If there is one thing to make sure you get right on your taxes, it's your filing status. It can determine how much you pay (or save) in taxes. Plus, it's one of the things that, if you get it wrong, will definitely land you in a dreaded audit.
(Find out what else will get you audited.)
Your filing status basically expresses how you wish to be treated by the IRS, and can determine which deductions and credits you are allowed to take, which forms you should fill out and more.
We don't want you to stay up at night fretting over this issue, so we've compiled everything you need to know into a handy flow chart. Once you find out your filing status, you can read more about it below.
Two notes before you get started:
- In the interest of keeping the chart simple and easy-to-use, this does not account for people who are not United States citizens. (If you are a resident alien, you might find this useful.)
- Also, the IRS does not recognize same-sex marriages, even if they are legal under state law, so if you are in a same-sex marriage, you should file as a single on your federal return.
Married Filing Separately
Married filing separately is just like it sounds: You have a spouse, but each of you will file a separate return, and keep your finances separate: separate incomes, separate expenses, everything.
If you got this as your filing status, you must have a really good reason. The IRS discourages couples from filing under this status by preventing couples filing separately from taking many deductions and credits available to married couples filing jointly. Plus, it's twice the work for you and your spouse to file separately! However, there are some cases where it's in your interest to file separately.
Large Deductible Expenses. The first case is when you have a large expense that might be deductible. An expense must be over a certain percentage of your AGI (figure out your AGI) in order to qualify as deductible. So let's say you had a medical expense that cost you $5,000. If you file separately and your AGI is $50,000, that means the medical expense was 10% of your AGI. You can deduct a portion of it. But if you filed jointly with your spouse, who has an AGI of just $30,000, that means the medical expense was only 6.25% of your combined AGI, and you can no longer deduct it, which means you could be missing out on some tax savings. (Read our post on deductions to see which ones you might qualify for.)
You'll have to look at your entire financial picture to decide what works best for you (because you may miss out on other deductions by filing separately). We suggest either getting the help of an accountant, or working through the tax filing paperwork separately and then jointly to compare the tax bill on each.
Your Spouse Has a Business. Instead of being a math equation, this decision is based on how comfortable you feel with combining your interests with your spouses. If you file a joint return, you will be liable with your spouse for any audits, fines and interest on unpaid taxes, as this woman learned the hard way when she found out she owed $3 million to the IRS because of her late husband's creative accounting. She had no idea he was cheating on his taxes, but it cost her years and thousands in lawyer fees to prove her innocence. (This is how she did it.) So even if your spouse doesn't own a business, but you suspect he's not on the up-and-up with the IRS, we suggest not signing your name on the paperwork he files.
If, however, you are ever caught in a situation like this, don't panic; the IRS has two special publications just for you. The first is called Innocent Spouse Relief, and you can claim it when your spouse does something shady that you didn't know about. The second is called Injured Spouse, and it can be claimed by you when your spouse owes child support or money to the IRS, and you want your fair share of the refund.
Married Filing Jointly
This is the typical choice for married couples, and it should save you big in taxes. You are eligible for more deductions and credits, and it will simplify your tax filing significantly. Find out how combining your salaries will affect your taxes.
Head of Household
This is the IRS's way of recognizing the challenge of taking care of someone else financially. This could mean someone is living in your home and you're paying for their expenses like clothing and food. Or it could mean you're taking care of a parent. If you are paying for a parent who is in a retirement home, this counts as well. Find out more about what qualifies someone as a dependent.
Your finances are pretty simple, and so is your filing status. You're considered "unmarried" if you have never been married, are divorced, are widowed without a dependent, or are married but legally separated by court decree (not just sleeping in separate bedrooms).
Widow(er) With Dependent Child
Losing a spouse is difficult, and can be more difficult when one is left to care alone for a child. This filing status is intended to lend a hand to those who have lost a spouse in the last two years and are still supporting a dependent. You cannot file as a widow(er) if you are not supporting anyone, your spouse passed away in 2010 or earlier, or you remarried this year.
If your spouse died in the last year and you did remarry before the end of the year, you can file a joint return with your new spouse. Your deceased spouse's filing status is married filing separately for that year.