Understanding Tax-Filing Status

Article Highlights:

  • Single 
  • Married Filing Jointly 
  • Surviving Spouse 
  • Married to a Nonresident Alien 
  • Head of Household 
  • Married Filing Separate 
Filing status is determined on the last day of the year and most often is based on marital status. The two most prevalent are as follows:
  • Single – Unmarried individuals without dependents. 

  • Married Taxpayers Filing Jointly (MFJ) – The 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, regardless of the date of the marriage, are eligible to file MFJ (but a special rule applies for nonresident aliens – see below). Likewise, those who divorce during the year are not qualified to file MFJ for the year when the divorce is made final. A couple that is separated but still married as of December 31 may file either MFJ or Married Filing Separate (or possibly Head of Household, as explained below), and 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 proper and most beneficial filing status. There are a number of possibilities:
  • Surviving Spouse (Qualified Widow[er]) – In the year of a spouse’s death, the surviving spouse, if not remarried by the end of the year, can use the MFJ status. 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 gets to us the MFJ tax rates, which are lower than those for the Single and Head of Household statuses. 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 (no age limits) – but not a foster child and not a grandchild – who can be claimed as a dependent, either as a qualified child or a dependent relative, except that the child’s gross income is disregarded for purposes of determining if the child is a dependent.

    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, except for temporary absences or if a child was born or died during the year or 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 or a U.S. resident 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, 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

    1. 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

    2. 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

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

    2. 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.

    Other Head-of-Household 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 (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.

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