Preparing your taxes can be stressful, but it doesn’t have to be. In fact, if you really look at it from the right perspective, you’ll actually find that the more information you have at your fingertips to do your taxes, the less likely it is that you’ll make a major mistake that will cause the IRS to audit you. Generally speaking, the IRS is pretty forgiving — they already assume that there will be a certain margin of error. It’s just those glaring mistakes that tend to get your return looked at a little more closely. Of course, no one from the official government agency will ever come out to admit what actually gets you audited and what does not.
One of the biggest things that can really get you in hot water is not doing the right filing status. It’s tempting to just handle your filing status any way you think it should be, but there are distinct categories. Keep in mind that each category is determined by what status you were on the last day of the year. So if you started out married but had your divorced finalized by the end of the year, you would be filing single, not married.
Let’s go over them in this guide.
Single is going to be one of the most common categories. If you are dating someone and you are not married to them, you will need to file single. Most domestic partnerships aren’t valid at the federal level for actual filing as married, so you will need to make sure that you’re filing as two single people. Of course, you can always combine your refunds or work together to pay down tax liabilities, whatever the case may be.
If you’re on your own, it’s important to make sure that you’re handling your W-4 withholding amounts properly, because it’s very easy to end up not paying enough in taxes over the course of the year. Who really wants to deal with paying a lot of taxes come April 15th, anyway?
Head of Household
This is a category that confuses a lot of people, but it’s really not that hard to understand. A head of household designation means that you are unmarried and that you also have a dependent. You don’t want to file under this status if you are married, of course. Under the tax law, you are unmarried if you are legally separated from your spouse under a divorce decree, as well as if you are married but you live away from your spouse for at least six months of the year. On top of these requirements, you must also be caring for a dependent and taking care of more than half the cost of maintaining a home. In other words, you can’t just think that you’re the head of the house — you have to be supporting the house.
Married filing jointly
For most married couples, this is going to be the primary way that they are actually counted. You will be filing one return, because you’re married to someone. Remember that in order to file as a joint married couple; you must be married by the last day of the tax year filed.
Married filing separately
Now, you might wonder why married people will want to actually file separately. There are some pitfalls to the MFS designation — for starters, you will not be able to claim any tuition and fees deductions, or student loan interest, or even the Earned Income Credit — these are big deductions and credits, which means that you will need to really think about it. In addition, both people filing MFS must decide whether or not to itemize. If one itemizes, the other must as well as the return is not valid. This is something that a lot of people don’t know abut, and it tends to delay their return being processed properly.
However, there are going to be times where you will want to file MFS. For example, if one spouse is self-employed, you might want to file MFS so that there aren’t any tax concerns. Self employed tax returns are already complicated already, so why complicate them any further? You don’t want to end up getting audited over something that isn’t your fault. These are just some points to consider. If you don’t want the hassle or you want to claim as many deductions as possible, you will need to file married filing jointly.
Now, you might be a little confused if your life changes. For example, what do you file if your spouse has passed away? For the first two years if you have dependents, you would be a qualified widow/widower. This means that you essentially get the same breaks as a couple filing married filing jointly. After the two year window elapses, you will need to file either single or head of household.
Overall, knowing where you stand in the tax game is key to making sure that you not only pay less taxes, but you also get the best chances at a refund as you possibly can — what else could you want?