What’s My Filing Status?
What’s My Filing Status?
Selecting a filing status is similar to taking a multiple-choice test, with four answers to choose from:
(a) Single
(b) Head of Household
(c) Married Filing Jointly
(d) Married Filing Separately
What is the correct answer? Most of the time, the answer will be clear. You ask yourself this question: At the end of the year, December 31, what was my marital status?
1)You can file as “Single” - if you are not married by December 31.
2)You can file as “Head of Household” - if you are not married, you paid more than half the cost of keeping up your home, and your home was the principal residence of your dependent.
3)If you are married by December 31, you have the option to file either jointly or separately. A lot of times, I get asked by married couples which option to choose. Usually, I would advise them to file jointly, because in most cases, a joint return results in lower tax liabilities.
4)However, there could be some reasons for a married couple to file separately. A spouse who files a separate return is not responsible for reporting or paying tax on items that belong to the other person. There is no joint liability. Also, it is possible for a married couple filing separate returns to have lower taxes than if they had filed jointly. It depends on the situation.
5)There is a fifth filing status, Qualifying Widow(er), which is the same as Married Filing Jointly. But special circumstances are needed to be eligible, and it doesn’t happen very often. (If you want to know more about this fifth filing status, I am happy to discuss it with you in greater detail).
It is important to choose your tax filing status carefully, because your choice determines what income tax rates you must pay and the size of your standard deduction. In general, the best tax rates and largest deductions belong to the Married Filing Jointly status. The worst rates and deductions belong to the Single and Married Filing Separately statuses. The Head of Household status is better than Single or Married Filing Separately, but not as good as Married Filing Jointly.
For most people, selecting a filing status is not difficult. However, there can be tricky situations which makes selecting the right filing status more difficult. For example, here are a few real-life questions that I have been consulted about in the past.
1)My son has finished college and has started some part-time work. Should I continue to claim him as a dependent or should he file his own tax return?
General Answer:
The answer depends on whether your son still *qualifies* to be claimed as a dependent by you. To continue to claim your son as a dependent, he must met the following tests:
a)Be either under the age of 19, or a full-time student under the age of 24 or (b) any age if totally and permanently disabled.
b)Live with you for more than half the year (temporary absences due to illness, education, military service are ignored).
c)Not provide more than half of his own support
d)Not file a joint return
e)Not be a qualifying child of another taxpayer.
2) I have a parent who I am supporting - does he/she count as my dependent? How does that change my filing status?
General Answer:
If you provide more than half the support for your parent, and the parent earned less than $3,800 income for 2012, then they could qualify to be your dependent. Instead of being Single filing status, you could be eligible to claim Head of Household filing status.
3) I am sharing custody of my child with my ex-spouse. Can I file as head of household or does my ex-spouse get to?
General Answer:
It depends on who is providing more than half the support for the child. Generally, a child who receives more than half of his support from his parents during the year and is in the custody of one or both of them for more than half the year is normally the qualifying child of the custodial parent. However, there are situations of which the non-custodial parent can treat the child as his qualifying child if certain criteria are met.
The answers to the above situations actually varies from case to case based on the specific facts and circumstances. At any time, if you feel like you are not sure which is the right answer to pick, feel free to contact me for a consultation. I have encountered many situations of which the taxpayer was not aware that their parents can be claimed as a dependent. I have also encountered situations of which taxpayers are surprised to find out that their child can no longer be claimed as a dependent. Once again, with proper tax planning - your CPA can help you to eliminate many unpleasant surprises. If you have not consulted with a CPA before, please feel free to contact me for a free consultation.
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