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05/24/2012 at 04:51PM PDT
Important Announcement! A planned system-wide upgrade will take place over the Memorial Day Weekend in the US (From Thurs, May 24, 2012 at 6 pm PDT thru Tues, May 29, 2012 at 5 am PDT). This includes QuickBooks, QuickBooks Payroll, Point of Sale, & Salesforce.com. This is only for US based products. This does not affect QuickBooks Online customers! During this time, you can shop, but can’t place orders online, activate products or update account info. We apologize for the inconvenience & thank you for patience while we improve our infrastructure to better serve you. International versions are unaffected. For more info, see our community discussion.
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Skylane
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03/17/11 8:59pm PDT
Viewed by asker 02/27/12 10:34pm PST

Need Sanity Check - HOH and exemptions

ProSeries

New Client -  Single woman, (medical records transcriptionist), works 3 W-2 jobs total 90K, has a 1099-Misc box 7 for 2k, lives with and supports her parents.

Parents do not collect soc sec but father has W2 for $7500+ and w2G for 700+. Both over 65.

2009 and 2010 situations are nearly identical....  Last year, preparer filed parents as MFJ, claiming NO exemptions.  He filed daughter as HOH claiming both parents. In addition, preparer allowed a $4500 auto deduction on Sch C and claimed 12% of household expense for office on Sch C (plus some other stuff)... total Sch C loss approx 8K.

My solution is that if father files MFS he will pay small tax on his earnings. Daughter can then claim HOH and mom...  only allow schedule C expenses directly attributable to the 1099 income... other unreimbursed bus exp to schedule A.

I'm going to have to explain this to TP tomorrow and just want to confirm my thinking or get other opinions....

I'd rather be flying........
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taxiowa
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03/17/11 9:10pm PDT

  Gonna take some explaining to client why refund dropped so much.  Gotta try the "IRS just got some computers this year that can track Sch. C losses back for the last 3 years" and see if she realizes the expense overstatement.  Otherwise logic is correct.  No exemption for Dad.  HoH and exemption for Mom.

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Skylane
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03/17/11 9:39pm PDT

Thanks .... I'm just going to lay it out straight...  IMO she is at risk of audit or CP2000 if computers crossmatch parents return w/ hers.

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03/17/11 9:13pm PDT

First question: why do the parents not collect SS?

I assume you have done the calculation for support.

Mom could qualify as "qualifying relative" because she doesn't have any income.

Dad makes too much money to be claimed as a dependent.

Prior Schd C should be amended to correct for personal stuff being expensed

Parents can file a joint return to claim a refund - that does not preclude daughter from taken the exemption

You might get the Pub that has the dependency test flow chart in it.  I use that sometimes and have the client follow it through. Makes them understand it better.

 

Hope this helps. If so please mark solved, if not please ask more questions. Thanks!
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Skylane
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03/17/11 9:43pm PDT

I printed pub 501 for her and will show her rules as you suggest...... parents can't file joint return if client is going to claim mom's exempaton... "joint return test' pg 10.

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03/17/11 9:37pm PDT
Best Answer - Chosen by the Community

Father filing his own tax, married separately, has no tax liability. He has a  standard deduction of $7100 and personal exemption of $3650.  Daughter could then claim mother and HOH.

When anyone doing nothing needs help, I will gladly help that person do nothing.
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03/17/11 9:47pm PDT

Thanks Charlotte,  his numbers are slightly higher this year (he apparently did better in the casino)... if there is a tax it will be less than $100... well worth being able to take mom's exemption on the daughters return.

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03/18/11 9:25am PDT
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Happy endings.... met TP... told her she might get a letter from IRS.... she pulled the letter out of her purse.... the rest was easy

I'd rather be flying........
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