Tax question - claim fiance as dependant?

[fbrdphreak]

So I did some googling and found some answers in the affirmative, others not so clear. I know we've got some tax folks on board, so I thought I'd put this out here.

Moved to FL earlier this year for my job. Fiance went from a decent salary FT job to a bad salary PT job and has been attending school. She didn't work for several months and still isn't making much, so I've been paying nearly all of our living expenses since May and will continue to do so for the next few years.

I have a good paying FT job but also get a fair amount ($10K+ yearly) of 1099-MISC income from some contract work on the side. As I understand it, I have a pretty large tax liability due to this.

Is there any way I can claim her as a dependant, or me as head of household, or anything like that to reduce my tax liability? I have a feeling I'm going to get killed in April.

And I do plan on seeing a tax planner, I was just hoping to get an answer to this one question in the near term. TIA!

 

[FoBoT]

if you have significant 1099 income you should be making quarterly tax payments, are you doing that?
the definition of head of household is

Head of Household

You may be able to file as head of household if you meet all the following requirements.

You are unmarried or “considered unmarried” on the last day of the year.

You paid more than half the cost of keeping up a home for the year.

A “qualifying person” lived with you in the home for more than half the year (except for temporary absences, such as school). However, if the “qualifying person” is your dependent parent, he or she does not have to live with you. See Special rule for parent , later, under Qualifying Person .

If you qualify to file as head of household, your tax rate usually will be lower than the rates for single or married filing separately. You will also receive a higher standard deduction than if you file as single or married filing separately.
How to file. If you file as head of household, you can use either Form 1040A or Form 1040. Indicate your choice of this filing status by checking the box on line 4 of either form. Use the Head of a household column of the Tax Table or Section D of the Tax Computation Worksheet to figure your tax.
Considered Unmarried

To qualify for head of household status, you must be either unmarried or considered unmarried on the last day of the year.

http://www.irs.gov/publications/p501/ar02.html#en_US_publink100041781

you may want to have your tax return prepared by a tax professional for 2009 to be sure you make the right choices on this, they can prepare your returns both filing single and you filing head of household and compare your refund amounts so you know you made the right choices

good luck

 

[fbrdphreak]

Thanks for the info. Looks like she wouldn't be a "Qualifying Person" since we're not related. Booooo.

As for the 1099, I have not been making payments and have no clue about that. This is the first year I've been making this larger amount of 1099-MISC income ($10K+), so haven't been in this situation yet.

I'll get my ass over to a tax planner/accountant/whatever first thing in the new year. Unfortunately the rest of this year is shot.

 

[FoBoT]

you could read this, but at this point, if you are going to a tax professional, just be sure to ask them for a recommendation on making estimated tax payments based on how much income you expect from the 1099 business next year. good luck

http://www.irs.gov/publications/p505/ch02.html

Estimated tax is the method used to pay tax on income that is not subject to withholding. This includes income from self-employment, interest, dividends, alimony, rent, gains from the sale of assets, prizes, and awards. You also may have to pay estimated tax if the amount of income tax being withheld from your salary, pension, or other income is not enough.

Estimated tax is used to pay both income tax and self-employment tax, as well as other taxes and amounts reported on your tax return. If you do not pay enough tax, either through withholding or estimated tax, or a combination of both, you may have to pay a penalty. If you do not pay enough by the due date of each payment period (see When To Pay Estimated Tax on page 24), you may be charged a penalty even if you are due a refund when you file your tax return.

 

[fbrdphreak]

Many thanks sir!

 

[mugs]

If this is his first year doing significant contract work, then he probably will not need to do estimated payments. I believe the worksheet that calculates whether you need to make estimated payments uses the same formula that is used to determine whether you have to pay an underpayment penalty.

You don't have to pay an underpayment penalty if you meet one of two conditions:
1. Your total tax payments this year were more than your total tax liability last year
2. Your total tax payments this year were more than 90% of your total tax liability this year

If his only source of income last year was a W-2 job, and if he makes more money in his W-2 job this year, and if his withholding is close to correct on that job, then he should meet the first condition - he would have made more tax payments this year than what his tax liability was last year. If for some reason his withholdings from his W-2 job are less than his total tax liability from last year, he'd probably want to make an estimated tax payment to bring your total payments up to that level to ensure that you don't have to pay the underpayment penalty.

Hopefully you've been setting aside a significant portion of that 1099 income to pay your taxes.

 

[Via]

Don't forget to keep track of ALL of your business expenses as they pertain specifically to the 1099 income. If you have a "home office" area you use exclusively for your contracting work you can even deduct that % of mortagage/rent. Don't forget to document every trip you make for your contracting so you can deduct the mileage.

That can save you a lot of money.

 

[fbrdphreak]

Yeah April is going to suck, but just doing what I gotta do to keep things afloat. Thanks all

 

[BlahBlahYouToo]

all this BS tax shit would be unnecessary with the FAIR TAX.

 

[Mill]

Yes, if she lived with you for the entire year you do not have to be related. If you are related the residency requirement is less, but if she is a fiance then she had to have lived with you for a full year.

You cannot claim HOH because you do not have a qualifying person living with you. Even if your fiance lived the entire year with you she would not be a qualifying person because you are not related.

You have until December 31st to get married. Then you could file MFJ and have a better tax situation.

Do you own a home? How much earned income do you have? Did you go to school this year?

It might be that one of you qualify for EITC for yourself. OR, perhaps Hope, American Opportunity (http://www.irs.gov/newsroom/article/0,,id=211309,00.html) or Lifetime Learning Credit.

If you itemize (did you have any large medical expense or casualty losses?) you might be able to go higher than the standard deduction if you have mortgage interest, medical bills, or paid a lot of state income/sales tax.

Finally, you can claim moving expenses even if you do not itemize:

http://www.1040.com/site/FederalTaxes/Deductions/MovingExpenses/tabid/159/Default.aspx

Check out the new Schedule L... you can claim a higher standard deduction with it if you meet certain requirements or had certain situations happen.

http://www.irs.gov/pub/irs-pdf/f1040sl.pdf

 

[Mill]

all this BS tax shit would be unnecessary with the FAIR TAX.

OP would likely have a higher tax burden under that plan. It would not be in his interest right now.

 

[Mill]

OP, a tax planner would be a waste of your time and money (and the tax planner's time as well). You have a very uncomplicated situation and 10 minutes on the IRS's website would give you all the answers you need.

It should be obvious that if you have 10k+ of income that did not have federal income tax withheld from that you will face a tax liability. There are no tricks that can change that fact. All you can do is look for ways to reduce your taxable income (deductions if you itemize or above the line deductions and Schedule L if you take the standard deduction). I also mentioned several tax credits that may apply to you and you always have the option of getting married before Jan 1. Other than that, there is not jack shit that you can do. Nothing.

 

[BlahBlahYouToo]

OP would likely have a higher tax burden under that plan. It would not be in his interest right now.

How so?
Unless he went out and spent all of his money he made in contracting jobs, his liability would be less, would it not?

 

[JulesMaximus]

Is there any way I can claim her as a dependant?

No

Or me as head of household?

No

File a schedule C for your 1099 income and offset that income with as many legitimate expenses you may have. Keep reciepts for everything and a written log of business related mileage in case you are audited.

 

[Mill]

Is there any way I can claim her as a dependant?

No

Or me as head of household?

No

File a schedule C for your 1099 income and offset that income with as many legitimate expenses you may have. Keep reciepts for everything and a written log of business related mileage in case you are audited.

And make sure you make those logs when the travel occurs. Don't wait 2 months to do it.

 

[JulesMaximus]

Don't forget to keep track of ALL of your business expenses as they pertain specifically to the 1099 income. If you have a "home office" area you use exclusively for your contracting work you can even deduct that % of mortagage/rent. Don't forget to document every trip you make for your contracting so you can deduct the mileage.

That can save you a lot of money.

That likely won't give you much of a break on your taxes and is more likely to trigger an audit.

 

[Mill]

How so?
Unless he went out and spent all of his money he made in contracting jobs, his liability would be less, would it not?

I'm not even considering getting into a debate on the Fair Tax today.

 

[fbrdphreak]

OP, a tax planner would be a waste of your time and money (and the tax planner's time as well). You have a very uncomplicated situation and 10 minutes on the IRS's website would give you all the answers you need.

It should be obvious that if you have 10k+ of income that did not have federal income tax withheld from that you will face a tax liability. There are no tricks that can change that fact. All you can do is look for ways to reduce your taxable income (deductions if you itemize or above the line deductions and Schedule L if you take the standard deduction). I also mentioned several tax credits that may apply to you and you always have the option of getting married before Jan 1. Other than that, there is not jack shit that you can do. Nothing.

I disagree. While I realize I WILL have tax liability, there are clearly at least several areas that I need to know about in order to not only maximize my deductions, but also cover myself so I am not delinquent in some way.

Sure, I could spend a while reading the IRS website, looking up terms & definitions, reading & re-reading to make sure I understand it properly, but in the end I know very little about tax law beyond the basics and wouldn't feel entirely comfortable about it. I generally prefer to research and educate myself on various things so I can handle them myself, like computers and cars. Between the hassle, lack of time, and lack of interest in this subject, I'd rather spend a little money, and a lot less time, talking to an expert. In years past I've used TurboTax and been happy with the product, but what I really need now is an education on these new facets of my financial situation.

I would rather pay a relatively small amount to someone who knows exactly what they're talking about to educate and advise me so that from there I can be more independent in managing my taxes. And it seems to me that a tax advisor can make a little extra scratch for a relatively small amount of time educating a noob.

If anyone on here is certified and wants a little holiday spending money, feel free to PM me and we can setup maybe 30-60 minutes to talk over everything.

 

[Mill]

I disagree. While I realize I WILL have tax liability, there are clearly at least several areas that I need to know about in order to not only maximize my deductions, but also cover myself so I am not delinquent in some way.

Sure, I could spend a while reading the IRS website, looking up terms & definitions, reading & re-reading to make sure I understand it properly, but in the end I know very little about tax law beyond the basics and wouldn't feel entirely comfortable about it. I generally prefer to research and educate myself on various things so I can handle them myself, like computers and cars. Between the hassle, lack of time, and lack of interest in this subject, I'd rather spend a little money, and a lot less time, talking to an expert. In years past I've used TurboTax and been happy with the product, but what I really need now is an education on these new facets of my financial situation.

I would rather pay a relatively small amount to someone who knows exactly what they're talking about to educate and advise me so that from there I can be more independent in managing my taxes. And it seems to me that a tax advisor can make a little extra scratch for a relatively small amount of time educating a noob.

If anyone on here is certified and wants a little holiday spending money, feel free to PM me and we can setup maybe 30-60 minutes to talk over everything.

That's the thing -- I do taxes for a living (just got back from a conference on new tax law for this year) and I am telling you it would be a waste of your money. Your situation is not complicated. The Turbo Tax version that allows you to itemize is more than sufficient for what you need. I, myself, used Turbo Tax for my individual return until recently. I had a schedule A, B, D, D-1, E, etc in my individual return. I also had various 1099's (DIV, etc), 1098-T, K-1, and other things.

So, by all means pay someone to tell you something that Turbo Tax or the IRS's website can do for you. The ONLY way to reduce your tax burden is to reduce your taxable income (deductions for your income or expenses that relate to your 1099 income) or reduce your liability through credits (education credits, EITC, energy credits, etc).

Again, any tax professional worth their salt will tell you exactly what I am. You have a 1099 with income that was not taxed. Not a big deal. Use Turbo Tax. Sure, you can come pay me 200+ dollars to do your return and I will do it but I would also tell you I am charging more than you should be paying. I am fair with my clients and I am telling you the straight truth. You do not need to hire a professional with your current situation. It would be a waste of your money (even if it is deductible).

PM if you have questions. I will be more than happy to give you general advice (which I have already done in this thread). What you can do is pretty limited and I gave you pretty much everything you can do. Perhaps I am missing something. Anyone else care to chime in?

 

[Mill]

OP, are you worried about the Schedule C???

 

[Via]

That likely won't give you much of a break on your taxes and is more likely to trigger an audit.

150 sq ft office in a 1500 sq ft home allows you to deduct 10%, including utilities. If you pay $2000 a month that's a $2400 a year deduction on housing costs alone. I wouldn't call that nothing.

There's no reason to be scared of an audit if you're not cheating on your taxes.

 

[bobdole369]

Is there any way I can claim her as a dependant, or me as head of household, or anything like that to reduce my tax liability? I have a feeling I'm going to get killed in April.

Absolutely not.

Here is where you fucked yourself:

Moved to FL earlier this year for my job.

Here is why you fucked yourself:

http://www.leg.state.fl.us/STATUTES...itle=-%3E2009->Ch0798->Section 01#0798.01

Specifically 798.01 of the Florida Statutes:
Specifically 798.02 of the Florida Statutes:

You are living with a member of the opposite sex, who is not your wife.

Refer to:

http://en.wikipedia.org/wiki/Adultery
http://www.google.com/search?q=defi...s=org.mozilla:en-US:official&client=firefox-a


Whereas in most states cohabitation is perfectly fine - it is a MISDEMEANOR in Florida to live with your fiancee before marriage.

The IRS DOES allow you to claim your fiancee as a dependent in any state where the living situation is legal.

In Florida it is illegal to live with someone to whom you are not married.

Thus you may not claim your fiancee as a dependent. Get thee to the courthouse before 31 Dec and marry her to reduce your tax burden.

 

[Xcobra]

Doesnt sound too complicated. I just started a few months ago as an accountant. The only thing you have to worry about in terms of the penalty on the self-employment tax is if you had at least 100% of last year's tax liability if your AGI is less 150K i think.

Back to your question, you cannot claim her unless you get married and file Married Filing Joint. I am not sure but I read somewhere where you don't have to have a qualifying person to file HOH. I may be wrong.

 

[sjwaste]

OP, if you are dead set on paying a professional for advice, just go to a tax attorney. At least you have a fiduciary duty and corresponding professional liability to fall back upon if you get bad advice.

Don't go to a tax preparer, as the agreement you will sign with them waives most any liability that makes their fee valuable. As Mill said, in that case, you're better off doing the work yourself. What I'm adding to what he told you is that you're liable anyway without any subsequent recourse if you use a tax professional that isn't an attorney or CPA.

CPAs likely do not always have a fiduciary duty either, but it varies by state and facts of the situation.

I am not a tax attorney, so I am sorry that I really can't help. I have no clue, so do not rely on anything I would tell you as legal advice.

 

[IronWing]

If you really plan on getting married, do so before Dec 31st and you'll get to file jointly, saving more in taxes than you ever would with your fiance as a dependent (which you can't do anyway). You don't have to announce it to the world, just find two witnesses and go to a JP and tie the knot. You can still get married again with a big wedding and all the hoopla. Only do this if you really are ready to be married though as that JP marriage is as binding as any.

<=== speaking from experience. The JP ceremony turned out to more pleasant than the big one. We saved a bundle on taxes and on car insurance. Still married sixteen years later.