Generally, filing status depends on whether the taxpayer is considered unmarried or married at the end of the tax year.
Currently, for federal tax purposes, a marriage means only a legal union between a man and a woman as husband and wife. States that recognize same-sex marriage will allow the couple to file married filing jointly, but the federal return must be filed as single or head of household.
A taxpayer is considered unmarried for the whole year, if on the last day of the tax year the taxpayer is unmarried or legally separated from the spouse under a divorce or separate maintenance decree. In addition, the taxpayer is considered married for the whole year if on the last day of the year they are married.
Though married couples normally filing jointly there are times that married filing separate may be a better option.
It is important to understand that when a taxpayer signs a tax return each person signing the return is responsible for any tax due even if only one spouse works. This is the most frequent reason a married couple files separately.
There are certain credits that are not available when filing separate. The credit for child and dependent care in most cases cannot be claimed. Married filing separate cannot claim earned income credit, education credits or credit for adoption expenses. If the taxpayer lived with their spouse at any time during the year, the credit for elderly or disabled cannot be claimed and 85 percent of social security benefits are included as income.
If the spouse itemizes deductions, both spouses must itemize. Capital losses are reduced to $1,500 instead of $3,000. It is important to consider all of these reductions when choosing between married filing jointly or married filing separate.
The most misused filing status is the head of household. In order to claim head of household status certain tests must be met. The taxpayer is unmarried or considered unmarried on the last day of the year. The taxpayer must have paid more than half the cost of keeping up a home for the year. A qualifying person must live with the taxpayer for more than half the year.
Under a separation agreement, the spouse did not live in the home during the last six months of the tax year to file head of household. The home must be the main home of the qualifying person for more than half the year and the taxpayer must be able to claim the exemption for the qualifying person.
The test for qualifying child is that the child must be the taxpayer's son, daughter, grandchild, stepchild, foster child, brother, sister, half-brother, half-sister, stepbrother, stepsister or any descendant of any of them. The child must be younger than the age of 19 (younger than 24 if a full-time student) at the end of the year and younger than the taxpayer. The child must live with the taxpayer for more than half a year and did not provide more than half of his or her own support for the year.
A qualifying relative must pass four tests to be considered a qualifying person for head of household status. The person is not a qualifying child and is related to you or must live with you the entire year as a member of your household and the relationship does not violate local law. The person's gross income for the year must be less than $3,800 and the taxpayer must provide more than half of the person's total support for the year.
Notice that a qualifying relative does not have an age restriction.
To learn more about filing status go to the IRS website at www.irs.gov and type filing status in the search box.
Tracy Bunner is an enrolled agent and tax preparer with an office in Harrisville. She can be reached at 801-686-1995 or at email@example.com.