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Choosing the Right Filing Status

October 07, 2014

One of the most important pieces of information to get correct on a tax return is the filing status. Fortunately, choosing the correct status is simple when you have a full understanding of the benefits and drawbacks, as well as the qualification requirements for each. There are five filing statuses to choose from: Single, Married Filing Jointly, Married Filing Separately, Head of Household, and Qualifying Widow(er) with Dependent Child. The Single filing status is fairly straightforward. A surprising amount of people use this status when they should choose a different filing status. A person should only use the Single filing status if he or she is unmarried or legally separated, and has no dependents. There are no tax benefits to filing as Single. Filing Single usually means a less complicated tax return merely because there is no need to provide evidence of a spouse or dependents.

The Married Filing Jointly filing status is clearly meant for a married couple sharing the same income tax return. There are often tax benefits to this status and taxpayers can include all of their dependents in the paperwork with this filing status.

The Married Filing Separately filing status is for anyone who is married but does not wish to file a joint return with their spouse. There are a number of reasons for this. One spouse may wind up owing a tax debt that he or she wants to protect his or her partner from. The two can also be going through a trial separation that is not yet a legal separation, and therefore they do not qualify to file as Single. Dependents can still be claimed on these income tax returns. However, each child cannot be on both tax returns simultaneously.

The Head of Household filing status usually comes with some enviable tax benefits. Those that qualify to use this status are unmarried but have dependents. A dependent is a qualifying person who spends more than half of his or her year with the taxpayer, and more than half of the dependent’s household expenses must be paid by that taxpayer. Unfortunately, many people who qualify for the Head of Household filing status are not aware of this option and file as Single. This means there are many people missing out on significant tax benefits.

The Qualifying Widow(er) with Dependent Child filing status is little known and little used amongst taxpayers. This status can be used by those who have lost a spouse for the 2 years following the year their spouse died. This allows these widowers to enjoy the tax benefits allotted to those who use the Married Filing Jointly status on their tax return. If the widow or widower remarries during that time period, this filing status no longer applies.

Each of these filing statuses comes with its own benefits and drawbacks. Taxpayers should make sure that they qualify for the status they have chosen in order to be in the best possible situation and remain in good standing with the IRS.