What’s Your Tax Filing Status? A Lot Of People Get It Wrong…

Filing Status

There are five different filing statuses for federal taxation purposes, and Head of Household is the most commonly misused one. So what is “Head of Household (HOH)?”. You may have seen this term in several commonly used tax documents such as Form W-4 and Form 1040. Most people think that Head of Household means the leader or the “head” of a house or a household.  However, many people who file as HOH should actually be filing as “Single”.

 

SINGLE STATUS

Tax filing status Single is considered to be the most common and the starting point of a filing status. If you are single, unmarried, divorced, or legally separated according to state law on the last day of the year, your tax filing status for the entire year is Single.

 

MARRIED FILING STATUS

On the other hand, if you are married by the last day of the year, tax filing status for the entire year is “Married”. In addition, there are 3 different types of filing methods under the Married filing status. The taxpayer has the option to choose, but should consult a tax professional such as myself to determine which method is most suitable to their specific situation.

  • Married Filing Jointly (MFJ)
    Married filing jointly means one tax return contains the information for both the taxpayer and their spouse, including income, deductions, expenses, etc. for income tax return filing purpose. The MFJ status has different tax brackets and is sometimes more tax favorable comparing to the Single filing status.
  • Married Filing Separately (MFS)
    Married filing separately means the taxpayer and their spouse do not file together, but file their own separate tax returns similar to a single tax filing status person. In most cases, MFS is the least tax favorable and has the least deductibility. In some rare cases, MFS can be more favorable depending on current tax laws and marriage penalty. In most cases, people don’t file as MFS for any tax benefits but for other purposes, such as proof of financial separation and/or other legal reasons.
  • Death of Taxpayer/Spouse – MFJ
    Even though the last day of the year determines the tax filing status, there is an exception to MFJ when death occurs during the year. In general, if a taxpayer or spouse died during the year, the surviving taxpayer or spouse (now the taxpayer) can still file as MFJ.

 

QUALIFYING WIDOW(ER) STATUS

Following the death of taxpayer/spouse, the surviving taxpayer may be qualified to be Qualifying Widow(er) status. In order to qualify, the surviving taxpayer must be both single and with a qualifying dependent child. This provides the taxpayer with the MFJ favorable tax rate while being single with a qualifying dependent child. This status is only an option for the 2 years following the death of the spouse. For example, if the spouse died in 2016, and the taxpayer has not remarried, the taxpayer may file under the qualifying widow status for 2017 and 2018.

 

HEAD OF HOUSEHOLD

Finally, the Head of Household status is very similar to the qualifying widow status. The taxpayer still must be unmarried, considered unmarried or single by the last day of the year.  The taxpayer also needs to pay for more than half of the cost for keeping up a home. Lastly, the taxpayer must have a qualifying person (dependent child or dependent relative) living with him/her in the home. The HOH status provides better tax rates compared to filing as Single. One of the main purposes for this favorable status is to give a tax break to single parents or single taxpayers with the burden of caring for dependents.
Tax filing status can be simple and complicated at the same time, especially when determining the various qualifying factors (e.g. qualifying depending child).  It is best to consult a tax professional regarding your specific situation.


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Daniel Lu

Daniel Lu - Certified Public Accountant

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