Exemptions Discussed by Tax Attorney

Each individual with taxable income must file an individual income tax return.  With all of the forms and schedules it is likely that many people’s tax Denver Tax Attorney Denver Tax Lawyerreturns will differ.  One common issue or thread when taxpayer’s prepare their tax return is the issue of dependents and exemptions.  The article below has been drafted by a Denver tax attorney at The McGuire Law Firm to discuss dependent and exemption issues.  We hope you find this article informative as we enter the 2013 tax season!

Exemptions Reduce Income: You may have two types of exemptions.  There is the personal exemption and the exemption for dependents.  In 2013, you can deduct up to $3,900 per exemption.  Thus, the exemption reduces your taxable income and the amount of federal income tax you must pay.  Take advantage of these exemptions on your 1040 individual income tax return!

Personal Exemption: You can generally claim an exemption for yourself and if you are married and filing joint, you can claim an exemption for your spouse.  If you are married, and filing married filing separately, you can claim an exemption for your spouse only if your spouse had no other income during the year, is not filing a tax return and was not the dependent of any other taxpayer.

Exemption for Dependents: Generally you will also claim an exemption for each dependent.  A dependent is a child or relative that meets certain tests or thresholds for claiming them as a dependent.  You would not claim your spouse as a dependent, but as stated above, you can claim an exemption for your spouse.  For more information, you can review Internal Revenue Service Publication 501.

Your Dependents May Have to File a Tax Return:  A individual you claim as a dependent may have to file a tax return.  This will depend upon their income and marital status.  If you can claim an individual as a dependent on your tax return, that individual cannot take the personal exemption on their tax return.  This tax law applies even if you do not claim the individual as a dependent.  The issue is the right to claim the individual as a dependent on your tax return prohibits the individual from claiming the personal exemption.

Exemptions May be Phased Out: The exemption amount of $3,900 may be phased out depending upon your income.  This means that at certain income levels, the $3,900 exemption amount may be reduced (or even eliminated) so that the exemption is less and less.

It is important to take proper exemptions on your 1040 individual income tax return.  If improper exemptions are taken, you may be audited by the IRS and receive a notice of deficiency.  In addition to the additional tax, the IRS could assess you penalties and interest on the past due tax amount.  You can discuss exemption issues with a Denver tax attorney at The McGuire Law Firm.

Contact The McGuire Law Firm to discuss your tax questions and issues with a tax attorney.  A free consultation is offered to all potential clients with law offices in Denver and Golden Colorado.