It’s tax season, and one of the first things filers need to understand is what they should file as. As a first-time tax filer or someone who recently changed statuses, it’s difficult to understand what status one should file under. Selecting the correct filing status when completing your income tax return is the first step when correctly reporting your tax return. This selection can impact the tax benefits you receive, the amount of your standard deduction, and ultimately the amount of taxes you pay. To help guide you in the right direction, we detailed each IRS filing status below, along with relevant descriptions and requirements.
What is a tax filing status? A tax filing status determines the rate by which income is taxed. It’s the tool the IRS uses to determine what should be deducted from one’s income, their filing requirements, and eligibility for certain credits or benefits.
What are the different tax filing statuses? Knowing the principle behind what tax filing statuses are and understanding the differences between each is the first step in ensuring you’re filing your taxes correctly. There are five different tax filing statuses to choose from, each with their own set of requirements. Once you understand the differences between each filing status, connect with one of Taxfyle’s Tax Professionals who can file your taxes for you. There, they can check if you selected the right tax filing option and go through the work of navigating your tax documents while you focus on enjoying your free time.
Single: This filing status is used by a taxpayer who is unmarried and does not qualify for any other filing status. According to the IRS, Single filers include people who, on the last day of the year, are unmarried or are legally separated from a spouse under a divorce or separate maintenance decree and do not qualify for another filing status.
Married filing jointly: When filing jointly, both spouses are equally responsible for the return and the taxes. If either one of the spouses understates the tax due, both are equally liable for the penalties unless the other spouse claims they were not aware of the mistake and did not benefit from it. When filing a tax return as married filing jointly, a married couple uses the same tax return to report income, deductions, credits, and exemptions.
When filing jointly, your combined tax liability is often lower than the sum of spouses' tax liabilities if they were filing separately. This is because of the increased standard deduction allotted to them and other tax benefits exclusive to this filing status. You can use the married filing jointly filing status if both of the following statements are true:
1. You were married as of the last day of the tax year. If you were unmarried, divorced, or legally separated (according to state law) as of Dec. 31, you won’t qualify as married filing jointly. There is an exception to this rule for a spouse.
2. You and your spouse both agree to file a joint tax return.
Additionally, if you were not divorced or legally separated as of Dec. 31, you won’t qualify as married filing jointly if all of the following apply:
1. You lived apart from your spouse for the last six months of the tax year. (not including temporary absences like business, medical care, school, or military service).
2. You file a separate tax return from your spouse.
3. You paid over half the cost of keeping up your home during the tax year.
4. Your home was the main home of your child, stepchild, or foster child for more than half of the tax year.
Married filing separately: Married filing separately enables the separation of tax liability from your spouse. This filing status may be wise if one spouse suspects the other may be hiding income. Filing separately may also be beneficial if both spouses have similar income levels and their combined reported results in entering a higher tax bracket. Likewise, if one spouse has significant itemized deductions that could put them in a lower tax bracket, filing separately may make sense. Note, however, that filing separately will usually disqualify you from valuable tax breaks such as the child and dependent care credit, hope and lifetime learning credits, and adoption expense credit, as well as deductions for your contributions to a traditional IRA.
Head of household: While many single people live alone and consider themselves the head of their household, the IRS distinguishes between a single filer and a person viewed as the head of a household. Head of household status generally only applies to an unmarried person who, for the given tax year, has paid more than half of the cost of maintaining a home for themselves and a qualifying person, such as a dependent. Generally speaking, the qualifying person a head of household lives with must be their child, parent, or another type of relative. The person may be a domestic partner, as long as that partner does not earn any income, making them dependent.
Qualifying widow(er)Surviving Spouse: For up to two years after the death of a spouse, the widow(er) may continue to use the married filing jointly tax rate by filing as a qualified widow(er) with a dependent child, as long as the taxpayer hasn’t remarried.
This should give you a better understanding of the different filing statuses and how they function based on the rules of the IRS. Take the time to weigh your options and see which status would work for you or benefit you most this tax season. Once you determine which filing option is right for you, contact one of our Pros to file your taxes for you. There’s no better way to feel relieved of taxes than by having an expert make sure everything is filed quickly and correctly without having to lift a finger.
