TAXATION

Jim and Sally are not married. They lived together all year. Sally had $5,000 in earned income during 2015. Jim earned $30,000 in wages. Jim and Sally have two children. Tyler is 10 years old, and Jamie is 8. Tyler and Jamie lived with Jim and Sally for all of 2015. Tyler and Jamie did not provide over half of their own support. Jim paid all the rents, utilities, groceries, and other household expenses, which totaled $16,000. Sally paid none of the household expenses. Jim and Sally agreed they would each claim one child on their individual tax returns. Jim, Sally, Tyler and Jamie are all U.S. citizens with valid Social Security numbers.

1. What are the correct filing statuses for Jim's and Sally's individual returns?

a. Both can file as Head of Household

b. They can choose which one files as Head of Household.

c. Jim can file as Head of Household and Sally must file as Single.

d. Both must file as Single.

2. It is allowable for both Jim and Sally to each claim one qualifying child for the earned income credit on their individual returns.

a. True

b. False