Articles

What is my Tax-Filing Status? by Jack Winter, CPA/PFS, CFP

View Jack's Profile
Posted on August 24, 2017 by Jack Winter

When U.S. taxpayers file their income taxes each year, they must choose a tax-filing status to ultimately determine the amount of taxes they must pay to the IRS. In some instances, selecting a filing status is easy; under certain circumstances, however, more than one filing status may apply. It is critical that taxpayers carefully consider their options and choose the appropriate filing status that applies to them and will allow them to lower their tax bills.

Select from Five Filing Statuses

The filing status individuals select will help to determine 1) the allowable deductions and exemptions they may use to reduce their tax liabilities as well as 2) their tax bracket, which refers to the rate of tax an individual will pay based upon his or her income. Under current law, there are seven tax brackets with rates of 10, 15, 25, 28, 33, 35 and 39.6 percent. Generally, the higher the income one earns, the higher the tax rate, and the more he or she will potentially owe in taxes.

  1. Single filing is reserved for those individuals who are not married, or who are currently divorced or legally separated under state law. The IRS requires taxpayers to select single status when they do not meet the criteria of the other four statuses.
  2. Head of Household filers are typically not married on the last day of the year, but they do pay for more than half of the cost of keeping up a home for themselves and another qualifying person, including a dependent child who has lived in the home for at least six months during the calendar year. This status typically applies to single parents with custody of minor children.
  3. Married Filing Jointly applies to couples who were married on the last day of the prior year and who choose to file one joint tax return between them.
  4. Married Filing Separately is an option for married couples who wish to keep their tax liabilities separate and for whom filing two separate tax returns will result in a lower tax burden than if they file jointly.  The IRS recommends that taxpayers prepare their returns both ways before making a final selection.
  5. Qualifying Widow(er) with Dependent Child is reserved for those taxpayers whose spouses’ died in the prior year and who have a dependent child.

 

When a taxpayer qualifies for more than one tax filing status on the last day of the year, the IRS allows him or her to select the status that results in the “lowest tax obligation.” Making this conclusion will often require taxpayers to speak with their accountants to run the numbers for each filing status and determine which estimate is more financially advantageous for an individual’s specific circumstances.

The advisors and accountants with Berkowitz Pollack Brant work with individuals, family, estates and business owners to navigate complex laws and implement tax efficient strategies intended to build and preserve wealth.

 

About the Author: Jack Winter, CPA/PFS, CFP, is an associate director with Berkowitz Pollack Brant’s Tax Services practice, where he works with individual taxpayers and entrepreneurs on estate planning, tax structuring and business consulting.  He can be reached at the CPA firm’s Ft. Lauderdale, Fla., office at (954) 712-7000 or via email info@bpbcpa.com.