett believes he can claim head of household filing status.
Issues: Is Brett qualified as head of household? Can Brett and Kathy file tax income separately? What is the most appropriate filing status for Brett and Kathy?
Under code section §2(b)(1), a taxpayer is eligible for head of a household filing status “if, and only if, such individual is not married at the close of his taxable year”. Code section §2(b)(2)(A) provides that an individual who is not married must get a decree of divorce or separate maintenance and separate from his or her spouse. Based on the statement of …show more content…
If married person chooses to file separately, each person has to report his or her own income, exemptions, deductions, and credits and each must use tax rate table scheduled for taxpayers filing separately. Brett and Kathy are still married, so they can choose to file income tax separately.
Reg §1.3-1 provides that the when computing income tax, married persons filing separate and filing joint use different tax tables. From the perspective of standard deduction, in 2014, married persons filing joint can deduct $12,400, but married persons filing separate can only deduct $6,200. That is to say, if Brett and Kathy decide to change from married filing jointly status to married filing separately, they will lose $6,200 deduction per person per year. So married filing jointly is the most appreciate status for Brett and