Chapter 4 Acctg 405 (Filing Status)

Filing status

Places taxpayers into one of 5 categories by marital status and family situation at end of year. Determines whether a taxpayer must file a tax return, appropriate tax rate schedules, standard deduction amounts, and several deduction and credit limitation thresholds

Does it make economical sense for tax purposes to MFS?

So that married taxpayers can't file separately to gain more combined tax benefits than they are entitled to if they filed jointly, tax-related items for married filing separate taxpayers—such as tax rate schedules and standard deduction amounts, among others—are generally one-half what they are for married filing joint taxpayers. Also, if one spouse deducts itemized deductions, the other spouse is required to deduct itemized deductions even if his or her standard deduction amount is more than the total itemized deductions.

Primary objective for tax rules under abandoned spouse

to provide tax relief to one spouse who has been abandoned by or separated from the other spouse and left to care for a dependent child.

In these situations, tax laws treat a married taxpayer as though he or she were unmarried at the end of the year if the taxpayer meets the following requirements:

1) Taxpayer is married at year end or not legally separated from the other spouse 2) Taxpayer does not file a joint tax return with other spouse. 3) Taxpayer pays more than half the costs of maintaining his/her home for entire year, and this home is main residence for child (who qualifies as the taxpayer's dependent) for more than half the year (the child must be a child of the taxpayer, including adopted child, stepchild, or eligible foster child).

Who's a qualifying person for determining head of household filing status (if If person is taxpayers qualifying child)

1) and is single, then considered a qualifying person whether or not the taxpayer can claim an exemption for the person 2) married and taxpayer may claim a dependency exemption then, a qualifying person 3) married and taxpayer may NOT claim a dependency exemption then, NOT a qualifying person

Who's a qualifying person for determining head of household filing status (if If person is taxpayers qualifying relative- mother/father)

1) and taxpayer may claim a dependency exemption for he/she, then qualifying person even if the taxpayer's mother or father did not live with the taxpayer. BUT taxpayer must have paid more than half the costs to maintain the household of the mother or father. 2) and taxpayer may not claim a dependency exemption for he/she, then NOT qualifying person.

Who's a qualifying person for determining head of household filing status (if If person is taxpayers qualifying relative- OTHER THAN mother/father)

1) and the person did not live with the taxpayer for more than half the year, then NOT a qualifying person. 2) and the taxpayer can claim a dependency exemption for the person, the person lived with the taxpayer for more than half the year and the person is related to the taxpayer through a qualifying family relationship, then qualifying person.

Filing status categories

1) married filing jointly 2) married filing separately 3) Qualifying widow or widower 4) Head of household 5) Single

Who's a qualifying person for determining head of household filing status (if If person is taxpayers qualifying relative- OTHER THAN mother/father) CONT.

3) and person is taxpayer's qualifying relative because person lived with taxpayer as a member of taxpayer's household for a year (the person does not have a qualifying family relationship with the taxpayer), than NOT a qualifying person. 4) and taxpayer cannot claim a dependency exemption for person or can claim a dependency exemption only because of a multiple support agreement, then NOT qualifying person.

In these situations, tax laws treat a married taxpayer as though he or she were unmarried at the end of the year if the taxpayer meets the following requirements (CONT):

4) Taxpayer lived apart from the other spouse for the last six months of the year. MAY ALSO FILE HEAD OF HOUSEHOLD

Single

If he/she is unmarried at end of year and doesn't qualify for any other filing status. Considered single if unmarried or legally separated from his/her spouse under a divorce or separate maintenance decree.

Married filing jointly

Taxpayers are legally married as of the last day of the year. When one spouse dies during they year, the surviving spouse is still considered to be married for tax purposes during the year of death. Both spouses are ultimately responsible for paying the joint tax. Combine income and deductions.

Married filing separately

Taxpayers are legally married as of the last day of the year. Generally no tax advantage to filing separately. Each spouse is ultimately responsible for paying own tax.

Married treated as unmarried (abandoned spouse)

Technically could file joint tax return, but undesirable from a nontax perspective, because each spouse would be assuming responsibility for paying tax on income earned by either spouse whether it was reported or not. However, because both spouses are married at the end of the year, their only other option is to file under the tax-unfavorable married filing separately filing status.

Head of household

Unmarried taxpayers or considered to be at year end. Pay more than half the costs of keeping up a home for a year. Have a "qualifying person" live in the taxpayer's home for more than half the year. However, if the qualifying person is the taxpayer's dependent parent, the parent is not required to live with the taxpayer. A qualifying person may not qualify more than one person for head of household filing status

Qualifying Widow or Widower (Surviving spouse)

When a taxpayer's spouse dies, the surviving spouse can file as qualifying widow or widower for two years after the year of the spouse's death if the surviving spouse remains unmarried and maintains a household for a dependent child.