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Okay, my husband owns a business with his brother and father. He receives guarantee payments monthly. His 2008 K-1 showed a net loss in 2008 (the business loss was greater than the guaranteed payments received). I work as an engineering consultant. My income was down from 2007. My 1099 income did not exceed his overall loss. We have two kids and paid for daycare in 2008. On our 2007 taxes, we filed married filing jointly and we showed a positive, albeit small income (his guarantee payments were the same, but his business loss was smaller than 2008 and I made more money). We were able to qualify for the EIC and the Additional Child Tax Credit. These credits offset my self-employment tax and we ended up getting a refund. For 2008, TurboTax is saying we do not qualify for any credits and if we file jointly we will owe ~$2800. If we file separately we will owe ~$1300. Is there a way to qualify for the credits with a negative AIG, jointly or separately? Or do we just pay?

Submitted: 38 days and 10 hours ago.

Category: Tax

Value: $15

Status: CLOSED

State/Country relating to question: Oklahoma

Already Tried:
We have toyed with TurboTax and like I said, married filing jointly gets us Taxes Due of about $2800. My husband thought about trying married filing seperately and that got us Taxes Due of about $1300. When filing seperately, I claimed both kids and the home loan interest and taxes. My husband claimed the bank interest income (which was minimal). Of course when filing seperately, we could not claim the Child or Dependent Care Credit, eventhough we paid more than $9000 in child care costs in 2007. For whatever reason, we could not claim the Child or Dependent Care Credit when we tried married filing jointly, either. What gives?

Posted by JK_CPA 38 days and 7 hours ago.

Answer

Hello,

Thanks for your question. Because your husband's earned income is a higher negative and yours is a smaller positive number, when they are combined you have negative earned income. Therefore, this disqualifies you for Earned Income Credit and Additional Child Care Credit. In 2007, you qualified because this was a positive number. Also, the Child and Dependent Care formula is based on the smallest of your earned income, your husband's earned income or your child care costs. Since your husband's earned income is negative, you do not qualify for this credit either.

Before you decide to file Married Filing Separate, you should consider whether filing Married Filing Joint with your Net Opertaing Loss (NOL) will benefit you more. You can either elect to carryback the NOL to tax years 2007 and any remainder to 2006 and then carryforward any remainder after that up to 20 years OR you can file an election to waive the 2-year carryback requirement with a statement attached to your 2008 tax return. This will enable you to just elect to carryforward the loss for up to 20 years. If you don't attach the statement to your return, you must file this election within 6 months of filing your 2008 tax return. .

You should file a Form 1045 to claim the NOL. You can also file an amended return on Form 1040X for each carryback year you want a refund.

For more information see IRS Pub. 536
http://www.irs.gov/pub/irs-prior/p536--2005.pdf

and

Form 1045 instructions
http://www.irs.gov/pub/irs-pdf/i1045.pdf

Hope this helps,
Sincerely,

38 days and 7 hours ago.

Reply

JK

One question: when you refer to the NOL, are you talking about our overall household negative AGI when filing Married Filing Joint?

Thanks

Accepted Answer

Actually, it is not just the AGI. You'd figure the loss after your Schedule A itemized deductions per line 41 of Form 1040. But some itemized deductions may be restricted-see Pub. 536.

Thanks,

Accepts:
Expert:	JK_CPA
Pos. Feedback:	100.0 %
Answered:	10/15/2009

Certified Public Accountant (CPA)

with 5 years accounting experience and 18 years tax experience.

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JK

One question: when you refer to the NOL, are you talking about our overall household negative AGI when filing Married Filing Joint?

Thanks

Accepted Answer

Actually, it is not just the AGI. You'd figure the loss after your Schedule A itemized deductions per line 41 of Form 1040. But some itemized deductions may be restricted-see Pub. 536.

Thanks,

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JK One question: when you refer to the NOL, are you talking about our overall household negative AGI when filing Married Filing Joint? Thanks

Accepted Answer

Actually, it is not just the AGI. You'd figure the loss after your Schedule A itemized deductions per line 41 of Form 1040. But some itemized deductions may be restricted-see Pub. 536.Thanks,

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JK

One question: when you refer to the NOL, are you talking about our overall household negative AGI when filing Married Filing Joint?

Thanks

Actually, it is not just the AGI. You'd figure the loss after your Schedule A itemized deductions per line 41 of Form 1040. But some itemized deductions may be restricted-see Pub. 536.

Thanks,