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Chapter 2. Filing Status Introduction This chapter discusses which filing status you should use. There are five filing statuses to choose from: ∙ Single ∙ Married Filing Jointly ∙ Married Filing Separately ∙ Head of Household ∙ Qualifying Widow(er) With Dependent Child Your filing status is a category that identifies you based on your marital and family situation. State law governs whether you are married, divorced, or legally separated under a decree of divorce or separate maintenance. Your filing status is an important factor in determining whether you are required to file (see Chapter 1), the amount of your standard deduction (see Chapter 20), and your correct amount of tax. Your filing status is also important in determining whether you can take other deductions and credits. Check the appropriate box on lines 1 through 5 of Form 1040 or Form 1040A to select your filing status. Check only one. There are no boxes for filing status on Form 1040EZ because your filing status must be single to file that form. There are different tax rates for different filing statuses. To determine your correct amount of tax, use the column in the Tax Table or Tax Rate Schedule in your forms package that applies to your filing status. Related publications and forms. This chapter refers to other publications and forms that you may need. The list of forms does not include Forms 1040, 1040A, and 1040EZ. For more information, you may want to order some of the following: Publication 519, U.S. Tax Guide for Aliens Publication 555, Federal Tax Information on Community Property Form 1040X, Amended U.S. Individual Income Tax Return Single Your filing status is single if you are unmarried or separated from your spouse either by a divorce or separate maintenance decree, and you do not qualify for another filing status. However, if you were considered married for part of the year and lived in a community property state (listed under Married Filing Separately), special rules may apply in determining your income and expenses. See Publication 555 for more information. You may file Form 1040EZ (if you have no dependents and are under 65 and not blind), Form 1040A, or Form 1040. If you file Form 1040A or Form 1040, show your filing status by checking the box on line 1. Use the Single column of the Tax Table, or Schedule X of the Tax Rate Schedules, to figure your tax. Married Filing Jointly You may choose married filing jointly as your filing status if you are married and both you and your spouse agree to file a joint return. On a joint return, you report your combined income and deduct your combined allowable expenses. If you and your spouse decide to file a joint return, your tax may be lower than the other filing statuses, your standard deduction (if you do not itemize deductions) may be higher, and you may qualify for tax benefits that do not apply to other filing statuses. You may file a joint return even if one of you had no income or deductions. If you and your spouse each have income, you may want to figure your tax both on a joint return and on separate returns (using the filing status of married filing separately) to see which method gives you the lower tax. If you file as married filing jointly, you may use Form 1040A or Form 1040. You select your filing status by checking the box on line 2 of either form. You figure your tax by using the Married filing jointly column of the Tax Table, or Schedule Y─1 of the Tax Rate Schedules. Married Taxpayers You are considered married for the whole year if on the last day of your tax year you are either: 1) Married and living together as husband and wife, 2) Living together in a common law marriage that is recognized in the state where you now live or in the state where the common law marriage began, 3) Married and living apart, but not legally separated under a decree of divorce or separate maintenance, or 4) Separated under an interlocutory (not final) decree of divorce. For purposes of filing a joint return, you are not considered divorced. If your spouse died during the year, you are considered married for the whole year for filing status purposes. If you did not remarry before the end of the tax year, you may file a joint return for yourself and your deceased spouse. See Final Return for the Decedent in Chapter 4. You also may be entitled, for the next 2 years, to the special benefits described later under Qualifying Widow(er) With Dependent Child. If you remarried before the end of the tax year, you may file a joint return with your new spouse. Your deceased spouse's filing status is married filing separately for that year. Married persons living apart. If you live apart from your spouse and meet certain tests, you may be considered unmarried, and you may file as head of household even though you are not divorced or legally separated. See Head of Household, later, for more information. If you qualify to file as head of household instead of as married filing separately, your standard deduction will be higher, your tax may be lower, and you may be able to claim the earned income credit. See Chapter 35 for information on the earned income credit. If you are divorced under a final decree by the last day of the year, you are considered unmarried for the whole year. Exception. If you obtain a divorce in one year for the sole purpose of filing tax returns as unmarried individuals, and at the time of divorce you intended to and did remarry each other in the next tax year, you and your spouse must file as married individuals. If you obtain a court decree of annulment, which holds that no valid marriage ever existed, you must file as single or head of household, whichever applies, for that tax year. You also must file amended returns claiming single or head of household status for all tax years affected by the annulment that are not closed by the statute of limitations for filing a tax return. The statute of limitations generally does not expire until 3 years after your original return was filed. For information on when and how to file an amended return, see Amended Returns and Claims for Refund in Chapter 1. Filing a Joint Return Both you and your spouse must include all your income, exemptions, and deductions on your joint return. Both of you must use the same accounting period, but you may use different accounting methods. See Accounting Periods and Accounting Methods in Chapter 1. Both of you may be held responsible, jointly and individually, for the tax and any interest or penalty due on your joint return. One spouse may be held responsible for all the tax due even though all the income was earned by the other spouse. Exception. You may not have to pay the tax, interest, and penalties on a joint return if you establish that you did not know, and had no reason to know, that there was a substantial understatement of tax that resulted because your spouse: 1) Omitted a gross income item, or 2) Claimed a deduction, credit, or property basis in an amount for which there is no basis in fact or law. When the facts and circumstances are considered, it also must be inequitable to hold you liable for the tax due. One factor is whether you significantly benefited, directly or indirectly, from your spouse's actions. Normal support is not a significant benefit. This exception applies only if your spouse's action resulted in an understatement of tax of more than $500. To the extent the understatement is attributable to claiming an incorrect deduction, credit, or property basis, this exception is available only if your liability for tax, interest, and penalties is more than 10% of your adjusted gross income for the most recent tax year before the deficiency notice was mailed if that income was $20,000 or less (25% if your adjusted gross income is more than $20,000). If you remarried before the end of that most recent year, include the income of your new spouse to see if the exception applies to you. For purposes of this exception, community property rules do not apply to items of gross income (other than gross income from property). Divorced taxpayer. You may still be held jointly and individually responsible for any tax, interest, and penalties due on a joint return filed before your divorce. This responsibility applies even if your divorce decree states that your former spouse will be responsible for any amounts due on previously filed joint returns. Signing a joint return. For a return to be considered a joint return, both husband and wife must sign the return. If your spouse died before signing the return, see Signing the return in Chapter 4. If your spouse is away from home, you should prepare the return, sign it, and send it to your spouse to sign so that it can be filed on time. If your spouse cannot sign because of disease or injury and tells you to sign, you may sign your spouse's name in the proper space on the return followed by the words "By (your name), Husband (or Wife)." Be sure to also sign in the space provided for your signature. Attach a dated statement, signed by you, to the return. The statement should include the form number of the return you are filing, the tax year, the reason your spouse cannot sign, and that your spouse has agreed to your signing for him or her. If you are the guardian of your spouse who is mentally incompetent, you may sign the return for your spouse as guardian. If your spouse cannot sign the joint return for any other reason, you may sign for your spouse only if you are given a valid power of attorney (a legal document giving you permission to act for your spouse). Attach the power of attorney to your tax return. You may use Form 2848, Power of Attorney and Declaration of Representative. Nonresident alien and dual-status alien. A joint return generally cannot be made if either spouse is a nonresident alien at any time during the tax year. However, if at the end of the year one spouse was a nonresident alien or dual-status alien married to a U.S. citizen or resident, both spouses may choose to file a joint return. If you do file a joint return, you and your spouse are both taxed as U.S. citizens or residents for the entire tax year. See Nonresident Spouse Treated as a Resident in Chapter 1 of Publication 519. Married Filing Separately You may choose married filing separately as your filing status if you are married. This method may benefit you if you want to be responsible only for your own tax or if this method results in less tax than a joint return. If you and your spouse do not agree to file a joint return, you may have to use this filing status. If you live apart from your spouse and meet certain tests, you may be considered unmarried and file as head of household, even though you are not divorced or legally separated. If you qualify to file as head of household, instead of as married filing separately, your standard deduction will be higher, your tax may be lower, and you may be able to claim the earned income credit. See Head of Household, later, for more information. Unless you are required to file separately, you may want to figure your tax both ways (on a joint return and on separate returns) to make sure you are using the method that results in lower combined tax. However, you will generally pay more combined tax on separate returns than you would on a joint return because the tax rate is higher for married persons filing separately. If you file a separate return, report only your own income, exemptions (you may not split an exemption), credits, and deductions on your individual return. You may file a separate return and claim an exemption for your spouse if your spouse had no gross income and was not a dependent of another person. However, if your spouse had any gross income, or was the dependent of someone else, you may not claim an exemption for him or her on your separate return. If you file as married filing separately, you may use Form 1040A or Form 1040. Select your filing status by checking the box on line 3 of either form. You must also write your spouse's social security number and full name in the spaces provided. Figure your tax by using the Married filing separately column of the Tax Table or Schedule Y─2 of the Tax Rate Schedules. Separate Returns Special rules apply when filing a separate return. Deductions. If you and your spouse file separate returns and one of you itemizes deductions, the other should also itemize deductions, because he or she cannot claim the standard deduction. However, see Married persons living apart, earlier, and Chapter 20. Community property states. If you live in Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, or Wisconsin and file separately, your income may be considered separate income or community income for income tax purposes. See Publication 555. If you file a separate return: 1) You cannot take the credit for child and dependent care expenses in most instances. 2) You cannot take the earned income credit. 3) If you lived with your spouse at any time in 1992: a) You cannot take the credit for the elderly or the disabled. b) You may have to include in income up to one-half of any social security benefits (including any equivalent railroad retirement benefits) you received in 1992. 4) You cannot exclude any interest income from Series EE U.S. Savings Bonds that you used for higher education expenses. Individual Retirement Arrangements (IRAs). If you make contributions to your Individual Retirement Account, your IRA deduction is subject to a phaseout rule if either you or your spouse was covered by an employer retirement plan, you and your spouse file separate returns, and you lived together during the year. See Deductible Contributions in Chapter 18. Passive activity losses. You may generally offset a loss from a rental real estate activity of up to $25,000 against your nonpassive income if you actively participate in the activity. However, if you are married filing a separate return and you and your spouse lived together at any time during the year, you may not claim this offset for a loss from a rental real estate activity. If you are married filing a separate return and you live apart from your spouse at all times during the year, your maximum offset for rental real estate activities is $12,500. See Limits on Rental Losses in Chapter 10. Joint Return After Separate Returns You may change your filing status by filing an amended return using Form 1040X, Amended U.S. Individual Income Tax Return. If you or your spouse (or each of you) files a separate return, you may change to a joint return any time within 3 years from the due date of the separate return or returns. This does not include any extensions. A separate return includes a return filed by you or your spouse claiming married filing separately, single, or head of household filing status. If the amount paid on your separate returns is less than the total tax shown on the joint return, you must pay the additional tax due on the joint return when you file it. Separate Returns After Joint Return Once you file a joint return, you cannot choose to file separate returns for that year after the due date of the return. Exception. A personal representative for a decedent may change from a joint return elected by the surviving spouse to a separate return for the decedent. The personal representative has one year from the due date of the return to make the change. See Chapter 4 for more information on filing a return for a decedent. Head of Household Your filing status is head of household if you are unmarried or considered unmarried on the last day of the year and you pay more than half the cost of keeping up a home for you and a dependent. The rules to qualify for head of household are explained below. The rules to claim a dependent are explained in Chapter 3. You are considered unmarried on the last day of the tax year if you meet all of the following tests. 1) You file a separate return. 2) You paid more than half the cost of keeping up your home for the tax year. 3) Your spouse did not live in your home during the last 6 months of the tax year. 4) Your home was, for more than half the year, the main home of your child, stepchild, or adopted child whom you can claim as a dependent. However, you can still meet this test if you cannot claim your child as a dependent only because: a) You state in writing to the noncustodial parent that he or she may claim an exemption for the child, or b) The noncustodial parent provides at least $600 support for the dependent and claims an exemption for the dependent under a pre- 1985 divorce or separation agreement. If the qualifying person is your child but not your dependent, enter that child's name in the space provided on line 4 of Form 1040 or Form 1040A. If you qualify to file as head of household, your tax rate will be lower than the rates for single or married filing separately, and you may qualify for the earned income credit and the child care credit. You also receive a higher standard deduction than if you file as single or married filing separately. (You can only claim the standard deduction if you do not itemize deductions.) Note. If you were considered married for part of the year and lived in a community property state (listed earlier under Married Filing Separately), special rules may apply in determining your income and expenses. See Publication 555 for more information. If you file as head of household, you may use either Form 1040A or Form 1040. Indicate your choice of this filing status by checking the box on line 4 of either form. You figure your tax by using the Head of a household column of the Tax Table or Schedule Z of the Tax Rate Schedules. You may be eligible to file as head of household if you were unmarried or were considered unmarried on the last day of the year. You must have paid more than half the cost of keeping up a home that was the main home for more than half the year for you and any of the following: 1) Your child, grandchild, stepchild, or adopted child who is: a) Single. This child does not have to be your dependent. b) Married. This child must qualify as your dependent. However, if your married child's other parent claims him or her as a dependent under the special rules for a Noncustodial parent discussed in Chapter 3 under Support Test for Divorced or Separated Parents, the child does not have to be your dependent. 2) Any relative listed below whom you claim as a dependent. However, if your dependent parent does not live with you, a special rule applies. See Father or mother, later. Parent Brother-in-law Grandparent Sister-in-law Brother Son-in-law Sister Daughter-in-law, or Stepbrother If related by blood: Stepsister Uncle Stepmother Aunt Stepfather Nephew Mother-in-law Niece Father-in-law You are related by blood to an uncle or aunt if he or she is the brother or sister of your father or mother. You are related by blood to a nephew or niece if he or she is the child of your brother or sister. Note. A dependent can qualify only one taxpayer to use the head of household filing status for any tax year. Dependents. If the person you support is required to be your dependent, you do not qualify as a head of household if you can only claim the dependent under a multiple support agreement. See Multiple Support Agreement in Chapter 3. Foster child. You qualify as head of household if you meet the rules above and you can claim your foster child as a dependent. See Chapter 3. Father or mother. You may be eligible to file as head of household even if your dependent parent does not live with you. You must pay more than half the cost of keeping up a home that was the main home for the entire year for your mother or father. You are keeping up a main home for your dependent father or mother if you pay more than half the cost of keeping your parent in a rest home or home for the elderly. Temporary absences. You are considered to occupy the same household despite the temporary absence due to special circumstances of either yourself or the other person. Temporary absences due to special circumstances include those due to illness, education, business, vacation, and military service. It must be reasonable to assume that you or the other person will return to the household after the temporary absence, and you must continue to maintain a household in anticipation of the return. Death or birth. If the dependent who qualifies you to use head of household filing status is born or dies during the year, you still may be able to claim that filing status. You must have provided more than half of the cost of keeping up a home that was the dependent's main home for more than half the year, or, if less, the period during which your dependent lived. Example. You are unmarried. Your mother lived in an apartment by herself. She died on September 2, 1992. The cost of the upkeep of her apartment for the year until her death was $6,000. You paid $4,000 and your brother paid $2,000. Your brother made no other payments towards your mother's support. Your mother had no income. Since you paid more than half the cost of keeping up the apartment for your mother from January 1, 1992, until her death, and she qualifies as your dependent, you may file as a head of household. Nonresident alien spouse. You are considered unmarried for head of household purposes if your spouse was a nonresident alien at any time during the year, and you do not choose to treat your nonresident spouse as a resident alien. Your spouse is not considered your relative. You must have another qualifying relative and meet the other tests to be eligible to file as a head of household. However, you are considered married if you have chosen to treat your spouse as a resident alien. See Nonresident Spouse Treated as a Resident in Chapter 1 of Publication 519. Dual-status and nonresident alien taxpayers may not claim head of household status. Keeping Up a Home You are keeping up a home only if you pay more than half of the cost of its upkeep. You may determine whether you paid more than half of the cost of keeping up a home by using the Cost of Maintaining a Household worksheet, later. Include such costs as rent, mortgage interest, taxes, insurance on the home, repairs, utilities, and food eaten in the home. Do not include the cost of clothing, education, medical treatment, vacations, life insurance, transportation, the rental value of a home you own, or the value of your services or those of a member of your household. Include or exclude these expenses only to figure whether you are keeping up a home. Do not claim them as deductions on your return unless they are otherwise deductible. See Support Test in Chapter 3 for expenses you can use to figure if a person qualifies as your dependent. State AFDC (Aid to Families with Dependent Children) payments you use to keep up your home do not count as amounts you paid. They are amounts paid by others that you must include in the total cost of keeping up your home to figure if you paid more than half. Cost of Maintaining a Household Amount You Total Paid Cost Property taxes $ __________ $ __________ Mortgage interest __________ __________ expense __________ __________ Rent __________ __________ Utility charges __________ __________ Upkeep and repairs __________ __________ Property insurance __________ __________ Food consumed on the premises __________ __________ Other household expenses __________ __________ Totals $ __________ $ __________ Minus total amount you paid ($ __________) Amount others paid $ __________ If you paid more than others paid, you meet the requirement of maintaining a household. Qualifying Widow(er) With Dependent Child If your spouse died in 1992, you may use married filing jointly as your filing status for 1992 if you would otherwise qualify. See Married Filing Jointly, earlier. If your spouse died in 1990 or 1991, and you have not remarried, you may be able to use Qualifying widow(er) with dependent child as your filing status for 1992. This filing status entitles you to use joint return tax rates, the highest standard deduction amount, and other deductions and tax credits. (You can only claim the standard deduction if you do not itemize deductions.) This status does not authorize you to file a joint return. Indicate your filing status by checking the box on line 5 of either Form 1040A or Form 1040 (you may not file Form 1040EZ). Write the year your spouse died in the space provided on line 5. You figure your tax by using the Married filing jointly column of the Tax Table or Schedule Y─1 of the Tax Rate Schedules. You may be eligible to file as a Qualifying widow(er) with dependent child if you meet all of the following tests. 1) You were entitled to file a joint return with your spouse for the year your spouse died (it does not matter whether you actually filed a joint return). 2) You did not remarry before the end of the tax year. 3) You have a child, stepchild, adopted child, or foster child who qualifies as your dependent for the year. 4) You paid more than half the cost of keeping up a home that is the main home for you and that child for the entire year, except for temporary absences. See Temporary absences and Keeping Up a Home, discussed earlier under Head of Household. Example. John Reed's wife died in 1990. John has not remarried. He has continued during 1991 and 1992 to keep up a home for himself and his dependent child. For 1990 he was entitled to file a joint return for himself and his deceased wife. For 1991 and 1992 he may file as qualifying widower with a dependent child. After 1992 he may file as head of household if he qualifies. Death or birth. If the dependent who qualifies you to use qualifying widow(er) with dependent child filing status is born or dies during the year, you still may be able to claim that filing status. You must have provided more than half of the cost of keeping up a home that was the dependent's main home during the entire part of the year he or she was alive.