Frequently Asked Questions
Q: Should you file married or separate?
A: Whether you should file taxes as married or separately from your spouse depends on several factors, including your financial situation and the tax laws and regulations that apply to your specific situation.
Filing a joint tax return with your spouse generally provides the best tax benefits, as it often results in a lower tax liability and a larger tax refund. However, if one spouse has a high level of debt or other financial obligations, it may be beneficial to file separately in order to protect the other spouse's assets.
If you and your spouse have significantly different levels of income or deductions, filing separately may also result in a lower tax liability. However, it is important to consider that filing separately also means that you will both be responsible for paying any taxes owed, rather than having the responsibility shared.
Ultimately, the best approach for you and your spouse will depend on your specific financial situation, so it is recommended that you speak with a tax professional to determine the best course of action for your particular circumstances.
Q: How does community property, common law, and registered domestic partnership affect your federal and state tax returns?
A: Community property, common law, and registered domestic partnership can affect your federal and state tax returns in several ways:
1. Community property: Community property states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin) have different tax rules for community property, which is property acquired by either spouse during the course of the marriage and is considered to be owned equally by both spouses. In a community property state, each spouse is generally required to report half of the income from community property on their individual tax return.
2. Common law: Common law states (all states except for community property states) follow the traditional rules of property ownership, where each spouse reports their own income on their individual tax return. In a common law state, if one spouse earns income, only that spouse reports the income on their tax return.
3. Registered domestic partnership: A registered domestic partnership is a legal relationship recognized in some states between two individuals who are not married but live together. Domestic partners are treated as unmarried individuals for tax purposes, regardless of whether they are registered in a community property state or a common law state. As a result, each partner must report their own income on their individual tax return.
Q: Should I have a trust?
A: A trust can help your beneficiaries in several ways after your passing:
1. Asset protection: A trust can protect the assets you leave behind from creditors, lawsuits, and other claims. By placing your assets into a trust, you can ensure that they will be managed and distributed in accordance with your wishes, without the risk of losing them to outside claims.
2. Probate avoidance: Probate is the legal process of transferring your assets to your beneficiaries after your passing. By placing your assets into a trust, you can avoid the time and expense of probate, as the trust can be managed and distributed according to your wishes without the need for court involvement.
3. Estate tax savings: Depending on the size of your estate, placing assets into a trust can help you reduce or even eliminate estate taxes, which are taxes imposed on the transfer of assets after your death.
4. Flexibility: Trusts can be designed to meet your specific needs and goals, such as providing for a beneficiary with special needs or protecting assets for future generations. This flexibility allows you to tailor the trust to meet the unique needs of your beneficiaries, even after your passing.
5. Control: With a trust, you have control over how and when your assets will be distributed, even after your passing. You can specify conditions that must be met before distributions are made, and you can also choose a trusted individual to manage the trust and carry out your wishes.
Q: What is a complimentary partnership between spouses, fiances, love partners when it comes to knowing your assets, responsibilities (both financial and personal), and rights. Is a POD right for you?
A: A complementary partnership between spouses, fiances, or love partners refers to a relationship where both partners are aware of and understand each other's assets, responsibilities, and rights. This type of partnership is built on trust, open communication, and mutual understanding.
A Payable on Death (POD) account is a type of bank account that allows you to name one or more individuals to receive the account balance after your death. The named individuals, often referred to as beneficiaries, have no rights to the account while you are alive. The account is paid directly to the beneficiaries, bypassing the probate process.
Whether a POD account is right for you will depend on your specific circumstances and financial goals. Some of the factors to consider include your overall estate plan, the size of your estate, and whether you want to provide for your beneficiaries immediately after your passing.
It's recommended that you consult with a financial advisor or attorney to determine if a POD account is a good fit for your situation, and to make sure that it is properly set up and coordinated with your overall estate plan. Additionally, having open communication and a clear understanding of each other's assets, responsibilities, and rights with your partner can help ensure a complementary partnership and make the best decisions for your financial future.
Q: What if you do not know how to file your taxes?
A: We can prepare your taxes, and educate you on your options and assist you in future planning.
Q: What happens in widowhood with my taxes?
A: Widowhood can have an impact on your taxes in a number of ways. Here are some things to consider:
Filing status: Your filing status will change from Married Filing Jointly to either Single or Qualifying Widow(er) with Dependent Child in the year that your spouse passes away. You may be able to use the Qualifying Widow(er) filing status for two years following the year of your spouse's death, as long as you have a dependent child living with you. This status provides a higher standard deduction and lower tax rates than filing as a single taxpayer.
Income: If you receive a life insurance payout or inheritance as a result of your spouse's death, it may be subject to income tax. Social Security survivor benefits may also be taxable, depending on your overall income level.
Deductions: As a widow, you may be able to claim a deduction for your spouse's medical expenses if they were paid in the year they passed away. You may also be able to claim a deduction for any unreimbursed medical expenses you paid for your spouse in the year of their death.
Retirement accounts: If your spouse had a retirement account, such as an IRA or 401(k), and you inherit the account, you will be required to take required minimum distributions (RMDs) from the account each year, which will be subject to income tax.
Q: Where's my refund?
A: You can check the status of your tax refund on the IRS website.
Q: "Offer in Compromise" federal and state programs. Is it right for you?
A: An offer in compromise (OIC) is a program offered by the Internal Revenue Service (IRS) in the United States to help taxpayers settle their tax debt for less than the full amount owed. This program is designed for taxpayers who are unable to pay their tax debt in full or who would face financial hardship if they were required to pay the full amount owed.
To qualify for an OIC, a taxpayer must submit an application to the IRS, which includes detailed financial information about their income, expenses, assets, and liabilities. The IRS will review the application and make a determination based on the taxpayer's ability to pay their tax debt.
If the IRS accepts the OIC, the taxpayer will be allowed to settle their tax debt for less than the full amount owed. The settlement amount may be paid in a lump sum or in installments. In addition, the taxpayer may be required to agree to certain conditions, such as filing all future tax returns and paying any taxes owed on time.
It's important to note that not all taxpayers will qualify for an OIC, and the process can be complex and time-consuming. It's usually a good idea to consult with a tax professional who has experience with OICs to determine if this option is right for your specific situation.
Q: What should I bring to my tax consulting appointment?
A: Here's a list of some of the items you should consider bringing:
Personal information: Your Social Security number, your spouse's Social Security number (if applicable), and the Social Security numbers of any dependents you will be claiming on your tax return.
Income documents: Forms W-2 from your employer(s), 1099 forms reporting income from self-employment, interest, dividends, or retirement accounts, and any other documents that report income you received during the tax year.
Deduction and credit information: Documentation for any deductions you plan to claim, such as charitable contributions, medical expenses, or mortgage interest. You should also bring information about any credits you may be eligible for, such as the Earned Income Tax Credit or the Child Tax Credit.
Investment information: Statements for any investment accounts you have, such as stocks, mutual funds, or real estate.
Business documents: If you own a business, you should bring records of your income and expenses, as well as any other business-related documents.
Prior year tax return: Your prior year tax return can provide helpful information for preparing your current year return, so bring a copy if you have it.
Any other relevant documents: If you received any letters from the IRS or state tax agency, bring them to the appointment so your tax professional can help you address any issues.
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