On the surface, it can be It seems the easiest part of your income tax form to fill, aside from your name and address. Is on top of 1040 tax form, Are the instructions that read: Filing Status. Check only one box.
- Marriage filed jointly.
- Marriage filed separately.
- Head of the household.
- Worthy widow (er).
Sounds easy, doesn’t it? But the more you think about it, you may be a little surprised yourself. After all, if you are married, you can file jointly or separately. Which is better And who can file as “head of household”, filing status that might sound like a 1950s throwback?
For these and more questions about choosing your tax filing status, read on.
When should the tax filing status be single?
This one is easy. If you are unmarried, you have no children and no one is financially dependent on you, such as an old parent who lives with you, you need File as a single.
I am married Is it smart to file jointly or separately?
According to Jeffrey Wood, a certified public accountant and partner at Lift Financial, a wealth management firm in South Jordan, Utah, it is generally clever to file jointly.
“There are some tax deductions that can be phased out or lost when a couple files separately,” Wood says. “Some common and frequently used deductions such as the Earned Income Credit, American Opportunity Credit, Student Loan Interest Deduction and Lifetime Learning Credit are not available to married individuals who file separately. In addition, tax rates are typically More for individuals. Filing as single or married filing than those filing jointly. “
found it? If you are married and file jointly you will probably save money.
Why would a separately married taxpayer file?
Sometimes it’s smarter to file separately, Wood says.
“If one party in the married relationship had a loan that could be garnished by the IRS, the other spouse would want to file separately to protect their expected tax return,” they could say.
Wood says that there can be such a big difference in income between you and your spouse that you will be taxed at a much higher rate than the income of a low-earning spouse.
“In this circumstance, low-earning spouses want to file separately to preserve their lower tax bracket and perhaps expect their return,” Wood says.
Another good reason for a married couple is to file their taxes separately: “A spouse may own a business and are choosing to push certain risky tax positions with which the other spouse or Wives may not feel comfortable, ”Wood says. “The IRS considers both spouses to be equally liable for the tax positions taken jointly and both spouses will be on the hook for any taxes and fines for that given tax year, even if They later separate or are divorced. “
And, finally, if you are separating or are thinking of separating, Wood says that you can consider filing separately for the tax year if it is financial for either of you. Makes sense.
What about the head of domestic filing position?
“The head of the household is one of the most unfairly filing cases,” says Mark Pujdrak, owner of Pujdrak CPA, an accounting firm in Austin, Texas.
Someone who files as the head of the household is usually unmarried with dependents. Pujadrak says that there are three qualifications that you must meet in order to be classified as head of household.
1. You were not married on the last day of the year.
2. You paid more than half the cost of keeping the house for the year.
3. A qualifying person lived with you in that house for more than half a year, except for temporary absence.
Who is an eligible person? Typically, this would be a minor: Your child, step child or maybe a foster child. In other words, if you are a parent who has never married or divorced, and your children live with you most of the time, you are probably going to file as head of household.
That said, you don’t have to be a parent to enter the head of the household. You can take care of a brother, sister, grandparents, mother or father or any other relative and claim them as dependents.
When should you file as a qualifying widow or widower?
Believe it or not, it is not as straightforward as it sounds. If you are a widow or widower since 2007, for example, you will not file as one Widow or widower. There is a time limit for how long you can file as one.
“If your spouse died within the year, you can still file jointly or separately for that year as a married person. After that, if you have not remarried and have a dependent child , You can file as a qualified widow or widower. For two years, says Joshua Zimelman, managing partner of Westwood Tax & Consulting, a virtual tax firm.
There is a reason for the time limit. Filing as a widow or widower allows you to receive the same standard deductions and tax rates as marital couples, Zimelman says.
“Two years later,” he says, “your status changes to ‘head of household’ or ‘solo’ – until you have remarried.”
What do I need to know about choosing filing status?
Here are some useful rules to keep in mind:
Dates matter. You are filing for your taxes for last year and not this year, and the date to actually consider is 31 December. Zimmelman states it this way: “If you are married, you should file it as a marriage, even if you are single for her, 364 days of the year. If you are married on December 31, you will file your tax return. But married. “
Choose your filing status carefully. Ultimately, you may be stuck with your filing status for the specific tax year in which you are filing. If you are married and file jointly, and a few months after that when you send it to the IRS you wanted to change your taxes. And file separately, Zimmelman says that you will not change it.
“On the other hand, if you file separate returns and then later realize that you should have filed jointly, you can amend your return to file jointly within three years , ”Says Zimmelman.
Understand the meaning of “dependent”. This is important, Zimmelman says. For starters, if you are going to Claim someone as a dependent, You need to understand how the IRS defines dependent. In short, it is a qualified child or a qualified relative of the taxpayer. Your spouse is not dependent. To claim adult children, they must be under 24 at the end of the tax year – and unmarried.
Or maybe you are a dependent. You may be 19 years old to complete your first tax form, or you are living with your 91-year-old son or daughter. You have to keep this in mind while filing.
“While technically not a filing status, someone else claims you as a dependent that your own filing status is affected,” says Zimmelman. “To be legally claimed as a dependent by a parent or other qualified relative, you must be unmarried. If you fit all the necessary criteria of a dependent, you must still file your tax return. There may be a need – based on how much you earned. Year – but you can’t take the standard deduction. “
So hope that helps. It wasn’t so bad, was it? Now all you have to do is fill in your name and address, answer a few dozen questions, and perhaps complete some tax schedules, and you will … be completed.