Members of the Maryland Association of Certified Public...

Tax answers

April 12, 1996

Members of the Maryland Association of Certified Public Accountants are answering readers' tax questions through April 15.

Q: I'm a single mother with three children. In 1995, I earned $16,500, and $110 in federal taxes was withheld from my pay. Am I eligible for the earned income credit?

A: Yes. For tax year 1995, a family earning less than $24,396 and raising one child in the household may qualify for the earned income credit (EIC). A family raising two or more children and earning up to $26,673 may qualify. In addition, workers between the ages of 25 and 64 with no children and incomes of less than $9,230 may be eligible. Qualified Marylanders who work full or part time can apply for the credit by completing the appropriate federal tax filing form. Since you have children, you must complete federal income tax Form 1040 or 1040A and attach Schedule EIC (be sure to include the Social Security number for each child and the exact name under which the child's Social Security number is registered). Those without children need only to complete Form 1040, 1040A or 1040EZ to receive the EIC. Here's the good news: Based upon the information you've submitted, the EIC will pay you back the $110 in federal taxes plus about $2,000 more.

Q: My son passed away last April. His employer gave us $5,000, which was his last two weeks pay plus a severance check. We have received a 1099 form for this. The money was used to defray the cost of traveling to California to recover the body. Is any of this deductible?

A: Funeral expenses are deductible from the gross estate in those amounts as (a), are actually expended, (b), would be properly allowable under local law and out of property subject to claims, and (c), are paid within the time for filing the estate tax return where the total of those expenses exceeds the value of property subject to claims. Social Security death benefits payable to other than the decedent's spouse and Veterans Affairs death benefits reduce the amount of funeral expenses that are deductible.

A reasonable expense for a tombstone, monument or mausoleum, or a burial lot, either for the decedent or his family, including a reasonable allowance for its future care, are deductible as funeral expenses if allowable under local law. Included in funeral expenses are the costs of transportation of the person bringing the body to the place of burial.

CLARIFICATION: Several weeks ago in this column, a separated couple asked whether one spouse could itemize deductions while the other spouse takes the standard deduction. The federal rules are clear on this subject, however, state tax laws can become very complex based upon where the individuals are domiciled, whether the couple is considered married or unmarried in the eyes of the state, and other factors. MACPA recommends consulting a tax professional for advice on this subject.

The above advice is for general purposes only and is not intended as legal, accounting or tax advice. Specific situations may vary.

Pub Date: 4/12/96

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