Filing Status: IRC § 2
An individual may be eligible to file a return as an unmarried individual, head of household, married individual filing a joint return, or as a married individual filing a separate return. The type of filing status impacts the tax rate, the amount of standard deduction, and whether certain deductions or subtractions from income are allowed.
Generally, a person who is not married must file as single, unless head of household is available. This status is determined on the last day of the year. For example, if the taxpayer were to marry on December 31 then his or status is married or married filing separately but not single. On the other hand, if a client were to obtain a divorce on the last day of the year he or she could file as single or head of household.
Head of Household:
The head of household filing status defined in § 2(b) offers an alternative for single filing status for a single individual if the individual is entitled to claim a “qualifying child” or certain “dependents” for whom the taxpayer is entitled to a deduction under § 151 . A person who is married may not file as head of household. See § 7703 for determination of marital status that allows certain individuals who are married to be treated as single. The tax rate for the head of household filing status is usually lower than the single and married filing separately tax rates. A taxpayer who qualifies for the head of household filing status will also receive a higher standard deduction than if the individual had filed as single or married filing separately.
Many of the taxpayers who come to the Clinic have had their head of household status disallowed. In many instances, these taxpayers were audited because of their Earned Income Tax Credit (EITC) claims. Once their EITC claims were disallowed, their Head of Household filing status and dependency exemptions are usually also disallowed.
Requirements for Head of Household
Section 2 (b) and IRS Publication 17 applicable to the year in question should be consulted because some of the requirements for head of household change from year to year. IRS Publication 17 provides guidance as follows:
1. The taxpayer must be unmarried or considered unmarried on the last day of the tax year. A taxpayer is considered unmarried under IRC § 7703 if on the last day of the year if they are legally separated from their spouse, according to the law if the state taxpayer resides in, under a divorce or separate maintenance decree, or the taxpayer meets all of the following tests:
- (a) Taxpayer filed a separate return.
- (b) Taxpayer paid more than half the cost of keeping up taxpayer’s home for the tax year.
- (c) Taxpayer’s spouse did not live in taxpayer’s home during the last 6 months of the tax year. Spouse is considered to live with taxpayer even if they are temporarily absent due special circumstances.
- (d) Taxpayer’s home was the main home of the child, stepchild, or eligible foster child for more than half the year.
- (e) Taxpayer must be able to claim an exemption for the child. Taxpayer may still meet this test if they cannot claim the exemption because the noncustodial parent is allowed to claim the exemption for the child.
An individual is considered unmarried for Head of Household purposes if the spouse is a nonresident alien at any time during the year, and taxpayer chooses not to treat the nonresident spouse as a resident alien. However, the spouse is not a qualifying person for Head of Household purposes.
Even if an individual is considered unmarried for Head of Household purposes because the taxpayer is married to a nonresident alien, taxpayer is still considered married for purposes of EITC. Taxpayer cannot claim EITC unless the taxpayer files a joint return with the taxpayer’s spouse.
2. The taxpayer must have paid more than half the cost of maintaining a home for the tax year.
3. A qualifying person lived with the taxpayer for more than half the year (except for temporary absences, such as school). A qualifying person for the purposes of the Head of Household filing status is defined in § 2(b)(1)(A) to be either a “qualifying child” devinde in § 152(c) or a “dependent” other than a “dependent” described in § 152(d)(2)(H) or § 152 (d)(3)
Documents to Support Head of Household Status
- Copy of lease showing taxpayer as primary tenant*
- Copy of mortgage if taxpayer owns home *
- Paid utility bills for the taxpayer home with canceled checks
- School records listing the qualifying person’s address
- Medical records listing the qualifying person’s address
- Usually, the documents used to support dependency exemptions can also support Earned Income Credit and Head of Household. *If the taxpayer has a PO Box as the address, a copy of Postal form 1093 can be requested from the Post Office to obtain geographical address.
Married Filing Jointly
A husband and wife may file a joint return even though one spouse has no income or deductions and even though they are not living in the same household. (Treas. Reg. sec.1.6013-1 and 1.6013-4) but only if:
- Their tax years begin on the same date,
- They are not legally separated under a decree of divorce or separate maintenance on the last day of the tax year, and
- Neither is a nonresident alien at any time during the year.
However, a U.S. Citizen or resident and his/her nonresident alien spouse can elect to file a joint return if they agree to be taxed on their worldwide income and supply all necessary books and records and other information pertinent to the determination of tax liability (Code sec. 6013(g). Also, a one-time election to file a joint return is available in the year in which a nonresident alien becomes a resident (Code sec. 6013(h).
Election to file joint return: This election is made at the time that the tax return is filed. This election can be amended by filing an amended return (1040X) within the 3 year period for amending the that year’s tax return . Note, however, that filing status cannot always be changed. For example, while a taxpayer can change his or her filing status from a separate return to a joint return, he or she cannot file a separate return for a tax year after filing a joint return for that year, subject to some narrow exceptions, such as a personal representative for a decedent changing a joint return to a separate return if the surviving spouse elected a joint return (the deadline for this is one year from the return due date including extensions–see IRS Publication 17) or certain situations in which the marriage was invalid or there was a forged signature (see I.R.M. 184.108.40.206.7 (08-21-2015).
Married couples are entitled to file joint tax returns but this method of filing should be carefully considered prior to filing if the Taxpayer is involved in divorce proceedings or anticipates divorce proceedings. Taxpayers who file joint returns are jointly and severally liable.
Married Filing Separately:
This is the default filing status for those who are married, not legally separated or not considered married (see discussion above on Head of Household) but do not wish to elect married filing jointly. Generally, this is considered to be the least advantageous to the taxpayer. However, there are other personal or business reasons for a husband and wife to elect married filing separately. One of those situations occurs with the Clinic client when they are anticipating a divorce or there is spousal abuse.
Joint return after Filing Separate Return: For some of our clients, the one or both of the married couple filed separate returns. Hindsight indicates filing jointly may have been more advantageous. Treas. Reg. Section 1.6013-2 provides the IRS’s guidance on when this can occur.
In general, an individual who files a separate return for a taxable year for which a joint return could have been made by him and his spouse under section 6013(a) can amend that return. This period is generally the 3 year period to amend the return from the date of required filing without considering any extensions granted to either party. There are many complex rules provided for in the above regulation, however these are rarely seen in the Tax Clinic.
Limitation on making the Election: A joint return under I.R.C. section 6013(b)(1) cannot be elected:
- After July 30, 1996 unless the full tax is paid due on the separate returns the full tax due before filing the joint return.
- After expiration of the 3 year period from the last day prescribed by law for filling the return without regard to any extensions of time granted to either spouse; or
- After there has been mailed to either spouse, with respect to that year, a notice of deficiency under I.R.C. section 6212, if either spouse files a petition with the Tax Court timely; or
- After either spouse commences a suit in any court for recovery of any part of the tax for that taxable year; or
- After either spouse has entered into a closing agreement under section 7121 as to that taxable year, or after any civil or criminal case arising against either spouse as to that taxable year is compromised under I.R.C. 7122.
The Tax Court has ruled that a couple could elect to file a joint return even though the IRS had previously prepared and filed returns for the husband with a status of married filing separately (JU.V. Millsap, 91TC 926 (1988). The IRS filing of substitute returns did not bar the taxpayers from contesting whether the deficiency or the IRS’s choice of his filing status.
|Internal Revenue Code|
|IRC § 2||Definitions and Special Rules|
|IRC § 7703||Determination of marital status|
|Treas. Reg. § 1.2-1||Tax in case of joint return of husband and wife or the return of a surviving spouse (4/00)|
|Treas. Reg. § 1.2-2||Definitions and special rules (4/00)|
|IRS Forms and Publications|
|IRS Publication 17||Chapter 2 Filing Status|
|Tax Topic 353||Filing Status|
Flowchart for Determining Appropriate Filing Status