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Aca1 Task 2

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ACA1 Tax Treatments for Individual Returns (Task 302.2.3)

A. Recommended Tax Filing Status
From the two filing statuses that the couple can use, the most advantageous for them would be married filing jointly and not married filing separately.

A1. Explain your recommendation based on current, applicable tax laws.
The reason that using the married filing jointly status is more advantageous for the couple is that taxes will be lower than if they filed as married filing separately. Filing jointly provides more tax benefits and the tax rate is generally lower.
They will qualify for five exemptions, one for each of the dependent children, all under the age of 19 and that they provide over half the support for, and one personal exemption for each spouse.
Since the couple has calculated the rent, food and other family contribution for Spouse B’s mother support at $7,000 per year, and she contributes $7,920 per year, they cannot claim her as a dependent. This being that they did not provide over half the support for her.
In addition, filing jointly would also benefit them as they can claim credits, deductions and exclusions which they would not be able to if filing separately. The couple can claim $3,000 in capital losses as opposed to only $1,500 if filing separately, and exclude up to $500,000 on the sale of their primary residence as opposed to only $250,000 if filing separately.

A2a. Taxable and Non-Taxable Income
Most types of income are taxable, but some are not. Income can include money, property or services that you receive. (irs.gov, Taxable and Nontaxable Income, 2013)
The couple would report Spouse A’s partnership share of income of $142,000 from Fan Company A, Spouse A’s $2,000 in gross earnings from the city park district for a part-time soccer referee job, Spouses B’s $88,000, Spouse A’S dividends from Company E, and Spouse B’s net

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