 Income tax 2022-2023 filing status software example problem. Let's do some wealth preservation with some tax preparation. Here we are in our Form 1040. We're using LASERT tax software to populate it. You don't need tax software to follow along, but if you have access to tax software, it's a great tool to run scenarios with. Support Accounting Instruction by clicking the link below, giving you a free month membership to all of the content on our website, broken out by category, further broken out by course. Each course then organized in a logical, reasonable fashion, making it much more easy to find what you need than can be done on a YouTube page. We also include added resources such as Excel practice problems, PDF files and more like QuickBooks backup files when applicable. So once again, click the link below for a free month membership to our website and all the content on it. You can also get access to the Form 1040 related schedules, related forms at the IRS website, irs.gov, irs.gov. We're focused in this time on the filing status, which is right up top on the Form 1040 where we have the single filer, the married filing joint, married filing, separate MFS, Head of Household HOH, Qualifying Surviving Spouse, QSS. So we'll go through some scenarios on some of these items. Down below we've got our filer starting off the single filer, Mr. Anderson address down below, no dependence at this point in time. For the income, we're just going to stick at the 100,000 W2 income for our generic start point. And then down below we're just going to have the standard deduction, the 12,950, getting us to the taxable income of 87,050. Now the impact of changing the filing status on the actual tax equation will mainly be here in the standard deduction. So notice this is kind of linked to the calculation of the standard deduction. We're going to talk about the standard deduction in a future presentation. So we'll dig into that a little bit more in the future and then it has an impact on the actual tax calculations because we have a progressive tax system and you would expect there would be different tables depending on the filing status, most easily seen if you're going from a single filer to a married filing joint, then you would think that the income levels will be like doubled or possibly could be and therefore you'd have to kind of adjust your progressive tax tables to kind of fix that whole system. So let's go back to the first tab and focus mainly up top on the status. So the single status, and this is my thought process with the statuses, usually would be your first thought is someone either married or not married, right? And if they're not married, then the options that they have available to them would either be single, that would be the worst option for the purposes of tax filing at least and then if they could step up, they would step up to the head of household which could give you added benefit in terms of the standard deduction and possibly the tax tables but you can only do that if normally you had a qualifying dependent in the mix. If you're married and then you could have a step up from there to the qualifying surviving spouse but that would be a rare situation where you had a married couple, hopefully it's a rare situation and one of them passed away and then you'd be looking at whether or not they qualify for the surviving spouse. If they're married, then they can't jump back to single or head of household unless considered separated or divorced but rather have to then choose the married filing joint which is the normal option most people will be choosing. When married, it's usually going to come out to be most beneficial or married filing separately which might be chosen under some scenarios possibly in a situation where one spouse is thinking the other spouse isn't being honest with their taxes or something and maybe they want to separate for that reason or they just want to separate their returns or maybe in some cases it would come out better tax wise in total to file married filing separately but that's fairly rare of a situation on that third one. Note that you could again have different scenarios in terms of the community property states versus non-community property states in terms of how you would handle married filing separately so you got to make sure that you understand what the situation would be if someone wants to file in that area but usually people would be filing married filing joint when married so notice here we got a single filer and they're not married so they're locked into the single file or nothing else they can really do they're on the worst filing status because there's nothing that's going to pull them up from that status because they're not married and they don't have any dependence so then now if they had a qualifying dependent which would usually be down here they might be able to move up to the head of household so let's add a dependency what that would look like so now we've moved the status from single over to the head of household and everything else is the same up top for the tax payer and we don't have a spouse situation but now we have a situation where we have the dependent down here which is normally what you would kind of expect to see so if you're talking if you're thinking about talking to a tax payer and you're like okay what's the filing status if they're single if they're not married then the question would be are there dependence if there are dependence then it's possible quite likely possibly that they can move up from the single to the head of household now note this is often where there's kind of confusion or gray area if there's split custody in a child type of situation where you have two parents that have some kind of split custody situation because note that we can normally only have a dependent being claimed in one area so basically from a tax standpoint the IRS doesn't want to have two people getting the benefit of the one child and the benefits that could be gotten from a child from a tax standpoint is if they're a single filer they can move up the status to head of household which would have a benefit possibly on the standard deduction if they're taking the standard as opposed to the itemized deduction and possibly to the taxes on the tax calculations from the calculations there as well there could also be changes to thresholds in terms of income thresholds possibly from the calculations to credits and deductions now note if there's multiple children that are involved then there's not going to be any added benefit from the standpoint of filing status so if someone was single and they had like one dependent then that might be that would be possibly enough to push them up depending on the circumstances from single to head of household if there's another dependent involved then you might get a benefit from the dependent tax benefits such as possibly a credit this one being a qualified for the child tax credit which we'll get into later so there's other things involved but right now we're just focusing in on the movement from a single to head of household so that usually involves one you know qualifying usually dependent in some cases you might have a situation where they don't actually have to be a dependent so if they're in a situation where they don't where there aren't actually your dependent and that's because of like those kind of unusual scenarios here's just a recap of them so we're saying okay we're going to kind of go ahead of household but we've got this unusual scenario where they're not our dependent for example your unmarried qualified child who isn't your dependent your married qualified child who isn't your dependent only because you can be claimed as a dependent on someone else's now 2022 return your qualified child who even though you are the custodial parent isn't your dependent because of the rule of children of divorced or separated parents now that's kind of unusual but if that was the case then you're not going to see it down here so if you were to just remove the dependent down here and still have a head of household claim so if I was to say I'm just going to make this let's say inactive right now well just delete it if I go back on over now I've got a head of household claim but nothing on the face of the return indicating a qualifying factor because I don't have the dependent because they don't qualify as a dependent so then I would have to put them basically right here so they would basically go right here on the form that's unusual but might come up so here we have an example head of household and this would be the qualifying kind of factor that we're putting into play here even though there's not a dependent down below okay so now let's move up let's actually go back to just where we were before and then we'll move to a married status so I'm going to say let's go back to just the single status so I'm going to go back to single boom and then let's move up to a married filing joint situation so now we're going to say they get married now if they get married anytime in 2022 even if it's in December then you would count it as married so that's that cut off kind of question that comes into play with regards to getting married then as long as it happened within the tax year in this case 2022 it would be moved it would be within married filing joint possible or married filing separate if they are married so that's kind of a consideration you want to keep in mind if anybody asks you about tax planning and being married oftentimes getting married is a tax benefit if you're like in the middle income kind of area because the standard deductions will double typically and so will the and so will the tax tables will typically be beneficial but if you're on the low income and people are getting the child tax credits and the earned income tax credit it's possible you end up in a situation where it's not beneficiary from a tax basis doesn't mean you don't want to do it but you might want to think okay where should I have it in 2022 with the current tax year or maybe have another tax year without getting married and plan it after that time or something like that right so in any case let's move it up to married so now of course moving the filing status to married you'd be pushing it over here and of course then you would expect that you have a spouse involved another social security number involved on the tax return and the implications down below would be on the standard deduction increases significantly we'll talk more about the standard deductions later but you can see a big jump there which is indicated in this little box to the left and on page 2 you can have a big difference in terms of the tax rates as well because the progressive tax tables will be different from married to single now of course when you think about people getting married from a projection standpoint you have to think okay yeah the standard deduction got doubled but before you had two tax returns that both had so the question is when you combine the incomes together and what not are you are you better or worse off from a total tax standpoint the two tax returns to separate entities now being combined into one entity and so those projections you got to keep that in mind when you're doing those kind of projections as opposed to if you're moving from single to head of household where you're really dealing with just one person at that point in time or now you have a dependent possibly but when you're going from obviously single to married filing joint you got two tax returns that you're now putting together so when you're trying to think of would you be better off with two tax returns versus one you got to take that into consideration now of course the other option is to file married filing separately if marriage you can't go back to single or head of household unless divorcing or separating so let's go back on over and say okay let's go to let's go to married if we go to married filing separate this is what it looks like up top filing status now we've got the married filing separate status and down below we don't have the spouse located here but rather you know up top to indicate the other factor involved we've got the social security number here so obviously from the IRS's perspective they would expect then if this spouse was filing married filing separate that the other spouse would also be filing that way so they would expect you would think to have another return yeah maybe I'll file a federal income tax return and this will help them to kind of tie that in and say okay both spouses are doing that if the other spouse filed single and this spouse filed married filing separate you would think that the IRS just in terms of their machine just in terms of their computer would say hey wait something funny is happening here now as you would expect with the rates down below the standard deduction is going to go back down to what it was in a single and the tax rates are going to go back similar to what you would expect on a single area but married filing separate is not the same as filing single so you want to make sure to keep that in mind if people are asking questions in terms of well if I get married then if I lose some of the benefits that I had while being single such as possibly benefits for the child tax credits and the income tax credit well then I can always just bounce back to basically being single or head of household for taxes by using the married filing separately you can't basically can't do that because the married filing separately will likely not give you the same kind of benefits for those types of things so because the government is going to be wary of people choosing between married filing joint or married filing separate just to take advantage of certain credits like those kinds of credits so they kind of eliminate them in essence when you file married filing separately so be careful of that also be careful that the way you treat married filing separately could differ depending on state law whether you're in a community property state or not so it could be a little kind of confusing in terms of how to file married filing separate now note that remember that the idea of getting married at least from a legal standpoint from a contractual standpoint is now that you're a partnership you're like one legal entity so it's supposed to be kind of difficult from that perspective to file separately because you're supposed to be one kind of legal entity would be expected you're filing married filing joint you guys are doing a joint file so to kind of parse things out and split them is a little bit you know unusual that's not what normally happens but you know you could do that under certain circumstances so that is that one and then you've got of course the qualifying surviving spouse so if in the year of 2022 someone a spouse passed away that wouldn't be the date that you would be filing the qualifying surviving spouse generally you'd still be filing married because the second spouse would still have income or possibly could during that year so you'd need at least one more year the final year for that spouse to file and you'd get the benefit of having a married filing joint return in the year of death of one of the spouses and then in the year after the question is is there a qualifying dependent generally to qualify as qualifying surviving spouse which would be a better status than head of household or single so that would be the way to go if you can if not then you're going to bounce back most likely to single because you don't have a qualifying dependent which would move you up to head of household or surviving spouse so surviving spouse being better than the head of household so let's take a look at that so now we've got the qualifying surviving spouse and in that case you would expect then to have generally a dependent down here in order to hit that qualification and if you didn't have the dependent then you would expect you'd be bouncing back to single after that so I basically put in that the year of death was prior was 2021 because again if the year of death was 2022 you'd be filing married filing joint so then after that year of death then the question is should you file as we saw single head of household or qualifying surviving spouse and you would think that you would have that dependent in order to do that third one so once we get to as we looked at these kind of dependence notice that we had some interrelationships here between the filing status and the dependence and then the standard deductions as well as the tables on the second page so in future presentations we're going to focus more on the standard deduction so when we dive into the standard deduction we'll also be touching on the filing statuses again and and so there's going to be that and then of course in the future we'll also talk about dependence in terms of who qualifies for the dependence because some of the rules that we looked at is we're like well if someone qualifies as a dependent well now the question is who qualifies as a dependent so when we think about the dependence then we'll also think about the benefits of the dependent which could include a change to the filing status but that's not the only possible benefit of the dependent the other ones being like credits that might be involved with the dependence as well so we'll talk about those in future presentations and we'll also when we get into those items we'll kind of double check our numbers with our tax formula in excel so we can see it in a formula basis too