Without knowing the right tax filing status, you could end up paying more tax than you should or worse, you could end up filing for a wrong one. Selecting the right tax filing status can have a great impact on the tax benefits that you receive; the amount of taxes that you pay or the amount of your standard deduction.
Currently, there are five filing statuses for you to choose from. Most people can claim a filing status erroneously but in good faith. The filing status that is mostly filed in error is the “Head of Household” status.
In choosing the right filing status, firms such as AP Tax Group advice that you consider the following:
- Marital status. In considering the marital status, one must realize that the status of the person on the last day+ of the year represents his or her status for the entire year.
- Choices/options. At certain times, a person can fit into more than one filing status. In this case, one is free to choose the status that can give an individual the most benefit. It could be a filing status that affords a person of more tax benefits or a filing status that has the lowest taxes.
- Single Filing Status. If you have not been legally married, separated or divorced, then you can claim the Single Filing Status. Some have erroneous beliefs that being legally separated or divorced can afford them the single filing status.
- Married Filing Jointly. To some extent, this Married Filing Jointly status has some advantages over Married Filing Separately. Often, however, the differences in the taxes are so small that you might not even consider this. However, for couples who have separate tax brackets and would want to afford the same tax benefit when the other can and the other cannot, this status becomes beneficial.
- Married Filing Separately. Almost always, married filing jointly is the status that would benefit couples. In special circumstances, however, the status Married Filing Separately becomes more practical. We can consider the case of tax debt. When a partner has a tax debt, filing under the status Married Filing Separately makes the other partner liable for the same debt. This status, however, has some disadvantages over advantages on some couples. For couples filing separately, the deduction or tax exemption can only be applied once. If this takes effect, only one in the couple can list the child as a beneficiary to apply for a tax exemption.
- Head of Household. This status is considered to be the most filed in error. That is because most people think that this status applies to the breadwinner of the family. What most miss out is that the Head of Household status only applies to individuals that contribute equal to or more than half of the household expenses. Thus, this status can be filed as an alternative to the Single Filing Status if applicable.
- Widower with Dependent Child. This status applies to those whose spouse died during the preceding year of filing and those who have a depended child.
Tax is a crucial part of an economically strong state or country. Though they may seem a burden to people in general, choosing the best filing status allows you to make the taxes work for you rather than against you.