 Income tax 2023-2024 filing status. Get ready and some coffee so we can lessen the sting of the iris smack with income tax preparation 2023-2024. First, a word from our sponsor. Yeah, actually we're sponsoring ourselves on this one because apparently the merchandisers, they don't want to be seen with us. But that's okay whatever because our merchandise is better than their stupid stuff anyways. Like our Accounting Rocks product line. If you're not crunching cords using Excel, you're doing it wrong. A must-have product because the fact as everyone knows of accounting being one of the highest forms of artistic expression means accountants have a requirement, the obligation, a duty to share the tools necessary to properly channel the creative muse. And the muse, she rarely speaks more clearly than through the beautiful symmetry of spreadsheets. So get the shirt because the creative muse, she could use a new pair of shoes. If you would like a commercial free experience, consider subscribing to our website at accountinginstruction.com or accountinginstruction.thinkific.com. Most of this information can be found in the line instructions section of form 1040 instructions tax year 2023 which you can find on the iris website iris.gov irs.gov. We're considering filing status now such as single versus married versus head of household and so on. Anything we're thinking about with regards to taxes, we want to envision what will be the impact on the tax itself. Easiest way to do that envisioning the tax equation and what are the primary line items that will be impacted on it from in this case filing status. And then what will be the rippling effect of those changes on that line item to the rest of the equation. So for example, if we were going from the filing status of single to head of household or head of household to married for example, we will have changes in the standard deduction, which is the deduction that we would take if it was greater than the itemized deduction. We'll talk more about that later. And then we would have changes in the tax calculation, the actual rates or process of calculating the tax on the taxable income. Because as we discussed before, we do not have a flat tax, but rather a progressive tax. And the taxes that are going to be applied will be dependent upon filing status such as single, head of household, married and so on. Obviously changes in those two line items could have further rippling effects throughout the rest of the tax return. Okay, so if we're looking at the actual tax form, the standard deduction is going to be here on line 12 and it'll show you the changes that we have for the standard deduction and the single file or 13,850. If you can memorize that number, which will change from year to year, you can then double it to get to the married filing. So then you can remember one thing, right, the single double it to get to the 27,700. And then the head of household is going to be in between those two 20,800 in this case. And if you have people that qualify for added standard deduction amounts because they're over an age limit or blind, you can have different ones from there. We'll talk more about the standard deduction in future presentations. Just noting now, filing status will have a big impact on that portion or calculation of the taxes. Filing status. Check only the filing status that applies to you. Obviously we cannot have more than one filing status and our objective is to pick the filing status which we qualify for, which provides the lowest taxes. So the ones that will usually give you the lowest tax are listed last. They include married filing separately, single, head of household, married filing jointly and qualifying surviving spouse. So they tried to list them from the least favorable status to the most favorable status for taxes at least. Obviously qualifying surviving spouse is not a happy situation in life, but it could be beneficial with regards to the taxes. Now in reality, it doesn't always go in this order. You can imagine situations, for example, where filing head of household would be more favorable than married filing jointly. So this is just a general rule going from left to right. In practice, when we're thinking about filing statuses, we can kind of break them out to the potential statuses if we're unmarried versus the statuses if we are married. So if we are unmarried, then typically we have the single filing status or the head of household filing status. The head of household filing status typically needs some kind of dependent in order for us to step up to the head of household from single. Single is basically kind of like the worst filing status. And then if you're married, then you have the choice between married filing jointly, which is the typical filing status and married filing separately. Now the reason they put married filing separate over here as less favorable than single, I believe, is that when you file, when you're married, you can't really jump back to single. You can't say, well I'm married, but I should have the choice now to file as a joint person or as a separate person and have all the same kind of statuses as I did with single. That's not really how it works because if they let you do that, then you can try to game the system with credits and whatnot by kind of shifting your income between the two people. And the idea of being married is that now you are one entity in essence. So that's the idea of married filing joint. So if you go from married filing joint to married filing separate, you might lose some of the capacities to take some of the credits because the IRS is skeptical that you're going to do some manipulative stuff. So you have to be careful when you're talking about planning of someone going from single to married and I know you don't really want to, of course, make that decision based solely on taxes or even primarily on taxes, but there could be a significant tax implication. Married filing joint usually resulting in a better situation for more well-off individuals at least, but if there are credits, especially refundable credits involved such as a child tax credit and earned income tax credit and possibly education credits, it could actually work out to be unfavorable in terms of a tax situation. So we'll talk more about those at a future point, but that's how you can kind of think of them. Are they married or are they not married? And then group, if they're not married, single or head of household, if they're married, married filing joint is the default or married filing separately, which you have to be quite careful of. And then if someone died, then the question is, are they a qualifying surviving spouse? Okay, let's get into the details. For information about marital status, you can go to publication 501 if you want to dive into more detail. Tip, more than one filing status can apply to you. You can choose the one for which you qualify that will give you the lowest tax. So you might be in a situation where usually these are pretty straightforward, right? I mean, if you're single, you're single. If you don't have a dependent, okay, pretty simple situation. If you're married filing joint, you're married filing joint, pretty simple situation. But you could imagine where there's a question that you might be applicable or you might qualify for multiple statuses. You can't choose multiple statuses. You have to pick one and the objective there would be to pick the one that's going to give you the best benefit from a tax standpoint is the general idea because our general approach for taxes is to pay as little taxes as we're legally required to pay. So single, let's go through them. So if they're not married, the worst filing status is typically single for taxes generally as opposed to, you could say that the married filing separate is worse than that, but you have a choice of filing married filing separate if you're married, right? If you're not married and you don't have a dependent, then the only thing you can file is single, which is usually kind of like the worst filing status. So you can check the single box at the top of Form 1040 or 1040 SR if any of the following was true on December 31st, 2023. So you were never married. You were legally separated according to your state law under a decree of divorce or separate maintenance. But if at the end of 2023 your divorce wasn't final and interlockery agreement, you are considered married and can't check the box. Now this is where the messiness comes into play. So obviously if they weren't married, no problem, single, easy. Well, what if they're married, but now you have questions in terms of they're separated? Well, what does it mean? Were they divorced or were they separated? Did they stop living together? That's when typically you're moving from the federal law possibly to the state law to have to determine what it means to be separated. Because again, if they were married, generally the only classes that they can file for are married filing joint, married filing separate. But if they're separated, divorced, or not married, then you would think they would then qualify for single or possibly head of household depending on if there's a child involved. Okay, so you were widowed before January 1st, 2023 and didn't remarry before the end of 2023. But if have a child, you may be able to use the qualifying surviving spouse filing status. So now instead of getting divorced or separated, there's you're married, but the spouse dies. Well, if the spouse dies, then the question is, do you qualify for a qualifying widow? Which is usually the case if there's a child involved possibly and then if not, then you're going back to the single. So obviously single would be the worst if you qualify for a qualifying widow or widower or whatever they call in it now, then that would be better from a tax standpoint. So married filing jointly. So this would be the default if you're married, of course, and it's usually beneficial better than single. However, when you get into those credits, especially like an earned income credit and a child tax credit, which are refundable, which often have the most benefits for people that have a child, which means we're not talking single, too married, but possibly head of household, someone with a child, too married, then you could have a significant impact and you want to kind of map that out to see what's going to happen from single to married. We'll talk more about that later. So you can check the married filing jointly box at the top of form 1040, 1040 SR, if any of the following apply. You were married at the end of 2023, even if you didn't live with your spouse at the end of 2023. So you might say, well, when is the cutoff date to get married? Well, if they were, if you're married in 2023, even if it's in like December, then generally you're married before the cutoff. So like I say, taxes probably shouldn't be driving your decision to get married or not, but it might be able to drive the decision a little bit to say, should I get married in 2023 or wait till January? If it's a benefit to be married, then maybe you do it in the year that you're looking to get married so you can file married filing joint that year, or maybe if it's not beneficial because of earned income credits and child tax credits, then maybe you wait, you just push it off to the next year and get one more year of possibly higher benefits from those credit. I don't know. So your spouse died in 2023 and you didn't remarry in 2023. So now on the other side of things, you were married, but now the spouse died. They died in the tax year 2023. So it's not like we're not going to say now you're single for 2023. No, you still have married filing joint. That's the better benefit because obviously the spouse that died is still going to have income and whatnot. So it makes sense that you're going to keep the status of married filing joint in the year of death of the spouse typically. So you were married at the end of 2023 and your spouse died in 2024 before filing a 2023 return. So that seems pretty obvious, but if they died in 2024, well then you were married and he or she was alive. I'm assuming that's the guy that died. He had a hard tack or something. But if there's died in 2024, then you're still married for 2023. So I married couple filing jointly report their combined income and deduct their combined allowable expenses on one return. So the idea of being married is that you're two people and you've become one entity, one soul and whatnot. And for taxes, that means you're taxed as one entity is the general idea. You're co-mingling your finances together typically. When you're married, that means you file one return and that's why they have to change all the tables and whatnot for single versus married in terms of the tax rate and the filing status is standard deduction and everything. So they can file a joint return even if only one had income or if they didn't live together all year. However, both persons must sign the return. So both persons sign it. Why? Because you're both basically liable for the return, which causes problems because oftentimes one spouse doesn't know what the other spouse is doing if there's kind of funny business going on with the return. But you're both signing it. The IRS theoretically then can come after both of you, although in those situations you want to think about, you can drill down. We'll talk more about those later. Once you file a joint return, you can't choose to file separate returns for that year after the due date of the return. Okay, so joint and several tax liabilities. So if you file a joint return, both you and your spouse are generally responsible for the tax and interest or penalties due on the return. So it's kind of like a partnership if you think of a partnership type of situation, meaning if you have a business and you take on a partner, the risk of taking on a partner is that the partner can make decisions that basically hold you accountable. You're liable for their decisions. If you're getting married from a contract's perspective, you know, just in terms of the law, a similar situation, right? You've kind of performed a partnership here. You're one entity and so you're both liable for the taxes. That's the general rule. So this means that if one spouse doesn't pay the tax due, the other may have to. Or if one spouse doesn't report the correct tax, both spouses may be responsible for any additional taxes assessed by the IRS. You may want to file separately if, so they're saying, hey, look, you know, if one person is being crooked on the taxes or something like that, then it's going to impact the other person because you're one entity and you're both liable for the taxes, kind of like as a partnership. So then you might file separately so your spouse isn't reporting all of their income. So now you're saying, okay, look, I think my spouse is not doing this correctly. I don't trust them on that or whatever. So now you're going to try to separate as best you can with the filing. And so that's one reason that you might choose to report filing separately. So you can try to be as honest on your taxes as you can even though you possibly don't fully trust your spouse on there. Or you don't want to be responsible for any taxes due if your spouse doesn't have enough tax withheld or doesn't pay enough estimated tax. So see the instruction for married filing separately for more detail. Also see innocent spouse relief under general information. So another argument would be that if one spouse was doing things that the other spouse did not know about, then is there any way that you can relieve liability from the spouse that, ultimately is not at fault in that situation? It's kind of like the victim in essence. And that's when you can get into this innocent spouse relief situation, which kind of goes beyond the normal tax preparation. Hopefully we're not in that case, but that comes up fairly often actually. So non-resident aliens and dual status aliens. Generally a married couple can't file a joint return if either spouse is a non-resident alien at any time during the year. However, if you were a non-resident alien or a dual status alien and were married to a U.S. citizen or resident alien at the end of 2023, you can elect to be treated as a resident alien and file a joint return. So if you're in that situation, you can go to publication 519 for more details at the IRS website, iris.gov, iris.gov. Married filing separately. So now we're on the married side of things. You typically would want to file married filing joint. That's usually the best thing to do, but you could file married filing separately. Can you go back to single? Not usually, right? Is married filing separately like the same thing as single? No, because the IRS is skeptical that you're going to take advantage of some of the credits and whatnot that a single person could take by kind of manipulating possibly the income between the spouses or it's usually not as good. So don't think that you can get married and then just be like, ah, well, it's the same thing. I could just still file married filing separate, which is just like single and possibly still pick up the same earned income tax credit and child tax credit, for example, with the refundable portions to it, right? You could be restricted. So keep that in mind. So check the married filing separate box at the top of form 1040 to 1040 SR if you are married at the end of 2023 and file a separate return. Enter your spouse's name in the entry space below the filing status checkboxes. Be sure to enter your spouse's SSN, Social Security Number, or Individual Taxpayer Identification Number, otherwise known as the I-10, I-T-I-N, in the space for spouses SSN, Social Security Number on form 1040 or 1040 SR. If your spouse doesn't have and isn't required to have a Social Security Number I-10, enter NRA in the entry space below the filing status checkboxes. For electronic filing, enter the spouse's name or NRA if the spouse doesn't have an SSN or I-10 in the entry space below the filing status checkbox. So if you're filing married filing separate, you have to tell them basically who the spouse is is the general concept here because they're going to basically checking out if both of your returns are checking out, right? So if you are married and file a separate return, you generally report only your own income deductions and credits. Generally, you are responsible only for the tax on your own income. Different rules apply to people in community property states. That is very important, okay, so because just note that whether you're in a community property state or not can have an impact on how you're going to be treated when you file married filing separate. So take note what states you are in and again, this is another area of possible specialization. Are you a tax preparer that wants to take on these married filing separate kind of situation or is that kind of something that you don't want to step into especially if you're talking about multiple states and different state situations. So again, you can check that out in publication 555. So however, you will usually pay more tax than if you use another filing status for which you qualify. In other words, if you have the choice between married filing joint and married filing separate, usually married filing joint is going to be an overall benefit for taxes between the two people, the two married individuals involved. Possibly not always but usually. It's not the case that married filing joint will always be more beneficial than the two people before they got married who might be qualifying for head of household status in which case they would possibly could be getting refundable credits like child tax credit refundable portion and earned income credit possibly education credits but once married and they separate and try to file married filing separate which is different than head of household or single then it's usually beneficial to be filing as married joint. So usually if you file a separate return you can't take the student loan interest deduction or the or the education credits and you will only be able to take the earned income credit and child dependent care credit in very limited circumstances. So you also can't take the standard deduction if your spouse itemizes deductions. So in other words, we'll talk more about itemized deductions later but if the itemized deductions are greater than the standard deduction then you have to take the itemized deductions but what if you're married and you have itemized deductions greater than the standard deduction what would you try to do? I'm going to file married filing separate and have my spouse take the standard deduction while I take the itemized deduction or vice versa in which case you're kind of doubling up on the deductions you can't do that. That's why the IRS is really limiting what you can do with the married filing separate because you can see the potential to abuse married filing separate status. So the situation when you might want to file separately see joint and several tax liability earlier that we talked about. Tip, you may be able to file as head of household if you had a child living with you and you lived apart from your spouse during the last six months of 2023. So now we get into the situation again of were you really married or were you kind of separated because you have a child and you've lived apart for a while and therefore head of household possibly could be a more beneficial status because then you could get access to the credits possibly like the earned income tax credit and the child tax credit which could be refundable. So you can see married person who live apart later. So head of household so now they're single not married in other words and the options are either single which is the worst or head of household, head of household usually requiring some type of dependent as part of the qualification. So head of household you can check the head of household box at the top of form 1040, 1040 SR if you are unmarried and provide a home for certain other persons you are considered unmarried meaning usually a dependent right. You are considered unmarried for this purpose if any of the following applies you were legally separated according to your state law under decree of divorce or separate maintenance at the end of 2023 that's where the state law comes into play we're talking about federal income taxes but when you're talking about marriage law that often reverts down to the state right so if but if at the end of 2023 your divorce wasn't final and interlockery decree you are considered married and then you are married but lived apart from your spouse for the last six months of 2023 and you meet the other rules under married persons who lived apart so now you might qualify there based on you know just this information possibly you know as a separate instance from the state right situation because again we're talking about federal taxes which usually depends on marital status and then maybe you know you qualify because you are married but lived apart and so on and then we have you are married and your spouse was a non-resident alien at any time during the year and the election to treat the alien spouse as a resident alien is not made so check the head of household box only if you are unmarried or considered unmarried and either test one or test two applies so if you're not married then your options are single or head of household head of household would be beneficial how could we get there we'll test one you paid over half the cost of keeping up a home that was the main home for all of 2023 of your parent whom you can claim as a dependent so we'll talk about dependency later except under a multiple support agreement see who qualifies as your dependent later your parent didn't have to live with you so note the parents with this living with you kind of situation becomes a little bit tricky because sometimes your paying support on the parents but they're living in a care facility to help give them more full time care so test two you paid over half the cost of keeping up a home in which you lived and in which one of the following also lived for more than half of the year so now you have this living situation if half or less see exception to time lived with you later so number one any person whom you can claim as a dependent that would be the most common situation right you have a dependent living with you you paid over half the cost of keeping up a home in which you lived and in which one of the following also lived depends on who lived with you can claim as a dependent but but don't include also let's do that again any person whom you can claim as a dependent but don't include a your child whom you claim as your dependent because of the rule for children of divorced or separate parents under the quality qualifies as your dependent later so these are exceptions to the general rule somewhat rare be any person who was your dependent only because the person lived with you for all of 2023 or see any person who claimed as a dependent under a multiple support agreement see who qualifies as your dependent later so those are the exceptions to your unmarried qualified child who isn't your dependent so now you have unmarried so obviously if the person is married normally they would be a not a dependent right because now they're married they're not a dependent so your unmarried qualified child who isn't your dependent so now they're not your dependent and that's why you have an exception because usually they would need to be a dependent in order to qualify for head of household that would be the usual situation here we have the exception your unmarried qualified child who isn't your dependent and then three your married qualified child who isn't your dependent only because you can be claimed as a dependent on someone else's return again somewhat of a rare exception and then four your qualified child who even though you are the custodial parent isn't your dependent because of the rule of the children of divorced or separated parents under who qualifies as your dependent and then if the child isn't claimed as your dependent enter the child's name so we have these exceptions to being the dependent here if they're not a dependent they're not going to be on the tax return so if they're not under the dependent section of the tax return but you're still claiming head of household status then you have to notify the IRS hey look I still qualify for head of household because of one of these somewhat unusual circumstances and give the information of the person who's not a dependent but helps you qualify for head of household so if the child isn't claimed as your dependent enter the child's name in the entry space below the filing status check boxes if you don't enter the name it will take us longer to process your return and finally let's go to the qualifying surviving spouse so remember with the filing status is you have the unmarried single or head of household the married which means you're either married filing joint or you choose married filing separate and then in the special case then we have the surviving spouse meaning someone has died one of the married people has died and then the question is do you qualify for the qualifying surviving spouse which would be more beneficial typically than either defaulting back to single or head of household ok so you can check the qualifying surviving spouse box at the top of form 1040 or 1040 SR and use joint return tax rates for 2023 if all of the following apply meaning you're basically getting the benefits as though you're married filing joint the best filing status even though now you're in essence single you're unmarried in that you're a qualifying spouse so one now remember when we think about this if someone dies you're married you're married spouse dies in the year of death then you're typically still filing as married right and then the question is well what about the year after the spouse has died well you think you default back to either single or head of household however possibly to give a benefit to people that are widow or widower then you could that's where the status falls in ok number one your spouse died in 2021 or 2022 and you don't remarry before the end of 2023 so if you get married in 2023 then your choices are married filing separate you can't qualify for a surviving spouse in that case too so you have a child or step child not a foster child whom you can claim as a dependent or could claim as a dependent except that for so now again usually the circumstance would be you have a child whom you can claim as a dependent and then the exceptions which which could still qualify a the child had gross income of 4,700 or more be the child filed a joint return or see you could be claimed as a dependent on someone else's return if the child isn't claimed as your dependent enter the child's name in the entry space below the filing status checkbox so now you're saying ok obviously normally the situation would be you would have a child that is a dependent but in these weird and these more unusual circumstances where they're not a dependent it's going to be on the tax return as a dependent so you're going to have to basically include them so the iris knows that you have them there for the purpose of qualifying of a surviving spouse situation instead of reverting back to single or head of household so if the child isn't claimed as your dependent enter the child's name in the entry space below the filing status checkbox so if you don't enter the name it will take us longer to process the return this child lived in your home for all of 2023 if the child didn't live with you for the required time see exception to time lived with you later so 4 you paid over half the cost of keeping up your home 5 you could have filed a joint return with your spouse the year your spouse died even if you didn't actually do so in other words when the spouse dies typically you would file married filing joint now you might not have why not because you might have chosen to file married filing separately but you would have qualified to file married filing joint on the year of death and then the year after death is the question as to whether you would start to file as a qualified widow or widow were more beneficial status than filing as single or head of household so if your spouse died in 2023 you can't file as qualified surviving spouse instead see the instructions for married filing jointly in other words if they died in 2023 then you're most likely still filing married filing joint or possibly could decide filing married filing separate it's not till 2024 in that case where the question would be do you revert back to single or head of household or could you qualify for a qualified surviving spouse