Your filing status is a fundamental part of the individual income tax process. It will determine whether you have to file a return, what your standard deduction will be, and what your ultimate tax will be. Your filing status also affects your eligibility to claim certain tax deductions and credits. Therefore, your filing status is one of the first things you will need to determine when you start preparing your tax return.
There are five different filing statuses:
1. Single
2. Married filing jointly
3. Married filing separately
4. Head of household
5. Qualifying widow(er) with dependent child
The criteria for determining your filing status are described below:
Single:
If on the last day of the year, you are unmarried or legally separated from your spouse under a divorce or separate maintenance agreement, and you do not qualify for another filing status, you are considered single. If you are widowed and did not remarry before the end of the year, you may qualify as Head of Household or Qualifying Widow(er) with Dependent Child. You will need to see the requirements for those filing statuses.
Married filing jointly:
In order to file as Married Filing Jointly, you must be married as of the end of the year and both you and your spouse must agree to file a joint return. On a joint return you report your combined income and deductions. You can file a joint return even if one spouse had little or no income.
Generally, you cannot file a joint return if either spouse is a nonresident at any time during the tax year. However, if one spouse was a nonresident or dual-status alien who was married to a U.S. citizen or resident at the end of the year, the spouses can choose to file a joint return. If you do file a joint return, you and your spouse are both treated as U.S. residents for the entire tax year.
If you decide to file jointly, your tax may be lower than your combined taxes would be under a different filing status (Married Filing Separately or Head of Household). Also, your standard deduction will be greater and you may qualify for certain tax benefits that do not apply to other filing statuses. Nevertheless, if both spouses have income, you may want to figure your taxes both jointly and separately, to see which method results in the lower tax.
When you file a joint return, both of you may be held jointly and individually responsible for the entire amount of the tax and any interest or penalties due on the return, regardless of whose income the tax applies on. But there are provisions for relief from joint responsibility:
1. Innocent spouse relief – when there is an understatement of tax because your spouse omitted income or claimed false deductions or credits, or given all the facts and circumstances, it would not be fair to hold you liable.
2. Separation of liability, for joint filers who are divorced, widowed, legally separated, or who have not lived together for the last 12 months,
3. Equitable relief, for all joint filers who do not qualify for innocent spouse relief or separation of liability.
In order to claim any of these kinds of relief, you must file Form 8857 – Request for Innocent Spouse Relief.
Married filing separately:
If you are married, instead of filing jointly you may prefer to file separately if you want to be responsible for your own tax, or if filing separately results in a lower overall tax. If you don’t file jointly, you have to use the Married Filing Separately status, unless you qualify as Head of Household.
It should be kept in mind that when you choose the Married Filing Separately status there are special rules that apply:
1. Your tax rate will generally be higher than it would be if you filed jointly.
2. If you have to calculate the alternative minimum tax, your exemption amount will be half of what it would be if you filed jointly.
3. In most cases, you cannot take the credit for child and dependent care expenses. And, if you receive dependent care assistance from your employer, the amount you can exclude from income is half that for joint filers.
4. You cannot take the earned income credit.
5. In most cases, you cannot take the exclusion or credit for adoption expenses.
6. You are not eligible for the education credits – the Hope and lifetime learning credits, the deduction for student loan interest, or the tuition and fees deduction.
7. You cannot exclude any interest income from qualified U.S. Savings Bonds, the proceeds of which you used to pay for education expenses.
8. If you are married filing separately, but you lived with your spouse at any time during the year:
a) You cannot claim the credit for the elderly or disabled.
b) You will have to include more of any social security benefits you received in your taxable income.
c) You cannot roll over amounts from your traditional IRA to a Roth IRA.
9. The following credits and deductions are subject to reductions at income levels that are half of what they are for joint filers:
a) Child tax credit
b) Retirement savings contributions credit
c) Itemized deductions
d) Personal exemptions
10. Your capital loss deduction limit is half of the limit for joint filers.
11. If your spouse itemizes deductions, you cannot claim the standard deduction. If you can claim the standard deduction, your basic deduction is half of what it would be on a joint return.
Filing as Head of Household will generally result in a lower tax than if you file as Single or Married Filing Separately. This filing status is for unmarried people who paid over half the cost of keeping up a home for a qualifying person, such as a child who lived with you or your parent whom you can claim as a dependent.
In order to quality as Head of Household, there are three general tests you must meet:
1. You must be unmarried or considered unmarried on the last day of the year.
Certain married people who lived apart from their spouse for the last 6 months of the year may be considered unmarried for purposes of filing as head of household.
If your spouse is nonresident alien, you are considered unmarried for head of household purposes. But you are still considered married for earned income credit purposes. In this case, even though you are considered unmarried for head of household purposes, your spouse is not a qualifying person as required under number 3. You must have another qualifying person.
2. You must have paid more than half the cost of keeping up a home for the year.
The cost of keeping up a home for this purpose includes rent, mortgage interest, real estate taxes, insurance on the home, repairs, utilities, and food eaten in the home. It does not include the cost of clothing, education, medical treatment, vacations, life insurance, or transportation. Also, if you own your home, you cannot include the rental value as part of the cost of keeping up the home.
3. A qualifying person lived with you in the home for more than half the year (except for temporary absences, such as school). However, your dependent parent does not have to live with you.
In general terms, a qualifying person is a relative of yours, including in-laws and foster children, who you can claim an exemption for as a dependent. If you cannot claim an exemption for the person as a dependent, that person does not qualify you for head of household status.
However, your child, grandchild, stepchild or adopted child who lives with you and is not married, will qualify you as head of household even if you cannot claim that person as a dependent.
The same person cannot qualify more than one taxpayer to file as head of household for the year.
Qualifying widow(er) with dependent child:
You may be eligible to use qualifying widow(er) with dependent child as your filing status for 2 years following the year of death of your spouse. The advantage of this filing status is that you can use the married filing jointly tax rates and the higher standard deduction.
You can use married filing jointly as your filing status in the year your spouse died.
You must meet the following tests to be able to file as Qualifying Widow(er) with Dependent Child:
1. You were entitled to file a joint return with your spouse for the year your spouse died, whether or not you actually filed a joint return.
2. You did not remarry before the end of the year.
3. You have a child, stepchild, adopted child, or foster child for whom you can claim an exemption.
4. You paid more than half the cost of keeping up a home that is the main home for you and that child for the entire year, except for temporary absences.
Reference:
IRS Publication 17, Your Federal Income Tax (For Individuals)IRS Publication 501, Exemptions, Standard Deduction, and Filing Informationwww.irs.gov
