The primary task for everyone in the professional tax preparation business is readiness for the variety of circumstances encountered each tax season. A situation that is likely to arise at least once every year is a taxpayer who provides care for a parent. Tax benefits are available for these individuals when they hire someone with tax preparer training to assure that certain criteria are met.
Caring for an elderly parent affects possible claim of a dependency exemption and potential filing status as head of household. The tax rates for a head of household filer are lower than the rates for single filing status. Therefore, an unmarried individual providing support for a parent may enjoy a considerable tax advantage. Filing as head of household requires a qualifying person for the taxpayer. This person is usually a child. However, tax preparer study clearly reveals that a parent is also eligible as a qualifying person - if also claimed as a dependent.
Claiming a parent as a dependent means having to consider several factors. This normally creates tax preparer jobs because individuals in such cases customarily seek professional advice. The tests for qualifying a parent as a dependent are a little more challenging than evaluating a qualifying child. Therefore, a tax preparer study course aims to simplify the determination process for claiming a parent as a dependency exemption.
The first hurdle for claiming qualifying relatives as dependents is that these persons cannot have income that exceeds the annual personal exemption - which is $3,700 for 2011 tax returns. Because only taxable income is considered, Social Security benefits of a parent are excluded.
Even when parents have little income, however, the next barrier evaluated in tax preparer work for claiming a dependent parent is the support test. A taxpayer must have provided more than half of a parent's support to make a dependency claim. Under this test, Social Security income is considered. Dependent parents cannot use their own sources of funds to pay more than half the cost of such support categories as food, lodging, clothing, medical care, and similar necessities.
A taxpayer providing room and board to a parent considers the fair market rental value of the living arrangement. One of the twists covered in registered tax return preparer school is that a parent who doesn't live with the taxpayer is still possibly a dependent.. Dependency claims are permitted for taxpayers who paid for the housing of parents - including those in assisted living or nursing home environments. Paying housing costs of a parent for the entire year maintains eligibility for head of household filing status.
When siblings share the cost of caring for their parent, any one of them who paid at least 10 percent of total support costs can claim a dependency exemption. In these cases, a tax preparation checklist includes using Form 2120 to show siblings waiving an exemption claim. Signed statements by these siblings are maintained in the records of the taxpayer claiming the parent as an exemption. Because such arrangements only apply to a single year, multiple supporting siblings can rotate the parent dependency exemption among themselves for alternating years