Taxes are confusing for most people and knowing how to file and which deductions to take isn’t always easy. When completing your IRS tax return, each person must select a filing status. Generally when filing, it is important to know what your IRS filing status is. Your filing status can influence what taxes you owe and the deductions you can take. There are five different filing status options you can choose from and each one has its own requirements. It’s important to review each option because it can impact the tax benefits you receive. Here are the five filing statuses you can choose from:
Filing Single Status
A taxpayer filing as single means they are either unmarried, divorced, legally separated or widowed as of December 31st. If you are an individual that has dependents but you weren’t the primary caregiver for at least half the year, you must also file as single. The IRS urges people that don’t meet the criteria for any other statuses to file under single status.
Married Filing Jointly
Married couples who file under this status will submit a combined tax return and both take responsibility for the income reported and taxes owed. You must be married by the last day of the tax year to be able to qualify for married filing jointly. Most married couples file jointly because there are more benefits such as lower tax liability and a bigger refund.
Married Filing Separately
Married couples that have separate high income or large itemized deductions will usually file Married Filing Separately. If taxpayers decide to use this method and one person itemizes deductions, the other spouse will not be able to claim the standard deduction. Filing separately will also eliminate certain tax breaks and may cause a higher overall tax due for married couples. Tax professionals recommend married couples calculate their tax liability under both joint and separate statuses to see which one works best for their situation.
Head of Household
A taxpayer can file for this status if they are unmarried by December 31st. The head of household must be paying for over half the costs to maintain the home and have a qualifying dependent that has been a resident of the home for at least six months. This status is most common for single parents who have custody of their children. This status offers more benefits than filing single or married filing separately due to the lower tax rates and higher standard deductions.
Qualifying Widow(er) with Dependent Child
This status can only be used by a widow who has not remarried and lives with a dependent child. Taxpayers can also use this status for up to two years after the death of their spouse. The taxpayer must have been planning on filing married jointly regardless of if the return was actually filed. This status allows individuals to use the same tax rates as people married filing jointly and they also receive the highest standard deduction if they choose not to itemize deductions.
If you need help filing your taxes or deciding which status best fits your situation, Polston Tax can help! Our team of tax accountant and preparers will help you navigate the confusing tax law and make sure you take advantage of every deduction on your federal tax return. Call us today at 844-841-9857 or click below to schedule a free consultation!