Beginners Guide to Figuring Out Your Tax Filing Status

Understanding tax filing status can be confusing. This article can help clear up any questions you may have about your tax filing status.

Filing status is determined on the last day of the year and most often is based on marital status.

The two most common tax filing status:

Single

Unmarried individuals without dependents. 

Married Taxpayers Filing Jointly (MFJ)

This is when a couple combines their incomes, deductions, and credits on a jointly filed return. They are jointly and separately liable for the tax determined on the return. Because filing status is based on the taxpayers’ marital status on December 31 of each year, this means that couples who marry during the year are eligible to file MFJ. (A special rule applies for nonresident aliens – see below). Likewise, those who divorce during the year are not qualified to file MFJ the year when the divorce is made final. A couple that is separated, but still married as of 12/31, has options. In this case, they may file either MFJ or Married Filing Separate. They could also file possibly Head of Household, as explained below. For this case, neither spouse can file using the single status. 

But single and MFJ are just the tip of the iceberg when it comes to determining the most beneficial filing status. There are more tax-filing status’ that exist. Let us explain.

Additional tax filing status that exist:

Surviving Spouse (Qualified Widow[er])

In the year of a spouse’s death, the surviving spouse can use the MFJ status. But only if they have not remarried by the end of the year. In the two subsequent years, if not remarried, the surviving spouse may be able to file as a Qualified Widow(er). The benefit of filing as a Qualified Widow(er) is that the taxpayer is able to use the MFJ tax rates. And the MFJ tax rates are lower than those for the Single and Head of Household statuses. However, to file as a Qualified Widow(er), the taxpayer must meet the following requirements:

1. The taxpayer must have a son, daughter, stepson, or stepdaughter who can be claimed as a dependent. This dependent could be either as a qualified child or a dependent relative – but not a foster child or grandchild.
2. The child cannot have filed a joint return.
3. The taxpayer cannot be claimed as someone else’s dependent.
4. The child must have lived in the taxpayer’s home all year. Exceptions include for temporary absences or if a child was born or died during the year. Or if the child was kidnapped.
5. The taxpayer must have paid more than half the cost of keeping up the home for the year. 

Married to a Nonresident Alien

Generally, a U.S. citizen who is married to a nonresident alien must file as Married Filing Separate. However, a person who is a nonresident alien at the end of his or her taxable year and who is married to a U.S. citizen or a U.S. resident can be treated as a U.S. resident for income-tax purposes. But only if the spouses so elect. In doing so, both spouses must agree to subject their worldwide income for the taxable year to U.S. taxation. And both parties must make the election. 

Head of Household (HH)

This status may be claimed by a single or married individual meeting certain requirements. While the status provides favorable tax rates, it is frequently used in error, often because the taxpayer doesn’t understand the eligibility rules. Of all of the statuses, head of household is the only one in which a paid tax preparer is subject to a penalty if they do not perform the IRS-prescribed due diligence when determining if their client qualifies to claim HH. It is also closely monitored by federal and state tax agencies.

A single (unmarried) individual may use this status if he or she

• Pays more than one-half of the cost of maintaining, as his or her home, a household that is the principal place of abode of a qualified person for more than half of the year. A qualified person generally includes a qualified child (the child’s exemption does not have to be claimed – it can be released to the other parent) or a relative for whom the taxpayer may claim a dependency exemption, OR
• Pays more than half the cost of maintaining a separate household that was the main home for a dependent parent for the entire year.

A married individual may use this status if he or she

• Lived apart from their spouse for at least the last six months of the year, and

• Pays more than one-half of the cost of maintaining, as his or her home, a household that is the principal place of abode, for more than half the year, of a child, stepchild, or eligible foster child for whom the taxpayer may claim a dependency exemption.

Head-of-Household tax filing status issues:

• Generally, a single house cannot contain more than one household.
• For HH purposes, “temporary absences” for school, vacations, illness, military service, etc., do not change the place of a dependent’s abode.
• A person claimed as a dependent under a “multiple support agreement” does not qualify a taxpayer for the HH filing status. (When several people together provide over 50% of support for an individual, those providing more than 10% of the support can have a multiple-support agreement that specifies which of them will claim the dependent.)
• A married child (including a grandchild, stepchild, or adopted child) who is a dependent will qualify a taxpayer for this filing status. But to be a “qualifying child,” the child cannot file a joint return unless the return was filed only as a claim for a refund. 

Married Filing Separate Tax filing Status (MFS) 

Married taxpayers have the option of filing a joint return or separate returns. Generally, if the income, deductions, and credits are split exactly 50-50, the total tax when filing separate returns will be the same as a joint return. However, some credits and deductions may not be allowed when filing MFS. These are the most common reasons for filing MFS.

1. They may be separated and may not wish to file jointly. However, this creates complicated issues in dividing up the income and deductions because the spouses are often uncooperative. In some states, community property laws can also add complications in dividing the income and deductions.

2. They may wish to keep their financial affairs separate. This most commonly occurs when individuals marry later in life, or when one spouse comes to the marriage with significantly greater wealth than the other spouse, and they wish to keep their finances separate, even if doing so costs them some extra taxes.

3. A spouse may be concerned that the other spouse is not properly reporting their income or deductions. When a joint return is filed, both spouses are liable for the tax. Even if only one spouse earned the income. 

Generally, there is no tax benefit to filing MFS except if the taxpayer is married to a non-resident spouse.

Questions about your tax filing status? Give us a call and we’ll help you make that determination so you can file accurately. Or you can take the IRS “What is my filing status” questionnaire that can help you determine what your filing status is.