Learning About Your Tax Status

It's tax season. Are you done with your taxes or are you just panicking about all of the unfamiliar terms? Let's take one of those terms, tax status, and try to make some sense of it.

There are five tax classifications to consider when you are filing your income taxes: single, married filing jointly, married filing separately, head of household or qualifying widower with dependent child. You may think you know which one applies to your situation, but are you sure?

The first choice is fairly simple: single. If you are, indeed, single (and have no dependents), this is usually a "no brainer." However, there are other situations in which you can file as a single tax status. If you were married, then legally separated before the end of the year, you are qualified to file as a single person. You would also be considered "single" if your marriage was annuled or if you were divorced during that year.

There are a couple of reasons that you might not be able to file as single even though you are. You could have a dependent, or you could have been widowed within the past year. If you were widowed, and have dependents, your filing status would be "head of household" or widow (widower) with dependent children.

Now, let's talk about the married taxpayer status. Of course, the obvious one is that you are legally married. Some states recognize common law marriages, (a designation given when a couple has lived together for a certain amount of time), in which case your filing status would be married. You are also considered to be married if you are living apart but have not finalized your divorce or gotten a "legally separated" status.

If your spouse passed away during the filing year, and you did not remarry, you would file as married for that year. The next two years after that, you would file as a widow or widower with qualified dependents. If you remarried the same year that your spouse died, you would file as married with your current spouse. You would also file your deceased spouse as married filing separately. It can get pretty confusing so it is best to consult with a tax professional for situations such as these.

Most couples choose to file a joint tax return. In this case, your tax status would be married, filing jointly. Both spouses' income would be included on the tax return and both spouses would sign and date the return. All exemptions, deductions, and credits are also reported on the joint return. You and your spouse would also share joint responsibility and liability for the information reported on the tax return.

In some cases, a spouse's responsibility can be waived: innocent spouse relief, separation of liability for spouses who have not lived together for the previous 12 months, or equitable relief which essentially shares the liability between the filers.

If a spouse filing on a joint tax return is not able to sign it, the other spouse can sitn for him or her. But, there must be an information statement included which gives the reason he or she could not sign it. One reason would be because of military obligations.

Knowing how to choose your tax filing status is one of the first steps to learning how to prepare your taxes.

Article Source: http://www.find-investment-advice.com

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