UNDERSTANDING YOUR FILING STATUS

Some questions I usually get is “what is my filing status? Which of the filing statuses will give me a lower tax rate? Some tax payers will go like “I don’t know my filing status. Well, because of the love I have for my clients and prospective clients like you, I have taken some time out of my busy schedule to explain each of the filing status and the benefits of each. It’s Friday, 6:00pm central time and IT'S chilly outside.

Now let’s get the ball rolling,

According to the Internal Revenue Code (IRC), the IRS has five status from which every individual taxpayer belongs to one. I repeat, you as a taxpayer, belongs to only one of the five statuses. The five statuses are as follows:

Married filing jointly (MFJ)

Married filing separately (MFS)

Head of Household (HOH)

Qualifying Widow/Widower

Single (S)

Married Filing Jointly (MFJ)

Individual taxpayers who are legally married under a court decree and who decide to file their taxes together qualify under the Married Filing Jointly status. Taxpayers who choose this option are both responsible for payment of interest and taxes due on their return. The IRS put it as “Jointly and severally liable”. The IRS is sometimes liberal by allowing one couple to be exempted from the interest and taxes due under what is called “innocent spouse” or “Injured Spouse”. This will be discussed differently in my next post. Taxpayers who file Married filing Jointly report combined income and expenses. Even if one has no income or deductions during the year, The IRC allows filing together. For 2018, the standard deduction for individual taxpayers filing jointly is raised from $12, 800 (2017) to $24, 000 (2018)

Married Filing Separately (MFS)

Taxpayers who are legally married under a court decree but decide to file separately because he/she wants to be responsible for the accuracy of the return and payment of all interest and taxes due. Taxpayers report separately all income and expenses during the year. Taxpayers will end up paying more taxes than using other filing statuses. This is because, married filing separately is denied of certain credits and deductions which I will discuss in one of my future posts. Standard deduction for this status is raised from $6,350 (2017) to $12,000 (2018)

Head of Household (HOH)

Individual who is unmarried OR considered unmarried (file a separate return and spouse did not live in the home in the last six (6) months during the year) may file as head of household. This taxpayer must have at least one qualifying individual as a dependent. He/she must provide more than half of the cost of keeping up a home in the year this status is elected. The qualifying individual must live with taxpayer for more than half of the year (except mother or father of taxpayer). But taxpayer must provide more than half the cost of maintaining the parent’s home. Taxpayer who chooses this option has lower tax rate than single or married filing separately. Standard deduction is raised from $9, 350 (2017) to $18, 000 (2018)

Qualifying Widow/Widower

Taxpayer whose spouse die on or before 31st December and who do not remarry before the end of the year qualifies for this status. In that year of death, if surviving spouse does not remarry, he/she can file married filing jointly with the deceased spouse. After the year of death, qualifying widow/widower status will exist for two years. Taxpayer must live with a qualifying dependent all year and pay more than half the cost of keeping up a home in order to file as a qualifying widow/widower. Standard deduction is raised from $12, 800 (2017) to $24, 000 (2018)

Single

Individual is single if on the last day of the year, the taxpayer is unmarried or legally separated from spouse under a court decree and he/she does not belong to any of the statuses mentioned above. Standard deduction is raised from $6,350 (2017) to $12,000 (2018)


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