Total taxable income, age, and marital status determine whether or not you must file a tax return for 1976. The gross income minimums for filing which were originally increased for 1975 were extended permanently by the Tax Reform Act of 1976.
However, these minimums were established by the Revenue Adjustment Act of 1975 to apply for only the last six months of that year. Since they apply for the full year 1976, the annual income levels at which you must file are effectively higher than for 1975.
The new minimums for the various filing situations, and the normal number of $750 exemptions which apply in each case, are shown in the table accompanying this article.
You should file a return, even if you had no tax liability and paid no taxes during the year, if you are entitled to a "refund" check as a result of the earned income credit. This credit, available to certain taxpayers with annual income of less than $8,000, is explained in more detail in a letter article.
TAX TIP: If you are not required to file under any of the applicable rules, but income tax was withheld from your pay during 1976, you should file a return to claim a refund of the amount withheld.
Any taxpayer may use IRS Form 1040, the so-called "long form." You may use the "shot form" 1040A regardless of the amount of your income if that income consists only of wages or other employee compensation and $400 or less of either interest or dividends, and if you take the standard deduction.
You must use Form 1040 if you received more than $400 in interest or dividends; have income from rental property, a business, estate, or trust; itemize deductions; claim moving expenses, employee business expenses, the child care credit, the new credit for the elderly, or an IRA or Keogh plan deduction; or compute your tax by income-averaging.
If you were married on Dec. 31, 1976, you are considered by the Internal Revenue Service to have been married for the entire year. If you were unmarried (including those divorced or legally separated) on that date, consider yourself single for the year.
Most couples will pay less tax if they file a joint return. You may elect to file separate returns even if you are married; but in only a few cases - usually when both husband and wife have substantial independent incomes - will this be the better method.
TAX TIP: If one spouse had major medical expenses during 1976, check separate filing for possible tax savings.
If you do file separately, you must both use the same method for computin the tax. That is, if one itemizes deductions, the other must also itemize and may not take the standard deduction.
If you were married but living apart from your husband or wife during the entire year, you may file as a single individual if you meet bot of these tests:
(1) You paid more than half the cost of maintaining your home during 1976; and
(2) Your home was the principal home of your dependent child or stepchild for more than six months of the year.
If your husband or wife died during 1976 and you had not remarried by Dec. 31, you may file a joint return and claim both your personal exemption and the exemption for your deceased spouse. If you are due a refund, you must also file Form 1310 with your tax return to establish your right as the surviving spouse to the refund.
If your husband or wife died during 1974 or 1975, you are eligible to use the joint return tax rate for 1976 if you meet all three of these tests:
(1) You had not remarried by Dec. 31, 1976;
(2) You were eligible to file a joint return in the year of your spouse's death, whether you actually filed that way or not; and
(3) Your home was the main home during 1976 of a child or stepchild whom you claim as a dependent.
If you qualify, however, you may not claim the personal exemption for your deceased husband or wife, even though you are using the joint return tax rate. This personal exemption can only be taken if death occurred in 1976.
TAX TIP: If an executor or administrator has been appointed for the estate, he or she may have filed (or may intend to file) a separate "final return." If the executor is not himself a professional, you are likely to need help in this situation.
If you were single on Dec. 31, you may be eligible to file as "head of a household" if you meet any one of the following tests:
You paid more than half the expense of maintaining your home which was also the principal home all year or your unmarried child, stepchild, foster child, or grandchild, whether or not the child qualifies as your dependent.
You paid more than half the cost of upkeep for your home which was also the principal home of any other relative you claim as a dependent (except a dependent under a mutual support agreement).
You paid more than half the cost of maintaining a home which was the principal home of your dependent mother or father, even if you did not live in it yourself.
A taxpayer filing as head of a household does not get any extra personal exemptions, but does get the benefit of a lower tax rate than other single taxpayers.
In addition to the personal exemptions shown in the table, a person who is legally blind may claim an additional $750 exemption regardless of age or filing status. Like the exemption for age 65, this extra exemption is available only to the filing taxpayer(s). It may not be claimed for dependents.
The IRS prescribes five tests to determine whether a person qualifies for a dependent exemption on your tax return.
CITIZENSHIP OR RESIDENCY TEST. A dependent must be either a U.S. citizen or have resided in the United States, Canada, or Mexico during 1976. (This test is waived for an alien child adopted by and living with a U.S. citizen in a foreign country.)
RELATIONSHIP OR MEMBER OF HOUSEHOLD TEST. A relative as defined in the IRS instruction booklet need not have lived in your home to qualify as a dependent. If you file a joint return, a dependent meets this test if related to either spouse.
TAX TIP: Once this qualifying relationship has been established it does not end because of death or divorce. Thus if your husband or wife has died, you may continue to claim your former mother-in-law as a dependent if she meets the other tests - even if you have remarried.
Dependents who are not related must have lived in your home for the entire year. But a student is considered to have lived with you even though he was away at school much of the year, if he lived in your home when not at school. Similarly, hospitalization is not a disqualifying absence from the home.
INCOME TEST. In order to qualify, your dependent must not have received $750 or more in income during 1976 - but you need count only income which is subject to tax. Do not include, for example, bona fide gifts received by the dependent; social security benefit payments; interest on tax exempt securities; or scholarship payments.
This income test is waived for a child who was under the age of 19 on Dec. 31 or who was a full-time student regardless of age. (For this test, a student is defined as one who was enrolled full-time at a regular educational institution during any five months of the year.)
You may claim a dependency exemption for such a child even if he files a tax return on which he claims his own personal exemption, if he otherwise qualifies.
TAX TIP: There are limitations on the deductions that can be claimed on the tax return of a child who is eligible to be claimed as a dependent on the tax return of another. See the IRS instruction booklet for the applicable rules.
SUPPORT TEST. In order to claim an exemption for a dependent, you must have provided more than half of his support during 1976. Unlike the income test, all income of the dependent, whether taxable or not, must be considered in determining how much the dependent contributed to his own support.
However, only as much of that income as was actually spent by the dependent on items of support - that is, necessary living expenses - need be included in the calculation. For example, if your child used $400 of his income to buy a car, do not include that $400 as self-support, since a car is not considered essential.
Scholarship payments received (and spent for that purpose) should not be counted. Any money your dependent paid for life insurance premiums, income tax payments, or social security contributions should also be excluded.
Similarly, do not count as support any money which your dependent deposited in a bank account, unless the withdrew it later in 1976 and spent it on his own support. The amount of income during the year is not the criterion for this test, but rather the amount actually spent by the dependent from his own funds for his own support.
You should include in your contributions to the support of the dependent the cost of such living expenses as lodging, food, clothing, medical care, and schooling.
If the dependent lived in your home, count the fair market value or food and lodging provided. You may count the value of lodging (but not food) for the full year even if the dependent was at school part of the time, if the lodging was available to him whenever he came home.
If you provided separate living quarters, such as an apartment for a dependent parent, count the cost to you of that housing.
TAX TIP: The IRS ruled in 1976 that the father of a bride could include as support the money spent on her wedding.
JOINT RETURN TEST. Normally a married person who files a joint return with his or her spouse may not be claimed as a dependent by another taxpayer. However, you may claim an exemption for a married dependent who meets the other tests if the dependent's spouse files a separate return and does not claim an exemption for your dependent.
TAX TIP: The filing of a joint return will not always disqualify a married dependent. If neither your dependent nor the spouse is required to file, but they file a joint return solely to obtain a a refund of taxes withheld, you may still claim the exemption.
Several taxpayers may jointly support a dependent (such as children caring for a dependent parent) with no single person contributing more than half of the total support.
If together you contributed more than half the support and the dependent otherwise qualifies, one of you may claim the exemption (using from 2120) if you provided at least 10 per cent of the total support and the others agree to waive their claims.
Each taxpayer may earmark one dollar from his income tax payment to help provide financing for the 1980 presidential election campaign. The payment will be assigned to a general fund, to be made available then to qualifying candidates for the offices of president and vice president.
This is not an additional tax on your income.It requires no payment of any kind on your part, nor will it reduce any refund you have coming. You simply are directing the federal government to set aside one dollar of your regular income tax payment for the campaign fund.
FILING MINIMUMS(TABLE) If you are:(COLUMN)File only if(COLUMN)And take - (COLUMN)your income(COLUMN) personal (COLUMN)is at least:*(COLUMN)exemptions: Single, under 65(COLUMN)$2,450(COLUMN)1 Single, 65 or older(COLUMN) 3,200(COLUMN)2 Married, filing jointly,(COLUMN)3,600(COLUMN)2 both under 65(COLUMN)(COLUMN) Married, filing jointly,(COLUMN) 4,350(COLUMN)3 one 65 or older(COLUMN)(COLUMN) Married, filing jointly,(COLUMN) 5,100(COLUMN)4 both 65 or older(COLUMN)(COLUMN) Married, filing(COLUMN) 750(COLUMN)1 separately(COLUMN)(COLUMN) Qualifying widow(er)(COLUMN) 2,850(COLUMN)1 under 65(COLUMN)(COLUMN) Qualifying widow(er)(COLUMN) 3,600(COLUMN)2 65 or older(COLUMN)(COLUMN) Eligible to be claimed(COLUMN) 750(COLUMN)1 as a dependent on a(COLUMN)(COLUMN) parent's return, and(COLUMN)(COLUMN) had taxable interest,(COLUMN)(COLUMN) dividends, or other(COLUMN)(COLUMN) unearned income(COLUMN)(COLUMN)(END TABLE)(FOOTNOTE)
* If you had income of $400 or more from self-employment, you must file regardless of other conditions. (END FOOT)