You have status with the IRS….but don’t let it go to your head. They do not think that you are special. Rather, all individuals have a tax filing status as determined under the Federal Income Tax laws.
The tax filing status of individuals is often taken for granted rather than thoughtfully considered. The wrong status could subject you to scrutiny, penalties, interest or, even worse, paying more tax than you need to. It is sometimes difficult to make the correct determination. However, your tax filing status can significantly affect your income tax outcome.
You must first determine what your status is and whether you qualify for more than one status in the same tax year. The status is determined by a variety of factors including your marital status, whether you have children or other relatives living with you and whether you support them. The tests are done on a year by year basis, and, for the most part, are based upon what it is at the end of the day on December 31st of each tax year.
Most people are familiar with the Single or Married filing status. A few others know that the Married status can be subdivided into Married Filing Jointly, or Married Filing Separately. However, you get a gold star if you have heard of the Head of Household and Qualifying Widow(er) filing status. If you qualify for more than one filing status in a particular tax year you can choose the one that gives you the best answer. For most taxpayers, the best answer means the lowest tax liability.
Your tax status would be Single if, at the the end of the day on December 31st of the applicable tax year you were either:
- Unmarried (never married, divorced or annulled); or
- Married but legally separated.
There are special rules for those married persons who have their marriage legally annulled. If you have your marriage legally annulled you are treated as though your marriage never existed. If your marriage never existed, you are required to go back and amend your tax returns for all open tax years in which you filed as Married to change the status to Single (or if you qualify, Head of Household or Qualifying Widow(er)). Open tax years are determined based upon the applicable statute of limitations for your individual tax returns.
Here are a few examples:
- If you have never been married you are considered to be unmarried for tax filing status purposes.
- If you get married on February 2, 2009 and either get divorced, are legally separated or have your marriage annulled on or before December 31, 2009, then you are considered to be unmarried for the entire 2009 tax year.
- If you get married on March 15, 2007 and have your marriage annulled on or before December 31, 2009 then you are considered unmarried for 2007, 2008 and 2009. In this event, both spouses must go back and file amended tax returns for 2007 and 2008 if already filed.
There are a variety of definitions out there as to what constitutes a marriage. Here are the guidelines for Federal Income Tax purposes:
Marriage Defined: The Federal Defense of Marriage Act of 1996 (DOMA) defines marriage as “only a legal union between one man and one woman as husband and wife” and the word spouse as “only to a person of the opposite sex who is a husband or a wife.”
Common Law Marriages: Common law marriages qualify as a marriage under DOMA. Just so that you know, Illinois does not allow you to create a common law marriage but Illinois does accept it if it was created in a different state. Either way, you are considered to be married if any state considers you to be married under their common law marriage laws.
Same Sex Marriages: Even though same sex marriages are allowed in some states, for the purposes of filing taxes, each partner would still file as Single.
Not Legally Separated: If you are married and living apart from each other, but not legally separated you are still considered “Married” for tax purposes. Further, you are considered to be “Married” even if you are subject to an interlocutory (not final) divorce decree so long as you are not legally separated.
Once it is established that you are married at the end of the day on December 31st of the applicable tax year, you can file in one of the following two ways:
Married Filing Jointly: As a married person, you may elect to file a joint income tax return with your spouse called Married Filing Jointly. When you file as Married Filing Jointly, you combine your income, deductions, elections, withholding, etc. Since you are both signing the Married Filing Jointly return you are both responsible for what is in the return, how it is filed and when it is filed. Each spouse can be held responsible for the civil and even criminal acts of the other spouse by filing as Married Filing Jointly. In those unfortunate situations, you or your spouse may be able to avoid the other spouses’ bad acts under the “innocent spouse” rules provided in the Federal Income Tax laws.
If your spouse dies during the tax year, your tax filing status is still Married for the entire year in which your spouse died. Of course, the Federal Income Tax laws contemplate that some people seem to recover from their spouses’ death quickly. If you marry another person before the end of the year of your prior spouses’ death your tax status would still be “Married”. However, it would be “Married” with your new spouse rather than your deceased spouse.
Married Filing Separately: As a married person you may elect to file a separate income tax return from your spouse called Married Filing Separately. The most common reasons why this is done include:
- One spouse does not want to be associated with what and how the other spouse is reporting on tax returns.
- One spouse cannot obtain the other spouses’ tax information.
- There is a tax advantage to one or both spouses by filing separately.
In most cases, both spouses filing as Married Filing Separately results in a higher tax overall than if they had filed as Married Filing Jointly. Further, there are certain tax benefits that are not available to either spouse if you file as Married Filing Separately that are available if you file as Married Filing Jointly. The optimal tax result can only be determined on a case by case, year by year basis. It is nearly impossible to guess. Rather, it requires that the tax returns be computed jointly and then each separately to determine which gives the better overall tax answer.
Here are a few examples:
- If you are married for all of 2008 and 2009, you and your spouse can freely elect to file as either Married Filing Separately or as Married Filing Jointly. You can then freely elect either status in 2009 regardless of how you elected in 2008.
- If you are married and your spouse dies on January 1, 2009, you are considered to be Married to your deceases spouse for all of 2009 unless you marry someone else in 2009.
Head of Household
You qualify to file with a tax filing status of Head of Household if you satisfy all of the following tests for the applicable tax year:
- You were unmarried (or “considered unmarried”) at the end of the day on December 31st;
- You paid more than half of the costs of maintaining a principal residence for yourself and a “qualifying person” (e.g. certain qualified children or relatives);
- The qualifying person must have lived with you for over half of the year (there is a special rule for parents who do not live with you);
- The child or relative can be claimed as a dependent.
While it is important to know that there are rules for determining a “qualified person” defining those rules is beyond the scope of this discussion. There are also a separate set of rules to be applied to determine whether a person is “considered unmarried” for purposes of Head of Household filing status (i.e. they are legally married but just not considered unmarried for this test) that are also beyond the scope of this discussion.
As discussed above, a widow(er) can file as Married for the year in which their spouse died. A widow(er) is also allowed to file as Qualifying Widow(er) for the up to 2 tax years following the year of the death of their spouse provided they satisfy all of the following requirements:
- You maintained a home as a principal residence;
- You have a child that you can claim as a dependent;
- That child lived in your home all year (with a few exceptions);
- You paid more than half of the costs of maintaining the home;
- You were entitled to file as Married Filing Jointly in the year that your spouse died;
- You did not remarry before December 31st of the applicable tax year or even for the next 2 years.
Qualifying Widow(er) is a tax favored filing status as compared with Single. While the filing status of Qualifying Widow(er) is not the same as Married Filing Jointly, the Qualifying Widow(er) status allows you to use the same beneficial tax rate tables as those who file as Married Filing Jointly. When the allowable two years runs out, you default to your next most favorable tax filing status. If you are unmarried you would qualify as Single or possibly Head of Household.
Here are a few examples:
- Your spouse died in 2007 and you do not remarry before the end of 2009. For the 2007 tax year, you are entitled to file Married Filing Jointly with your deceased spouse. In 2008 and 2009, you may be eligible to file as a Qualifying Widow(er) if you satisfy all of the requirements.
- Your spouse died in 2007 and you got remarried in either 2008 or 2009. For the 2007 tax year, you are entitled to file Married Filing Jointly with your deceased spouse. However, beginning in the year that you get remarried, you can no longer qualify as a Qualifying Widow(er) and would either file Married Filing Jointly or Married Filing Separately with your new spouse.
There are a variety of tax filing statuses. In some cases, you may have an option to choose one or another. There are more details and exceptions than can be discussed in this forum. This discussion is designed to make you generally aware of the filing statuses and certain life events that may impact them. This could help keep you out of trouble and possibly reduce your income tax liability.
Copyright ©, Keith B. Baker – 2009
This article is designed to be a public resource of general information. It does not constitute “legal advice” nor does it create a “client-attorney” relationship. While the information is intended to be accurate, this cannot be guaranteed. Tax laws are complex and constantly changing as a result of new laws, regulations, court interpretations and IRS pronouncements. Often, there are also various possible interpretations. Further, the applicable rules can be affected by the facts and circumstances of a particular situation. Because of this, some of the information may no longer be correct or may not apply to all situations. We are not responsible for any consequences or losses resulting from your reliance on such information. You are urged to consult an experienced lawyer concerning your particular factual situation and any specific legal questions you may have.
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