When it comes filing your tax return, your filing status can make a big difference on the size of your tax liability. Additionally, your tax filing status can even determine if you have to file at all. Filing status can also determine the available credits and deductions you can take as part of determining your tax liability. Consulting with a tax professional or accountant, such as Kenneth M Perkins CPA/PFS in South Boston, VA, can assist you in determining which of the five filing status would be appropriate for your circumstances. Keep in mind that you may qualify for more than one filing status, so your tax preparer can help you to figure out which one reduces your tax bill the most. Here are five filing statuses that are available, so you can better understand how they can affect your tax bill.
Single
If you have never been married or are divorced and unmarried, then this would make you single according to the IRS. You would also need to have been single in the legal sense on the last day of the tax year that you are filing for, in order to claim this filing status. For example, if you married on December 31, then you would not be able to file as a single taxpayer on your return that was due that April.
Married Filing Jointly
As with the single status, if you were married on the last day of the tax year, then you will qualify to file with the married filing jointly status. This also applies to married couples regardless of gender throughout the nation. Part of filing jointly means that you and your spouse are reporting all your income on one Form 1040. This also means that both taxpayers are responsible for any tax liability that may be incurred, which is true even if only one spouse earned all the income for the whole household. Using this filing status, you are able to claim some tax credits that are not available to the other types of filing statuses. Therefore, you will want to determine with your spouse if this filing status is in the best interests of your family.
Married Filing Separately
For married couples, there is also the option to segregate their income, deductions and any exemptions to file two separate tax returns. For example, if one of you has more medical expenses than the other, filing separately may allow your spouse to attain the deductible for medical expenses easier than if your income was combined. However, doing so will mean that you lose some deductions and tax credits. Additionally, one spouse may end up with a higher tax rate and the overall combined tax of the two returns may be higher than a joint filing. If you are not required to file separately, then if it is beneficial to complete a joint return, as well as separate ones, to determine which scenario will result in the lower tax liability.
Head of Household
This status is for those taxpayers who are unmarried, but provided more than half the cost of keeping up a home for the filer and a qualifying individual who lived with them for more than six months out of the year. Tax rates for these filers are typically more favorable than those filing in the single or married filing separately statuses. Those who use head of household also may qualify for a larger standard deduction than single filers. This status may be available for those who are married, but do not live with their spouses.
Qualifying Widow or Widower with Dependent Children
You may file a joint return for the tax year that your spouse passed away, but after that, you will be able to file under the qualifying widow or widower status. This option is available for the first two years after a spouse passes away. It gives the surviving spouse the filing data benefits afforded to joint filers. The key to remember is that the dependent child must have lived with the adult for the full tax year and the taxpayer must have paid more than half of the cost of keeping up the home.
As you can see, there are several options available to the average taxpayer in terms of filing status. By choosing the correct one for your circumstances, you can take advantage of all the appropriate credits and deductions that you are eligible for.
Kenneth M Perkins CPA/PFS