There are five filing statuses to choose from when filing a federal income tax return. A taxpayer may file as Single, Head of Household, Qualifying Widow(er) With a Dependent Child, Married Filing Jointly or Married Filing Separately. Each of these filing statuses has certain requirements that must be met before they can be used. If a taxpayer qualifies to use more than one status, he or she should use the filing status that provides the greatest tax benefit.
This article provides a summary of the qualifications to use each filing status. For complete information regarding all of the available filing statuses, see IRS Publication 501: Exemptions, Standard Deduction, and Filing Information.
Qualifications to be Considered Single or Married
The Single filing status is the easiest one to qualify for. If on the last day of the year, a taxpayer is unmarried or legally separated and does not qualify for any other filing status, he or she may file as Single for tax purposes.
To be considered married for tax purposes, a taxpayer will have to meet any one of the following four tests.
- The taxpayer is living with his or her partner as husband and wife.
- The taxpayer and partner are living together in common law marriage in a state that recognizes it.
- The taxpayer and partner are married and living apart, but are not legally separated.
- The taxpayer and partner are separated under a divorce decree that has not yet been finalized.
Should a taxpayer and his or her partner meet any one of these qualifications, the couple can be considered married for tax purposes and file jointly, if so desired. There are a few exceptions to this. If a spouse dies at any time during the year, the surviving mate who has not remarried can be considered married for the entire tax year. If a couple divorces at any time during the year, they will be considered unmarried for the entire tax year.
Married Filing Jointly
To file a joint tax return as a married couple, both the husband and wife must agree to file together. This is highly recommended, since the Married Filing Joint tax status affords a couple the maximum credits and deductions. Along with the benefits of filing a joint return, a couple must accept certain requirements.
For instance, a couple that files a joint return must include the income from both partners. This means that each spouse will be held equally responsible for any taxes, interest or penalties that may be assessed from the tax return. A spouse who wishes to separate his or her tax liability from the marital partner’s may do so by meeting certain requirements and filing for Innocent Spouse Relief. For more information about this option, see IRS Publication 971: Innocent Spouse Relief.
If one spouse is a nonresident alien at any time during the tax year, the couple will generally be disallowed from filing a joint return. An exception is made when a spouse who is not a United States citizen is married to a United States citizen. If the two are married by the end of the tax year, they can both be considered as U.S. citizens for the entire year.
Married Filing Separately
A married couple can choose to file separate returns. Couples should only do this when a tax professional advises them that it is in their best financial interest to do so, since this filing status severely limits the allowable deductions and credits. A couple who files separately will be subject to several special rules. These include:
- A higher tax rate
- Personal exemption amount is reduced by half
- Being disallowed for Earned Income Credit
- No Adoption, Education, or Child and Dependent Care Credit
- Itemized Deductions, Dependent Exemptions, and Child Tax Credit are all reduced by half
- First-Time Homebuyer’s Credit is reduced by half
A couple who is considering filing separately should figure the amount of their tax using the Married Filing Joint status and the Married Filing Separately status before submitting their return. This will help them to know which status is the most advantageous for them. If a couple wishes to go back and change past returns that they have filed separately, they can amend any return filed in the last three years to a joint return.
Qualifying Widow(er) With a Dependent Child
The Qualifying Widow(er) filing status is a temporary provision for taxpayers who have lost a spouse in death. It is intended to allow a grieving mate time to adjust to any tax impact that the loss of their mate will cause. When a marriage mate dies, the surviving spouse who does not remarry has the option to file a joint return with their deceased spouse for that tax year. This will enable the surviving mate to qualify for the tax benefits he or she would have claimed with their spouse.
For the two tax years following the death of the spouse, the surviving mate can use the Qualifying Widow(er) filing status as long as they do not remarry and as long as they have a dependent child. The Qualifying Widow(er) filing status affords a taxpayer the same deductions and credit as a couple that files a joint return. After the two years have been claimed, the taxpayer will convert to using the Head of Household filing status as long as he or she is still caring for the dependent child.
Head of Household
In order to file as Head of Household, a taxpayer must meet three tests. The taxpayer must be unmarried as of the last day of the tax year. The taxpayer must have paid over half the cost of keeping up a home during the year. The taxpayer must also have had a “qualifying person” living with him or her more than half the year. An exception is made for a dependent parent, who is not required to live with the taxpayer.
A “qualifying person” must meet the same tests as a “qualifying child” or a “qualifying relative” for dependent exemptions. This means that the qualifying person must be related to the taxpayer in particular ways. Examples of eligible qualifying persons are: a child or grandchild that is single, a child or grandchild that is married but can be claimed as a dependent by the taxpayer, a dependent parent that can be claimed by the taxpayer, or a grandparent or sibling that lived with the taxpayer for more than half of the year and can be claimed by the taxpayer. For a complete list of the requirements and a table of qualifying persons, see IRS Publication 501.
Knowing which filing status is most beneficial is a great help to tax filers. Selecting the best one will provide a taxpayer with the lowest tax rate and the highest possible deduction. Making sure of the qualifications will help a taxpayer to avoid an audit by the IRS. These factors make selecting the right filing status very important when filing a federal income tax return.
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