What’s My Tax Filing Status?
I wanted to share about filing status. That sounds exciting, right? Filing status, everyone knows what they are. This is how you file your tax return. You file single, you file married filing joint, you file married filing separate, head of household, or possibly qualifying widow or widower. I’m not going to talk about all of them and all these ins and outs because no one really cares, but there are a few things that people seem to care about. First, why does it matter? Well the standard deduction is higher for some filing status’s and lower for others. So 2019 you’ve got single $12,200 standard deduction, married filing joint and qualified widower is $24,400, and head of household is $18,350. If you notice I’m actually reading that because it changes every year and we’re at the beginning of 2019. So it matters, right? It matters what filing status you use. This is the biggest thing I want to go over and that is I get at least a handful of clients every year who come in and they say “hey I want to file as head of household.” These are people who aren’t married and they’ve got kids living at their home and they want to file head of household, or maybe they’re married but their spouse is somewhere and they think they want to file head of household. There’s some rules that you need to be aware of:
- The number one thing I see that people get tripped up on with head of household, you can’t file head of household unless the children that live with you are legally related to you. For instance, I have a client who is living with his girlfriend and his girlfriend’s children and he cares for them, he supports them all. Because he supports them and because these kids live with him and because his girlfriend lives with him, he can certainly claim all of them as dependents, that’s true. But he can’t use the head of household filing statusbecause the kids that live with him are not related to him in any legal way. They’re not his kids, step kids, grandchildren, parents, aunts or uncles, they’re not related to him and he cannot use head of household. I have to explain that multiple times every year. It’s a big disappointment for some people because it does mean they get a smaller standard deduction, but I wanted to clarify that.
- One other quick point about head of household. The IRS kind of deputized all of us professional tax preparers this year with regard to head of household. They do that on occasion regrettably and they essentially said that I have to verify in some way. When a client comes to me and says they want to file as head of household, I have to verify that they are entitled to claim of head of household. I can’t just take their word for it. For instance, I can’t just say, “well do you live with your kids?” and if they say yes I can’t just say okay great and put it on their tax return. If I do and I don’t verify it some way and I don’t exercise some due diligence in trying to verify that information then I can be penalized $500 per instance by the IRS. So just be aware that your tax preparer is subject to those same due diligence requirements. If they ask you questions about your head of household status and they ask you to provide strange documents like school records or something else or medical records or something to demonstrate that your kids are your kids and that they live with you, or maybe birth certificates or whatever. I mean it is what it is. Don’t be too surprised.
- One other thing. I get this question a lot. People will constantly ask me, “Is it better for me to file married filing joint or married filingseparate?” That is certainly a legitimate question. There are cases where that should be explored. Generally speaking, married filingjoint is the best way to file if you’re looking to pay the least amount of tax. There are reasons to file as married filing separate, but there’s just a few reasons and kind of specialized reasons, so they might be applicable to you. You might want to file married filingseparate, but generally married filing joint is better for tax purposes and we can always run a comparison and see what actually is best in a given situation.
I hope that helped you out a little bit. If you need any help contact me.