Provide an appropriate response.IRS guidelines state that a married person under 65 years of age who can be claimed as a dependent on another person's tax return must file a return if(i) unearned income was over $750; or(ii) earned income was over $3925; or(iii) total of earned and unearned income was at least $5 and your spouse files a separate return and itemizes deductions; or(iv) total of earned and unearned income was more than the greater ofa) $750; orb) earned income (up to $3675) plus $250.Julia is 45 years old and can be claimed as a dependent by her father. She had earned income of $3800 and unearned income of $200. Julia's husband Bret files a separate return but does not itemize deductions. Must Julia file a return? Explain.

Question

What will be an ideal response?

Answer 1

Yes, Julia must file a return. She is a married person under 65 years of age who can be claimed as a dependent on another person's tax return. As such, she must file a return if any of (i)-(iv) apply.
(i) does not apply since $200 < $750; 
(ii) does not apply because $3800 < $3925;
(iii) does not apply because although her spouse (Bret) files a separate return, he does not itemize;
(iv) does apply. Part (b) is a little confusing. It says to start with earned income, but only earned income up to $3675. Since $3800 > $3675, we start with $3675. Then we add $250 to get $3925. The greater of (a) $750 or (b) $3925 is clearly $3925. The total of Julia's earned and unearned income is $4000 ($3800 + $200). Since $4000 > $3925, (iv) applies and Julia must file a return. (Explanations will vary.)