One of the first items to consider when filing an individual tax return is your filing status. An individual’s tax liability is determined by the taxpayer’s filing status. Some taxpayers do not have a choice in this matter while others qualify for more than one status. Those taxpayers will want to choose the filing status that will result in the lowest tax. Below is a summary of the conditions that must be met for each filing status.

Single (S)

If the taxpayer is not married on the last day of the tax year, he or she should file as Single. An individual who is legally separated or divorced on the last day of the tax year is considered not married for the entire year.

Note: If a single taxpayer qualifies, they should choose to use either the Head of Household or Qualifying Widower status which would result in a lower tax.

Married Filing Jointly (MFJ)

Married taxpayers may elect to file a joint return or file as married persons filing separately. Marital status is determined on the last day of the tax year. For example, if a couple marries on December 31, 2011, they are considered married for all of 2011. The same can be said for a divorce.

For a MFJ return, both spouses are responsible for the tax, interest and penalty owed on the return, regardless of who earned the income or caused the interest and penalty charges.

Married taxpayers who are living apart are still married under tax law if they are not legally divorced or separated. Although some states have amended their constitutions to allow for same-sex marriages, the federal government still defines marriage as a legal union between a man and a woman. Therefore, taxpayers in this situation may not file a joint return.

Common-law marriages are recognized for federal income tax purposes if the couple is either currently living in a state that acknowledges that arrangement or if they resided in that state when the common-law marriage began.

If a taxpayer’s spouse dies during a tax year, the surviving spouse may file a joint return with the deceased spouse as long as they did not remarry during the same year.

Married filing Separately (MFS)

In most cases, if a taxpayer is married, filing a joint return will result in the lowest tax. However, there are some reasons why a married taxpayer may choose to file a separate return. Below are a few examples of why some may choose to file MFS.

  • Keep individual financial information confidential from the spouse
  • If the other spouse does not file a return
  • If the other spouse files fraudulent return
  • To gain a deduction that is limited by adjusted gross income (ex. medical expenses)
  • To get a tax refund when the other spouse owes back taxes, past-due child support, or certain debts to other federal agencies

Taxpayers choosing to file MFS should be aware of the limitations that apply. Some limitations will depend on whether the taxpayers lived together or not for part of the tax year:

  • The earned income credit (EIC), credit for adoption expenses, and the education credit are not allowed
  • Normally qualifying interest income from U.S. savings bonds that is used for education cannot be excluded from income
  • They cannot claim the credit for the elderly or disabled
  • They may have to include more of their social security benefits in income
  • The deduction phase out for a contribution to a traditional IRA begins at a lower income level
  • The special allowance for rental real estate activity losses is reduced, and it phases out at a lower income level

Head of Household (HoH)

Filing Head of Household is more advantageous than filing as single or MFS. However, to file HOH an individual must satisfy all three of the following requirements:

  • Must be unmarried or considered to be unmarried on the last day of the tax year
  • The individual must pay more than half of the cost of keeping up their home
  • A qualifying person must share the individual’s home for more than half of the year, unless the qualifying person is the individual’s parent

For the definition of a qualifying person to meet the requirement, please click here for IRS information.

For a worksheet on how to calculate the cost of keeping up a home click here. The total amount paid by the individual must exceed the total amount paid by others for the individual to qualify as HoH.

Qualifying Widow(er) with Dependent Child (QW)

In the following 2 tax years after a spouse dies, a surviving spouse with a dependent child(ren) can receive some of the benefits of a joint tax return by filing as a Qualifying Widow(er). The benefits include use of the joint return tax brackets and standard deduction. There are five requirements that must be met for a surviving parent to make the QW filing status:

  • The surviving spouse and deceased spouse were eligible to file a joint return in the year of death
  • The surviving spouse has not remarried
  • The dependent child is the surviving parent’s child or stepchild. A foster child(ren) are not qualifying child(ren) for the purpose of QW
  • The dependent child(ren) lived in the parent’s home for the entire year
  • The surviving spouse paid more than half the cost of keeping up the home

For a consultation to discuss your tax filing status, please Contact Us to schedule an appointment.