What you ultimately have to pay the Internal Revenue Service rests in large part on your filing status. Your filing status also determines whether you can take certain tax deductions or credits that could lower your final tax bill. In some cases, your status can even be the deciding factor in whether you have to file at all. So picking the right one when you file is crucial.
Picking the right filing status isn't always easy and some individuals find they actually qualify to file as more than one type of taxpayer. For example a divorced mother, who can file as Single, however, it would be a smarter tax move to file as a head of household since she is taking care of dependent children. Head of household would give her a tax rate lower than the single filers' rate, plus a bigger standard deduction.
Keep in mind that the IRS lets you file under the appropriate status that offers you the best tax advantage.
There are five official tax status options:
1. Single.
This applies to never-married, unmarried and divorced taxpayers. You are considered single for the whole year if you were legally single on the last day of the year.
2. Married filing jointly.
You are considered married for the whole tax year as long as you were married on the last day of the tax year. When you file jointly, both husband and wife report all their income on one Form 1040. This status offers some tax credits not available for filers using another status.
3. Married filing separately.
You can choose Married Filing Separately as your filing status if you are married. This filing status may benefit you if you want to segregate your income, deductions and exemptions and file two individual returns. Unless you are required to file separately, you should figure your tax both on a joint return and on separate returns. This way you can make sure you are using the method that results in the lowest combined tax.
4. Head of household.
This status applies to unmarried taxpayers who provided more than half the cost of keeping up a home (for more than six months) for the filer and a qualifying relative. Tax rates for qualified filers usually are more favorable than those in the single or married filing separately categories. Head of household filers also get a larger standard deduction amount than do single filers. In some cases, married persons who have not lived with their spouses may qualify for this status.
5. Qualifying widow or widower with a dependent child.
This filing status is available for two years following the year of a spouse's death and basically applies the filing data afforded married joint filers. The key here is that the surviving spouse cared for a dependent child who lived with the adult for the full tax year. During that time, the taxpayer must have paid for more than half the cost of keeping of the home.
