Question

Rebecca was single on December 31, 2020. Her husband, Doug Washington, passed away on March 20, 2019, and she has not remarried. Rebecca and Doug have always filed Married Filing Jointly in previous tax years, Rebecca and Doug have two children, Sara, age 15 and David, age 11. Rebecca is 45 years old. Rebecca earned $36,000 in wages in tax year 2020. This was her only source of income. Each of the children received $200 in Social Security Survivor Benefits for the year, which Rebecca put into a college fund for their education. Rebecca paid all the cost to keep up her home and support for Sara and David. Rebecca received $2,200 in an Economic Impact Payment. In order to work, Rebecca paid $3,100 to ABC Academy for after-school child care. The statement from the care provider includes the provider's name, address, valid Employer Identification Number, and the amount paid for child care expenses for David ($2,500) and Sara (S600). They all are U.S. citizens and have valid Social Security numbers. No one in the family has a disability.

a. What is the most beneficial filing status allowable for Rebecca?
b. Rebecca has $3,100 in qualifying child care expenses for the child and dependent care credit.

1. True
2. False

Answer 1

Answer:

A.  The most beneficial filing status allowable for Rebecca is:

Head of Household.

B. 2. False

Explanation:

a) Data:

Rebecca's (widowed March 20, 2019) 2020 earned income = $36,000

Dependent children = Sara, age 15 and David, age 11

Social security survivor received by children = $400 ($200 * 2)

Economic Impact Payment received by Rebecca = $2,200

Child care expenses paid = $3,100 (for David ($2,500) and Sara (S600)

b) Rebecca, as a widow, should file as the head of household.  This status has some important tax advantages over the Single filing status.   Since she qualifies as Head of Household by virtue of the death of her husband, she will enjoy a lower tax rate and a higher standard deduction than as a single filer.  Rebecca's qualifying child care expenses will be limited to $2,500 for David since Sara is 15 and not disabled.