Tax forms from the IRS can be incredibly confusing to people who are not versed in the tax code. In truth, they are confusing to experts as well. Regardless, one of the simpler questions is really the first one on your 1040 form. Specifically, what is your filing status?
Filing status refers to how you are positioning yourself in the tax code. Single people tend to get fewer deductions because there simply are fewer concerns about you making the bill. Married couples or people running small businesses, in turn, can claim more things as deductions as well as claiming more tax credits. Ah, but those are not your only two filing status choices. Let's take a closer look at your options.
1. Single ? If you chose this designation, you are telling the IRS you are neither married nor claiming dependents other than yourself. If you are divorced, you may also claim this status if you are not responsible for any kids.
2. Married Filing Jointly ? As the name suggests, this category is for married couples.
3. Married Filing Separately ? The government wants to promote families, so it created the filing separately designation. The basic idea was to avoid situations where getting married hurt people from a tax perspective. The goal hasn't always been met, but at least there is an option if filing jointly hurts you.
4. Head of Household ? Often confused with the single filer designation, this status is a reflection of modern times. It is for an unmarried person who is responsible for maintaining a home for themselves and another who qualifies, such as a child. This status is often known as the divorced filing status.
5. Widower with Dependent ? The least used filing status, it is for people who have lost their spouse but still have a child dependent.
At the end of the day, many people fall nicely into one designation or another. If you are married, you need to take the time to sit down and figure out whether filing separately or jointly is in your best interest. It sounds like a time waster, but it can save you a lot of money on your taxes.
Well, there you have it on the filing status. You should be able to fill out the first line of your 1040 return. Now for the other 80 or so?
