Unique tax situation - only $8k income

[Deleted]

I have too many deductions/credits that I'm not able to take advantage of because I have no income. It doubly sucks because my boyfriend supports me (he's the one who paid for the $10k in tuition that's being deducted) but he can't take advantage of any of my credits because we aren't married.

Here's what turbo tax is telling me:

Federal Tax Summary Your Total Income $8,002 Federal Deductions We Found For You $10,231 Your Taxable Income $0 Federal Credits We Found For You $1,000 How We Calculate Your Federal Refund Federal Taxes You Owe $0 Federal Taxes You've Paid, Plus Credits - $1,001 Your Bottom Line $861

 
Income is so low because I made minimum wage in college ($7.25) for two of my jobs, I got college credit for my TA job, and I did some nannying but was paid in cash. Also I stopped officially working in July - my graduate assistantship is considered a scholarship and not income.

When I put in a $400 traditional IRA (have yet to contribute for 2012) my refund didn't change at all because my taxable income was already at $0. I should make it a ROTH so it grows interest-free, right? Should we do something else for 2013 - we'll probably be paying $20k in tuition this year and my income will be $0 for the entire year. There's nothing we can do unless we want to secretly get married, right?


Thanks in advance! 

[rubytue]

The cash nanny position should really be claimed as income on your taxes.

But yes, a Roth would be better at this point because it would be tax free forever.

I'm pretty sure you'd have to get married for your SO to get any tax benefits from paying your tuition. You have to be a qualifying relative to be considered a dependent. You might consider running your taxes together and seeing what happens, just as an exercise (obviously can't file that way) to see what marriage would do for you. Kind of the same way married folks often run both joint and separate and file the best way.

[atarianna]

I am not sure exactly how this worked or even if it were legit but my old boss had a live-in GF and supported her while in school and her young son. He was able to claim them both as dependents and get credit for the tuition he paid. Maybe talk with someone who knows taxes and see if that could be a possibility/legal.

[Deleted]

You are one situation where it is bad to earn money. If you had earned less that $3650 he would have been able to claim you since you fit the other criteria. I know this may sound weird, but you may want to see if it would be more of a benefit for you to earn less than $3650 for 2013. It may help his taxes so much that you will more than make up for the loss of income in his reduction in tax liability.

Edit- It is $3800, not $3650.

[rubytue]

Wait... I'm reading the IRS publication (http://www.irs.gov/publications/p501/ar02.html#en_US_2012_publink1000220939),

Qualifying Relative



Four tests must be met for a person to be your qualifying relative. The four tests are:
Not a qualifying child test,
Member of household or relationship test,
Gross income test, and
Support test.

Age. Unlike a qualifying child, a qualifying relative can be any age. There is no age test for a qualifying relative.



Then...

Member of Household or Relationship Test

To meet this test, a person must either:

Live with you all year as a member of your household, or
Be related to you in one of the ways listed under Relatives who do not have to live with you .

If at any time during the year the person was your spouse, that person cannot be your qualifying relative. However, see Personal Exemptions , earlier.


So... ummm.. you don't actually have to be related to be considered a dependent?  Go figure!  Sounds like you might be a dependent next year if you have $0 income.  Probably should find a real tax advisor to double check that.

[sillygoosegirl]

You know how I said a few months ago that staying unmarried would be a really expensive choice for you as a couple? I wasn't kidding. I wouldn't advocate getting married just for taxes, but if you are as sure about each other as you say, staying unmarried to keep up appearances because you are young is a really expensive choice.

As for your 2012 taxes, yes, fund a Roth IRA rather than a traditional one. If you do, you will owe no tax on that money or it's earnings EVER. If you can afford it, put more in. If you currently have any money in a traditional IRA or rollover IRA or 401(k) in your name, consider converting it to a Roth in 2013 (provided you aren't getting married).

ETA: Being paid in cash does not free you from the obligation to report and pay taxes on your nanny income. You are still required to do so. You have so many deductions, it might not really change much on this years' taxes (though self employment taxes are kind of a bitch, so it might), but it will count in your favor for social security, so it's not like you don't get anything for reporting it.

[Deleted]

Feb 2, 2013 12:31:49 GMT -5 rubytue said:

Wait... I'm reading the IRS publication (http://www.irs.gov/publications/p501/ar02.html#en_US_2012_publink1000220939),

Qualifying Relative



Four tests must be met for a person to be your qualifying relative. The four tests are:
Not a qualifying child test,
Member of household or relationship test,
Gross income test, and
Support test.

Age. Unlike a qualifying child, a qualifying relative can be any age. There is no age test for a qualifying relative.



Then...

Member of Household or Relationship Test

To meet this test, a person must either:

Live with you all year as a member of your household, or
Be related to you in one of the ways listed under Relatives who do not have to live with you .

If at any time during the year the person was your spouse, that person cannot be your qualifying relative. However, see Personal Exemptions , earlier.


So... ummm.. you don't actually have to be related to be considered a dependent?  Go figure!  Sounds like you might be a dependent next year if you have $0 income.  Probably should find a real tax advisor to double check that.

Yep, but you can earn money so long as your gross is less than $3800.

[Deleted]

@forcuatro I'll actually earn $0 for 2013 because it's impossible for me to work in my grad program. he won't miss my income because that was always considered mine - I had my own place at school, supported myself, and when I graduated college my savings account was kept as mine (it is my back up plan).

We were talking this morning about just getting married on paper in late December - he anticipated it saving $7,000. I don't know how I feel about that. If it did happen I wouldn't tell anyone and we would just proceed as usual with a wedding a few years down the road when we feel ready.

but if he could claim me without being married on paper, that would be great! rubytue, thanks for that info. we will definitely have to talk to someone this year to straighten things out.

[Deleted]

The IRS defines "relative" differently than what we think of as a relative. He could claim you if you had made quite a bit less. I would try to reduce my I come this year if I were you, that way he would be eligible to claim you next year.