Can a person being claimed as a dependent by their parents file married-joint status if they were married as of December 31st, 2006 ? Turbo tax says yes, but they lose their 3,300 personal exemption. H&R Block says the couple has no choice but to file married-separate. I greatly appreciate the help.
You're phrasing the question backwards. Any married couple can file a joint return. The question is whether one of the spouses can be claimed as a dependent on another return if they file a joint return. The answer is "no" unless the joint return is filed solely to secure a refund and there would have been no tax liability on separate returns. See IRS Publication 501.
Block is wrong. Rather than my usual "I don't fix pipes, and I wish plumbers would stop doing tax returns" rant, I'll ask whether Block is saying they cannot file a joint return at all or that they cannot e-file because someone has already claimed one spouse as a dependent. If it's the latter, the remedy is to file their joint return on paper. If it's the former, the remedy is to avoid Block.
-- Phil Marti Clarksburg, MD
I believe the Block rep said it in a general sense. That we could not file joint if she was being claimed. Neither my wife nor myself owe. We both will receive a refund this year. She lived in Missouri for the entire year and only has Missouri income. I lived in Illinois most of the year and all of my income is in Illinois. We were married December 30th 2006 and she moved to Illinois January 5th. (She was in school all year). Her parents want the deduction. I believe I read somewhere that it is possible to file a joint return for federal and then separate state returns. She will be claimed as a dependent by her family either way. It seems the tax system is not friendly to married-separate. Our joint refund is greater even without her 3,300 personal deduction. My income was much greater than hers since she was a student the whole year. Any advice on how to make this work, or should I eat the extra refund dollars and just file separate ? Thanks for the help. Perhaps I should have majored in accounting instead of marketing ;)
It's not.
From this statement I infer that if you file a joint return her parents will not be able to claim her as a dependent. It's evident that you, at least, have some income tax liability, so not all of your withheld tax will be refunded. You and your wife control the situation, regardless of her parents' wishes. My advice would be to suck it up and file Married, Filing Separately for 2006. Future peace with the inlaws is worth more than a few bucks in the bank.
-- Phil Marti Clarksburg, MD
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