Tax Basics:

Filing Status

Although there are only two filing statuses for 1040EZ users, single and married filing jointly (with no dependents), there are 5 filing statuses your client must choose from when filing a 1040 or 1040A. Each filing status is associated with it's own tax rate. The 5 filing statuses are as follows:

Single
Married filing separately
Married filing jointly
Head of household
Qualifying widow (er) with dependent child

Single: Single means exactly what your client would expect it to mean. Never-before-married, widowed, divorced or legally separated people may file as single. If they have dependents that they provide support for, they may qualify for other filing statuses which would increase their savings in tax dollars, such as the head of household or qualifying widow (er) statuses.

Married filing separately: The majority of couples choose not to file under this status as they can usually save more money filing jointly. However, there are certain circumstances under which some couples may benefit from filing separately. In addition, this status comes in handy if your client suspects their spouse has been underreporting his/her income or exaggerating deductions and they do not want to be held responsible for their mate's share of the tax bill. The best way to determine if they would benefit from filing separately as opposed to jointly is to figure their taxes both ways.

Married couples that are most likely to benefit from filing separately as opposed to filing jointly usually meet the following requirements:

Couples who have two incomes
Couples with heavy deductions for medical expenses, miscellaneous itemized deductions or casualty losses

The following restrictions may apply if filing separately:

Both spouses must itemize deductions or both spouses must take the standard deduction. It is not permissible for one to itemize deductions and the other to take the standard deduction
They may not take the earned income credit
In most cases, your client cannot claim credit for child and dependent costs
Unless they have lived apart from their spouse for the entire year, they may not be able to claim credit for being elderly or disabled
They cannot claim credit for a qualified adoption expenses
They may have to include 50-85% of any Social Security benefits your client received throughout the year as income
They may not deduct interest paid on a student loan
They cannot claim Hope Scholarship and Lifetime Learning credits
They may qualify for a lower Child Tax Credit filing separately than your client would filing jointly
They are not allowed to claim the $2,000 IRA deduction for a nonworking spouse and your client may not be able to deduct all or any of their $2,000 IRS contribution should their spouse be covered by a separate retirement plan

Married filing jointly: Most married couples choose to file under this status as most find they save the most money in taxes this way. A married couple may file jointly even if only one spouse earned income or if they lived separately for the entire year. When your clients file jointly, both people are assuming responsibility for the taxes owed. That means if their spouse skips out on his share of the taxes, they may be held responsible for it. However, the Innocent Spouse Rule can provide some relief to a spouse who was unaware of a partner's wrongdoings concerning taxes. In order to file jointly, they must meet any of the following requirements:

They were married as of the last day of last year
Their spouse died during the last year and your client did not remarry in that year
Their spouse died this year, but before your client filed their tax return for last year

Head of household: Your client may be entitled to file as the head of household if they maintain a home under one of the following conditions:

They paid more than half the cost of maintaining the main home for a parent that they can claim as a dependent (this parent did not live in their home)
They are legally married but did not cohabitate with their spouse, even if your client was not legally separated or divorced during the last year if they fulfill all the following requirements:
They lived apart from their spouse for the last half of the year and they are filing a separate return
They paid more than half of the cost of maintaining their main home in the past year in which they foster, adopted, step or natural child resided for more than half of the year.
Your client paid more than half of the cost of maintaining their main home in the past year in which one of the following also lived for more than half of the year:
An unmarried adopted child, natural child, stepchild, grandchild or great-grandchild that is or is not their dependent (if this child is not their dependent, they must enter the child's name on line 4 of Form 1040 or 1040A.)
A married adopted child, natural child, stepchild, grandchild or great-grandchild that is your client's dependent (unless this child's other parent claims him as a dependent under IRS rules)
A foster child that is a dependent
Any of the following relations whom your client claims as a dependent: siblings, parents, grandparents, step-relatives, in-laws or aunts, uncles, nieces or nephews who are blood related.

Qualifying widow (er) with dependent child: If your client's spouse died in the past year, they can use married filing jointly as the filing status if they would otherwise qualify to use that status. Your client may be eligible to use qualifying widow (er) with dependent child as their filing status for the next two years following a spouse's death if they have not remarried. This status entitled them to use joint return tax rates and the highest standard deduction amounts (if they do not itemize deductions.) This status does not however entitle your client to file a joint return. They indicate this status on their tax return by checking the appropriate box on line 5 of Form 1040 or 1040A and writing the year their spouse died in the space provided on line 5. In order to fit the qualifying widow (er) with dependent child status, they must meet the certain criteria:

Your client was entitled to file a joint tax return with their spouse the year he/she died (regardless of whether they actually did)
They have a child, stepchild, adopted child or foster child that they claim as a dependent
Your client did not remarry before the end of the tax year for which they are filing
They paid more than half of the cost of maintaining theirmain home in the past year in which their dependent child lived for more than half of the year