Understanding Your Tax Filing Status

For most, determining your tax filing status probably does not create a lot of question or confusion. But for others, it might not be so cut and dry. For most, whether you are married or unmarried at the end of the year is the determining factor. If marital status is a primary factor, when is it not so cut and dry? And what are the implications?

Filing status is important to get right because it has a significant impact on your tax, but also impacts other areas of your tax return. Below you’ll read some of the other areas filing status can impact:

• Whether or not you’re required to file a federal return.
• If you should file to receive a refund.
• Your standard deduction amount.
• Which tax credits you’re eligible to receive.
• The amount of tax you owe, and more.

IRS publication 501 defines the five-filing status’s, along with the standard deduction, as well as dependent status, and is the ultimate resource in understanding how you should file. Below we summarize the five and offer a brief description of each.

• Single: Generally, you file Single when you are unmarried, if you are divorced or legally separated under a decree governed by state law.
• Married Filing Jointly (MFJ): Generally, you’ll file MFJ if your married prior to December 31 of the current tax year. However, and this is one of those NOT cut and dry moments, if you’re spouses passes away prior to December 31 of the current tax year, you may still file MFJ.
• Married Filing Separately (MFS): Though you are married, you may still choose to file separate. Why would you do this? There can be many reasons for MFS and like a lot of financial decisions we make, there are trade-offs. It’s important to understand the impact on your tax, as well as available credits, retirement contributions, etc., before making that decision and a tax professional can help wade through that muck.
• Head of Household (HOH): HOH is a unique filing status with special rules. Generally, it applies to taxpayers who pay more than half the costs of maintaining a home themselves and a qualifying person that lived in the home for half the year. Important to understand these rules and make sure you qualify to avoid a letter from the IRS.
• Qualifying Widow/Widower: This is another filing status that can create some question, and confusion. If you are a widow/widower, you have a dependent child, and your spouse died within two years of the current tax year, you may claim this status. This status can be claimed for up to two years. Let’s break this down a bit further:
  • 2019 – Spouse dies, you file MFJ.
  • 2020 – Year following spouses’ death, have not remarried, provided more than half the costs of maintaining a home for a child, stepchild, or adopted child (foster children do not qualify), you may file as a qualifying widow/widower.
  • 2021 – Second year following spouses’ death, no remarriage, you again provided more than half the costs of maintaining a home for a child, stepchild, or adopted child (foster children still do not qualify), you may file as a qualifying widow/widower.
  • 2022 – Third year following spouses death, not remarried, and again provided more than half the costs of maintaining a home for a child, step-child, or adopted child (foster children still do not qualify), you may file as HOH.

We hope this is helpful as we move into tax season. If you have questions, please contact us, or if you’d like to schedule an appointment to have us prepare your taxes, you can do that here.

Will Ellis, CFP