What are they teaching people at Jackson Hewitt? I thought H & R was bad. Okay let me explain a little bit.
A new client (referred to as Lady M), has been talking to me about her tax situation for several months and we have been discussing things trying to determine her best course of action to get her issue resolved with the IRS.
Okay.
Anyway. . .
Lady M’s husband took all their 2008 filing information down to their local Jackson Hewitt office unknown to Lady M. Not aware of everything he asked the “person” at JH
“Would it help if my wife and I filed separately”
The response from the JH representative was:
”you and your wife would have had to live apart for over six months to qualify to file married filing separately.”
Just so everyone is clear here are the rules from the IRS website from Publication 501:
(and there is more to the stupidity of the JH rep past the IRS quote)
You can choose married filing separately as your filing status if you are married. This filing status may benefit you if you want to be responsible only for your own tax or if it results in less tax than filing a joint return.
If you and your spouse do not agree to file a joint return, you have to use this filing status unless you qualify for head of household status, discussed next.
You may be able to choose head of household filing status if you live apart from your spouse, meet certain tests, and are considered unmarried (explained later, under Head of Household ). This can apply to you even if you are not divorced or legally separated. If you qualify to file as head of household, instead of as married filing separately, your tax may be lower, you may be able to claim the earned income credit and certain other credits, and your standard deduction will be higher. The head of household filing status allows you to choose the standard deduction even if your spouse chooses to itemize deductions. See Head of Household , later, for more information.
Unless you are required to file separately, you should figure your tax both ways (on a joint return and on separate returns). This way you can make sure you are using the filing status that results in the lowest combined tax. However, you will generally pay more combined tax on separate returns than you would on a joint return for the reasons listed under Special Rules, later.
If you file a separate return, you generally report only your own income, exemptions, credits, and deductions on your individual return. You can claim an exemption for your spouse if your spouse had no gross income and was not the dependent of another person. However, if your spouse had any gross income or was the dependent of someone else, you cannot claim an exemption for him or her on your separate return.
If you file as married filing separately, you can use Form 1040A or Form 1040. Select this filing status by checking the box on line 3 of either form. You also must enter your spouse’s full name in the space provided and must enter your spouse’s SSN or ITIN in the space provided unless your spouse does not have and is not required to have an SSN or ITIN. Use the Married filing separately column of the Tax Table or Section C of the Tax Computation Worksheet to figure your tax.
If you choose married filing separately as your filing status, the following special rules apply. Because of these special rules, you will usually pay more tax on a separate return than if you used another filing status that you qualify for.
1. Your tax rate generally will be higher than it would be on a joint return.
2. Your exemption amount for figuring the alternative minimum tax will be half that allowed to a joint return filer.
3. You cannot take the credit for child and dependent care expenses in most cases, and the amount that you can exclude from income under an employer’s dependent care assistance program is limited to $2,500 (instead of $5,000 if you filed a joint return).
4. You cannot take the earned income credit.
5. You cannot take the exclusion or credit for adoption expenses in most cases.
6. You cannot take the education credits (the Hope credit and the lifetime learning credit), the deduction for student loan interest, or the tuition and fees deduction.
7. You cannot exclude any interest income from qualified U.S. savings bonds that you used for higher education expenses.
8. If you lived with your spouse at any time during the tax year:
a. You cannot claim the credit for the elderly or the disabled.
b. You will have to include in income more (up to 85%) of any social security or equivalent railroad retirement benefits you received, and
c. You cannot roll over amounts from a traditional IRA into a Roth IRA.
9. The following credits and deductions are reduced at income levels that are half of those for a joint return:
a. The child tax credit,
b. The retirement savings contributions credit,
c. Itemized deductions, and
d. The deduction for personal exemptions.
10. Your capital loss deduction limit is $1,500 (instead of $3,000 if you filed a joint return).
11. If your spouse itemizes deductions, you cannot claim the standard deduction. If you can claim the standard deduction, your basic standard deduction is half the amount allowed on a joint return.
12. Your first-time homebuyer credit is limited to $3,750 (instead of $7,500 if you filed a joint return).
Okay, if you read the above, did you see where it says anything about how long you have to live apart from your spouse in order to file Married Filing Separate? No? Well because it isn’t one of the rules or stipulations. Yet the rep from JH said to a taxpayer that it was.
If I was to guess, he didn’t want to do the work necessary to determine if this filling statues would have benefited these taxpayers.
Okay for more of the stupidity:
Lady M and her husband have a unique situation, like so many had a bit of a problem with the IRS, and owe back taxes and penalties with interest. This is where I come into the picture. The idea was to reduce the penalties and interest prior to filing so that not all of their refund (if getting one) would not have been eaten up paying the back taxes.
Therefore, here is Lady’s husband down at JH who tells the rep the situation. I don’t know what JH charges for electronic filing, but the rep not only suggest doing this (a waist of the taxpayers money as there is no benefit to them), but he does it (transmits the return for Lady M and her husband) without both signatures on the necessary forms. This is a big no no for so many different reasons.
On a better note, I know how to fix all this and I will for sure get a long time client out of it.
Nevertheless, please, be smart about where you have your taxes done. This mistake holds a bill from JH for $330.00 for a simple return. Now to fix that problem there will be my bill. Don’t go to the fast food restaurant chains if you have special situations or considerations.
© 2009, Bruce Mc. All rights reserved.
