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Anatomy of a Tax Return: 1040 Series Part 2


Everybody calm down!! Part 2 is here!


This is actually the more interesting, if less common, part of the filing status conversation. So I'm sure you are as excited as I am. I hope you didn't lose any sleep while waiting for it.


Last week I explained that most people will file single, married filing jointly, or married filing separately. Generally, the rates and the standard deductions are better for married filing jointly than for the other options, as those are set to account for two people instead of one person. Because the IRS is known for their compassion, they set up two additional filing statuses: Qualifying widow(er) and Head of household (HOH), aimed at assisting single parents.


Qualifying Widow(er) is the easier and sadder of the two, so I'll do that one first. If you are married, and your spouse dies, you can file a married filing joint return in the year of death. So if John and Jane Smith are married and have one child, Jerry, age 7. If John dies in 2022, Jane can file a joint return with John in 2022. After that, though, Jane is not married anymore. If Jane does not remarry, she can select Qualifying Widow as her status for 2023 and 2024.


Qualifying Widow(er) status gives the same rates and deductions as married filing jointly, which are more favorable than those of a single or head of household filer.


However, if Jane meets Juan the sexy pool boy and they elope to Las Vegas and get married in 2024, then Jane is married on the last day of 2024, and can only choose Married Filing Jointly or Married Filing Separately. Once you remarry, the qualifying widow(er) status is not available.



Another important point is that qualifying widows or widowers must be maintaining the home for a child, adopted child, or step-child that would qualify as a dependent. They must live with that child in their home for the entire year and must provide more than half the cost of maintaining that home.


So, Jane could postpone her marriage to Juan until 2025, when the qualifying widow option expires for her anyway. Juan can still live there, but Jane needs to pay more than half the expenses and Jerry needs to live with them. I'm not saying that's the right thing to do, but it is an option.


The last filing status to cover is Head of Household. And this is the one I overhear people doing wrong all the time, so that makes it the most fun.


In order to claim this status, the taxpayer must be unmarried or "considered unmarried" on the last day of the tax year. In general, if you are married, you cannot claim HOH status.


"Considered unmarried" doesn't just mean you threw her clothes out on the lawn and paid for one of those cheating wife billboards. It also doesn't mean you took your ring off in the singles bar and hit on women far too young for you.



However, if you pay more than half the cost to maintain your home, provide the home for a dependent child, stepchild or foster child, and your spouse has not lived with you for the last 6 months of the tax year, the IRS says you can be "considered unmarried."


If you kick you husband out of the house in June, and pay all the costs to keep up your home for you and your child, you can be considered unmarried. If you kick him out in July, you can't. If the divorce isn't final, married filing separately is probably the one for you.


Head of Household status also requires that you have a qualifying person living in your home for more than half the year. Generally this means an unmarried child, a married dependent child, a dependent parent, or another qualifying relative who lived with you and can be claimed as a dependent. Claiming dependents is another issue for another day, but there are plenty of people doing that wrong as well.


The benefit of qualifying for HOH status is better tax rates and standard deduction than a single filer, although it is not as good as Married Filing Jointly or Qualifying Widow(er).


I have been asked many times by clients and acquaintances about HOH status. I have seen many returns claiming it incorrectly, and I even overheard an entire conversation at the hockey game (Go Knights Go!) last year where the participants were discussing incorrectly claiming that status. Just because you want to consider yourself unmarried doesn't mean the IRS will treat you that way. Get those divorce papers signed!


I'm not saying you should get divorced, I'm just saying talk to your tax advisor about the best way to get divorced. We especially love it when you inform your spouse of the impending divorce during the meeting with your tax advisor (yes that happened). Accountants are well-known for our social graces, so we appreciate the challenge.



Next week: dependents! (A teaser that is sure to keep you interested until next week)

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