I’ve received emails from accountants on how to craft responses to questions from clients. I’ve edited and condensed the questions for clarity and brevity.
Q. My elderly father came to live with us after his retirement, and we take a dependency exemption for him. But we also have to pay someone to stay with him while we are at our jobs. Do those payments entitle us to claim a credit for dependent care expenses?
A. Only if he’s disabled, which means a person who suffers from physical or mental disabilities that prevent him from dressing or feeding himself or tending to his personal hygiene without the help of someone else, or if he needs constant attention to prevent him from injuring himself or others.
To illustrate, your father otherwise enjoys good health. But he’s disabled if an injury, whether permanent or temporary, confines him to bed or to a wheelchair. Similarly, he’s disabled if he has suicidal or other dangerous tendencies that may require another person to attend him constantly.
If you claim a credit for care of a disabled person, you don’t have to submit proof of disability with your Form 1040. But to safeguard your credit, should the IRS ask questions, it’s wise to get a certification from the attending physician regarding the nature and duration of the disability.
Q. My income soared because of an unusually large bonus. What’s the form I should use to take advantage of income averaging?
A. Calculate your taxes the same as anyone else. A 1986 law change abolished averaging for nearly everybody, though there’s a limited exception for farmers.
Q. My husband died. Do I have to declare the proceeds of his life insurance as “other income” on line 21 of Form 1040?
A. No income taxes are due on insurance proceeds paid to you because of the death of the insured. Also, you’re relieved of income taxes on other kinds of property received as gifts or inheritances from your husband or anyone else. There’s no exemption from income taxes, however, for whatever interest, dividends, rents or other earning you later derive from the property.
Q. I bought a condominium apartment. Do I enjoy the same tax advantages as someone who owns a home?
A. Owners of condo or co-op apartments remain entitled to itemized deductions on Schedule A of Form 1040 for real estate taxes and mortgage interest.
Q. What if I decide to use the condo as an office for my business or rent part of it to someone else?
A. You get to write off depreciation, as well as outlays for maintenance, on Schedule C or Schedule E of Form 1040.
Q. We can lower our taxes considerably by filing a joint return. But as of now, we don’t plan to wed until November. Will it still be possible to file jointly?
A. Absolutely. It’s your marital status as of December 31 that usually determines your filing status for the entire year. Therefore, the IRS considers you a married person for the entire year. This holds true even if you’ll wed as late as December 31.
Going in the other direction, a divorce or legal separation, even one that takes place as late as December 31,bars you from filing jointly. The IRS considers you a single person for the entire year, and you must use the rates for a single person or a head of household.
Additional articles. A reminder for accountants who would welcome advice on how to alert clients to tactics that trim taxes for this year and even give a head start for next year: Delve into the archive of my articles (more than 200 and counting).
Attorney and author Julian Block is frequently quoted in the New York Times, Wall Street Journal, and the Washington Post. He has been cited as “a leading tax professional” (New York Times), an “accomplished writer on taxes...