 Income tax 2022-2023 filing status. Let's do some wealth preservation with some tax preparation. Most of this information comes from the Form 1040 Instructions Tax Year 2022 line instructions, which you can find on the IRS website, irs.gov, irs.gov. When we're looking at the filing status, you might think first by looking at it, it's just kind of an informational thing. It's at the top of the tax return. It's not dealing with any numbers, but it does, of course, have an impact, and often a significant impact. 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. On the calculation, if we look at that in the form of the income tax formula, the first thing that should come to mind when you're changing the filing statuses would be the impact on the standard deduction if we're gonna be taking the standard deduction as opposed to itemizing. So we'll have different standard deductions based on married filing joint, single, head of household, and so on. Also could have an impact on the tax. Collecting taxes. Traits, we also could have other impacts on phase outs and whatnot, but these are probably the main two things that will come to mind. We'll talk more in detail about the standard deduction in future presentations, but it is gonna be tied significantly to the filing status. If you look at the actual form 1040, this being a clip from page one of 1040 here, on the left hand side, you'll have this standard deduction given you kind of a brief scenario of the different standard deductions which will be tied to the filing statuses, which are single or married filing separate, married filing joint or qualified surviving spouse, head of household, and so on. So given that filing status, check only the filing status to the- Status. applies to you, the ones that will usually give you the lowest tax are listed last. So obviously when we're thinking about the filing statuses, you might want to kind of have them in your mind in terms of the most beneficial to the least beneficial. Usually I would categorize them in my mind to try to just kind of be able to recall them as easily as possible to run through different scenarios with individuals. I would think of them as the filing statuses that could be applied to people that are unmarried and the filing statuses that could be applied to people that are married. And then you've got some great area between the two in terms of when is someone married, if they're separated, are they're actually divorced for terms of the tax preparation. But generally on those two major categories, you can then think of the hierarchy of which would be best to worst filing statuses if you're not married, single typically being the worst and then head of household usually being better. And if you're a surviving spouse or something like widow or widower was the terminology we used to use before, that would be more of an unusual type of situation. But for taxes, it would be better than a single generally or head of household oftentimes, although in practice that would be a sad situation in life given the situation to qualify for qualified widow or widower. If you're married, married. Then you have the option of married filing joint. Oftentimes people think that I should be able to go back from married filing joint to single if I want to. I should have the choice to do that. But you don't typically because the idea of being married from a legal standpoint is that now you've kind of treated as one entity. So the idea would be that now you're gonna be taxed basically as one entity or you can choose to file married filing separate which is not exactly the same thing as single. There's a big differences, a lot of big differences. So you might think that, well, I can just get married. And if there's a negative tax implication which there can be sometimes especially when dealing with some of the refundable tax credits, you might think, well, I could just file married filing separately and that'll be just like single but that's not necessarily the case. And so that's something to be aware of and to make clear both to yourself and to clients when thinking about marriage. The general idea again with marriage you can debate it on different levels when we talk about married filing joint. Sometimes people get into the debates on different types of marriage and that kind of stuff. And you could think about in terms of what does marriage mean on a social level and what does marriage mean from a contractual kind of level in terms of the taxes. When we're talking about taxes we're basically talking about a contractual type of agreement in essence where you had two individuals before which are in essence thought of as kind of one entity with regards to taxes with that kind of contractual agreement. So you can't just really go back to single unless you have been separated, for example, or divorced. Okay, so married filing separately you've got the single status, head of household, married filing joint and qualifying surviving spouse. So they changed the terminology used to be qualified widow, widower before. Now they're saying it's a qualified surviving spouse. Okay, so tip, more than one filing status can apply to you you can choose the one that will give you the lowest tax. So we'll go into some of the questionnaires in terms of a filing status. We'll talk about that a little bit more in depth later. Usually it's a pretty straightforward thing meaning if you're single obviously it is what it is not much of a decision process there. Can you go from single to head of household? Well, that's gonna be dependent possibly on a dependent as one of the conditions that might be able to pull you up. There's gray area there oftentimes because if you have a separation of people or if you have a child and a non-married couple then the question is, well, who's gonna be able to claim the child? And if one person claims the child it could up the filing status but you might have a situation where the child has split custody which is a common thing these days. And then the question is well then who would be able to claim the child and whatnot. So that's where the gray area comes into there if you're in married filing joint it's pretty straightforward situation if you're married then you'd usually go married filing joint unless you wanna do married filing separate which you might check the tax consequences of the two usually married filing joint is the better route from a total tax standpoint but you might have other reasons to go married filing separate and you could check out if it's a better for total taxes. And then there's questions as to whether or not someone is married or legally separated and basically divorced for the purposes of the tax code in which case if they were they would be going from married to a head of household if they got divorced or something or to single. So those are kind of like the gray areas the gray areas often revolve around custody issue kind of situations where you've got these gray areas and so your idea that I would get in mind is that there's a hierarchy of filing statuses and I would think of them in two categories you've got married and non-married usually it's a pretty straightforward thing to assign the category of the filing status and then where those gray areas apply that's when you dig into the detail and you gotta do some research and make sure that you got things straightened out on it. So for information about marital status you can see publication 501. So single, 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, 2022. Notice the date that we're using here December 31st, 2022, the end of the year. So as a, you know, the end of the year cause things obviously could change throughout the year. So that's kind of an important key sometimes if you talk about someone getting married versus being single then what if someone got married in the middle of the year? Again, we're typically talking was true on December 31st, 2022. So you were never married. So we're talking single status. So if you got married again on December 31st you would have been married for all of 2022. Note that getting married is a huge tax event. So obviously you don't wanna make the decision to get married just based on taxes or I don't think that would be the best thing to do although sometimes people do that kind of thing sometimes but it is something that you would wanna take into consideration cause it can be a shock. Usually we don't wanna have of course, getting married be a negative tax impact because that would be a disincentive to marriage and it's usually not for like most like middle income individuals but you can imagine situations especially with these refundable credits where you have a situation where people get married and they could lose some of those refundable credits and actually being a worse overall tax situation which can be kind of a shock. So if those are like the child tax credit and the earned income tax credit being a couple of the big ones so you wanna kind of be aware of that and then you can plan when you're gonna get married. You could say, okay, well, maybe I'll take one more year of 2022 as filing separate if it's actually a better tax situation and get married maybe in 2023 or something versus if I'm gonna have a benefit of getting married maybe I get married in 2022 so I can get one more that one year within the tax year of getting married or something like that. So you were legally separated according to your state law under a decree of divorce or separate maintenance. So then you can have a situation where what if they were married and then they separated, they got divorced. Divorced. Again, the divorce happens if it happens before the end of the year, December 31st, 2022 then you can file as separated or divorced even though you were technically married up until that point. Now, here's where all the gray area comes in on the divorce side of things because different states have different laws to say when someone is divorced or legally separated. So you can run into these gray areas of, well, these people are married, they didn't have a formal divorce but they've been living apart for a long point in time and then it could come down to, well, does the state law say that they are legally separated and so forth as to whether or not they're under the married category which means they would have to file as you would think married filing joint or married filing separate or if they're legally separated which would mean you would think they would have then the capacity to file single or head of household. That's where the question, that's where the gray area comes in. So, but if at the end of 2022 your divorce wasn't final and interlockery degree you are considered married and can't check the box. So you were widowed before January 1st, 2022 and didn't remarry before the end of 2022 but if you have a child you may be able to use the qualifying surviving spouse filing status. So if you were married and you didn't get divorced but sadly there was, you were widowed, a spouse died then the question is from a filing status standpoint does that revert you back to the filing status of single or does it allow you to get the qualifying surviving spouse qualifying widow, widower usually to get the more favorable filing status of a qualifying surviving spouse you would need to have a child in play. Now if you remarry then of course that would mean if you were able to file as a qualified widow, widower or qualifying surviving spouse what it is now called then you no longer can qualify for that because now you'd be married again which means that you would now be filing as a married filing joint or married filing separate. Those would be your options at that point. All right so married filing joint status you can check the married filing jointly box at the top of the form 1040 or 1040 SR if any of the following apply. So obviously on the married side you were married at the end of 2022 even if you didn't live with your spouse at the end of 2022. So from this standpoint from taxes we can think of marriage as kind of just simply a legal contract, right? So I mean if you're getting married from a tax standpoint now we're saying, okay the marriage happened in 2022 therefore your assets would be thought of as kind of one for that year and your options would then be under the married category of married filing joint or married filing separate. So your spouse died in 2022 and you didn't remarry in 2022. Now if your spouse died in 2022 this also comes into that the category of top with the qualified widow and widower you have the year of death. So in the year of death you could still qualify as being married in that case. So notice it's a little bit wonky on the way that works because we said that when you get married if you get married by December 31st then we're gonna say that you were married for 2022. If a spouse dies anytime in 2022 and you were married then it's not like you revert back because they died in 2022. We're gonna say no you were married you're still married all the way through 2022. And from just the technical standpoint you could see that obviously that one of the spouses that passed away could still have income and whatnot that they would need to be reporting in the year of death. So you would think that obviously you would still have to be applying married filing joint would be generally what you would do in the year of death. And then after the year of death that's when the question is as to whether you would go to single or to qualified widow, widower or what are they calling it now qualifying surviving spouse if there was like a dependent. So were you married at the end of 2022 and your spouse died in 2023 before filing a 2022 return? So that one, once again you were married at the end of 2022. So that's basically the general rule you were married at that endpoint and your spouse died in 2023 before filing a 2022 return. Well, they died in 2023 you were still married in 2022. So even though you didn't file the return because you filed by April 15th or 18th of 2023 you were still married in 2022. So that would be that. So a married couple filing jointly report their combined income and deduct their combined allowable expenses on one return. That's the point of the married filing joint return. You're kind of thinking of yourselves as one entity contracted together the marriage being basically a contractual agreement when you're talking about it from a law standpoint tax law. And so you have the one return. 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 meaning it used to be that it was much more common that when people got married you had a one income household like and the other spouse was raising you know raising the children and whatnot you had a one income household and then you had persons that were working at the same job for a long period of time. So it was a little bit more easy to think about what's gonna happen from a tax standpoint going forward if the job is quite stable and you've got like a one income household and you're not going from job to job. Job, my job, my job. For example, these days that's not so much the case it's quite common that we have the two people working at this point in time and people are moving from job to job oftentimes instead of being in one job for their whole life or something like that. It's quite common for that to be more of the scenario. So you would think then in order not to disincentivize marriage you would get kind of a benefit of getting married because usually that's gonna double things like the standard deduction because now we're gonna say the standard deduction's double and they should adjust the tax rates so that in the event that you have two people coming together that both are earning you know the equivalent amount of money the same amount of money that you wouldn't have a tax disincentive and that often leads to actually a tax benefit you would think for many couples because one of the spouses is likely gonna be working less if they're gonna raise a family and now you've got a doubling of the standard deduction and the tax rates have been adjusted on the unfortunately on the low end that's where funny stuff happens that way because that's where you got the earned income tax credit and the child tax credit of these refundable credits which could actually be reduced when getting married. So it's kind of weird the way it works out that marriage is kind of incentivized for middle and upper income you would think and it's actually kind of possibly the tax could possibly disincentivizing sometimes on the lower income due to the way some of these refundable tax credits kind of work. So we'll look at some examples of that in the future you can see what I'm talking about. So once you file a joint return you can't choose to file separate returns for that year after the due date of the return. So once you file the return as married filing joint you're kind of locked in for that year of married filing joint. So once you file a joint return you can't choose to file separate returns for that year after the due date of the return. So joint and several tax returns. 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. This means that if one spouse doesn't pay the tax due, the other may have to. So that's, it's a partnership. It's kind of again a contractual agreement when we're talking about taxes. So that means if you've got one partner that's not being correct, being dishonest or not reporting the proper tax, then the other partner is liable for that generally. That's how partnerships generally work. So, 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 you believe your spouse isn't reporting all their income 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 it's an unfortunate situation because obviously again, if you get married from a contractual standpoint, then you're kind of tying your finances together. But if you're in a marriage situation and you're saying, I don't think my spouse is going to be reporting all their income properly and I don't want to be like on the hook for that. And I'm trying to separate at least to that degree so that I'm reporting my taxes like honestly to the best of my ability, even though I'm married and I have a partnership contractual agreement and that way then you could try to file that might be one reason why you file kind of separately. So if you're a joint filer, you might want to file separately if there was a tax benefit, total tax benefit to file separately, which isn't usually the case. It's usually married filing joint will be better tax benefit wise overall usually. Or if you're trying to say, hey, look, I want to separate my finances to some degree because I don't think my spouse is being completely honest, that one might be another reason or some people they just, they just want to have separate filings because they want to get separate refunds and they just don't want to mingle their money together. So they don't like, so they want to kind of keep separate stuff that way for some and for that's another reason. So you don't want to be responsible for any taxes due, okay. So we went over that, 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 we're married to a US citizen or resident alien at the end of 2022, you can elect to be treated as a resident alien and file a joint return for more information on that. You can look at publication 519. It's on the IRS website, irs.gov, irs.gov. Then we have the married filing separately, the second option we have for people that are in the married category, married filing joint or married filing separate, married filing joint, usually being the choice. Most people would be beneficial to go through, but married filing separate, check the married file separately box at the top of form 1040, 1040 SR if you are married at the end of 2022 and file a separate return. Enter your spouse's name in the entry space below, the filing status check box. So be sure to enter your spouse's social security number or individual taxpayer identification number in the space for spouses SSN on form 1040 or 1040 SR. If your spouse doesn't have and isn't required to have a social security number or I-10, enter NRA in the entry space below the filing status check box. So if you're filing married, filing separate, you're not gonna basically, you still have the two spouses involved because you're saying I am married is what you're saying there. And so they might still want the information for the spouse, for the partner even though you're filing in essence a separate return because you would think the IRS would be able to look at the spouse's side of things and make sure that they're filing in an equivalent fashion which you would expect the other spouse to also be filing married filing separate. For electronic filing enter the spouse's name or NRA if the spouse doesn't have an social security number or I-10, SSN, I-T-I-N in the entry space below the filing status check box. If you are married and filing 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. Now note that's a big caveat here because if you're in a community property state then you could have different formats on how you're gonna be filed, your return on married filing separately. So you wanna check where you are located if you're in a community property state or not and then if you're gonna be discussing married filing separate options with individuals make sure that you are doing so in alignment with the community property state laws or non-community property state laws. So however, and you can look at publication 555 for more detail there. However, you will usually pay more tax than if you use another filing status for which you qualify. So in other words, married filing separate is usually gonna come out to be less beneficial. That's why most people file married filing joint. They try to kind of remove any kind of manipulations that you might be able to do by filing separately because there's phase outs and thresholds for different deductions and credits which they just basically wipe out if you filed married filing separate because they don't want people to take advantage of these different filing thresholds. So that means that you lose the capacity to take advantage of some of these deductions and credits oftentimes. We'll talk about some examples of those once we dive into some details. So also if you file a separate return, you can't take a student loan interest deduction or the education credits and you will only be able to take the earned income credit and child and dependent care credit in very limited circumstances. You also can't take the standard deduction if your spouse itemizes deductions. So again, you could see why those are in place, right? Because if you were married filing joint, you would get the itemized deduction. For example, if you were qualifying for the itemized deduction, if the code allows you to file married filing separate and one spouse took the itemized deduction, they would be able to maximize the itemized deduction and then the other spouse would be able to maximize the standard deduction, which means that that one joint tax entity is now taking advantage of the itemized and standard deductions, right? So you could see like the IRS is gonna say, no, we're not gonna allow that kind of thing. The same things happens with these credits because the credits have these income phase outs. So if you separate the income in order to take advantage of lower income thresholds so that you can apply for the credit on the spouse that has lower income, then you're gonna be manipulating the tax code and what the tax code generally does in those cases is just say, we're not gonna give you access to those credits and stuff, which is usually not beneficial. If you would have been able to get access to them if filing, married, filing, joint 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 2022. So that's one of those gray kind of areas that the question is, well, what if you're living apart but you're still technically married? Can I file a separate or head of household? So you can see the married person who lived apart later for that, head of household. So this is the other status that's kind of like what's available if you're not married, single being the worst, head of household being a step up, and then the qualified widow or widower or whatever they're calling it now would be a step up from there, the surviving spouse, whatever. So you can check the head of household box at the top of Form 1040 or 1040 SR if you are unmarried and provide a home for certain other persons. You are considered unmarried for this purpose if any of the following applies. You were legally separated according to your state law under a decree of divorce or separate maintenance at the end of 2022. So again, we're talking the end of the year 2022. So if you were married and then you're separated, then you might be able to go back to either single or head of household. Head of household would be better, but head of household is typically dependent on a dependent, which is often like the confusion point, meaning who's gonna claim the dependent and custody issues and that kind of stuff is where the gray area comes into play. So, but if at the end of 2022, your divorce wasn't final and interlockerary degree and interlockerary decree, you are considered married. So you are married but lived apart from your spouse for the last six months of 2022 and you meet the other rules under married persons who live apart later. So that's again, one of the kind of gray areas you're like, okay, you're married but you've been living apart for the six months. If you're not technically divorced, can you still qualify to file head of household possibly in that case? So you can dive into more detailed rules if you're in that kind of situation. So 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 we've got test one. You paid over half the cost of keeping up a home that was a main home for one more time. You paid over half the cost of keeping up a home that was the main home for all of 2022 of your parent whom you can claim as a dependent except under a multiple support agreement. See who qualifies as your dependent later. Your parent didn't have to, your parent didn't have to live with you. Okay, so typically head of household we usually have a dependent involved. Now the dependent usually that you would think, well, that would be a parent generally or it would be a child. And the case of a parent, usually you've got the qualifications or in a dependent in general, usually you've got the requirement that they live with you but with a parent you could have an exception in that instance. So one more time, test one. You paid over half the cost of keeping up a home that was the main home for all of 2022 of your parent whom you can claim as a dependent. So you have the cost, there can be claimed as a dependent except under a multiple support agreement. So then you can go to the more instructions if you have more questions on that and we might dive into that later. Your parents don't have to live with you. So that's kind of the exception to the general rule when we're talking about dependents to qualify for head of household which usually applies for a child. Test two. And remember when we're looking at these tests it's useful oftentimes to remember are we talking about do we have to have both of these tests met or either of these tests met which is an and or or and notice we have an or here. So either test one or test two, test one related to the parent, generally as a dependent, test two, the child. 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. If half or less, you can see exception to time lived with you later. So this can be somewhat confusing sometimes because if you're looking at the child in terms of whether or not they're gonna allow you to file for head of household, you often have that split custody issue which then the question is did they live for you for exactly half or more than half and so on with regards to the ability to claim the child and possibly increase the status, filing status from head of household. I'm sorry, from single to head of household. So number one, any person whom you can claim as a dependent but don't include A, your child whom you claim as a dependent because of the rule for children of divorce or other separate parents under who qualifies as your dependent later, B, any person who is your dependent only because the person lived with you for all of 2022 or C, any person you claimed as a dependent under a multiple support agreement see who qualifies as your dependent later. So once again, any person whom you can claim as a dependent and then you've got these kind of somewhat more gray area, somewhat more random kind of exceptions on down below. Number two, your unmarried qualifying child who isn't your dependent. Number three, your married qualifying child who isn't your dependent only because you can be claimed as a dependent on someone else's return. So now again, you got this kind of unusual situation. They would be a dependent of yours except you're in a situation where you can be claimed as a dependent on someone else's return. So they might not be an actual dependent in that case but may still allow you to qualify for the head of household. Number four, your qualifying child who even though you are the custodial parent isn't your dependent because of the rule for children of divorce or separate parents under who qualifies as your dependent. We might talk about that rule a little bit later. So once again, a lot of caveats to this rule, the general idea being that you have a qualifying person that rule number one could be your parent which possibly you don't have to have as much strict of the rule in terms of them living with you. And then rule number two is gonna be the other dependent oftentimes a child but not necessarily. Let's read through it one more time. 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, more than half of the year. If half or less see exception to time lived with you later. Number one, any person whom you can claim as a dependent. So they lived with you and they're dependent on the tax return which means we can go into the rules which we will later of someone who qualifies as a dependent but don't include A, your child whom you claim as your dependent because of the rule for children of divorce or separate parents under who qualifies as your dependent. More of an unusual rule. We'll talk possibly diving into that later. B, any person who is your dependent only because the person lived with you for all of 2022. And then C, any person you claimed as a dependent under a multiple support agreement which again, we can see who qualifies as your dependent later for that more of an unusual situation. Number two, your unmarried qualifying child who isn't your dependent. So they're a qualifying child not your dependent in that case but a qualifying child. So now we can get into the definitions which we'll talk about later. What is a qualifying child and what is a dependent? And then three, your married qualifying child usually by the way, if they're a qualifying child they will be your dependent oftentimes, right? That would be kind of an unusual situation. Three, your married qualifying child who isn't your dependent only because you can be claimed as a dependent on someone else's return. So they would be a dependent and therefore push you ahead of household but they can't be claimed a dependent because you could be claimed as a dependent somewhere else. So therefore they might still push you ahead of household even though you're not claiming them as a dependent, weird situation. And four, your qualifying child who even though you are the custodial parent isn't your dependent because of the rule of child divorced. So again, that's an unusual kind of situation with that gray area in a divorced situation. So in the situation of a divorce unfortunately oftentimes these arguments happen with regards to the child. The child could impact the filing status if they're the only child, if they're one child involved pushing someone up from single to head of household which could have a significant impact on the taxes. And of course there's other credits and whatnot that could be involved with who claims the child. 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 in these unusual situations where you're saying the child is helping to move the filing status from single to head of household but I'm not claiming them as a dependent because I have one of these unusual situations. I still need to note that on the tax return. So the IRS sees that the requirement has been met even though the child isn't a dependent in that particular case. So if you don't enter the name it will take us longer to process the return.