 Income tax 2021-2022, filing status part one. Get ready to get refunds to the max. Diving into income tax 2021-2022. Most of this information can be found on the Form 1040 Instructions Tax Share 2021, which can be found on the IRS website, irs.gov, irs.gov, when thinking about filing statuses such as married, filing joint, single, head of household. We also wanna consider the major impacts that are gonna be on the tax return, and it's easiest to visualize that in terms of the tax formula. So when we have different filing statuses, some of the major areas we would think there would be an impact would be the standard deduction. The standard deduction is gonna be impacted directly by filing statuses such as married, filing joint or single, for example. You would think if they're just gonna give you a standard deduction, then you would think that married, filing joint would have to basically be double. Otherwise there's gonna be a disincentive for married, filing joint versus single, which would disincentivize marriage, which you would think would not generally be what you would want. We also have to have adjustments to the tax rates. So when we think about the whole progressive tax schedules, we're gonna have the different tax rates that are gonna be involved. Many people overlook this component because we often are reliant on the software in order to do the calculation. So we don't really even visualize what the calculations are. We might have a kind of understanding on what the progressive tax tiers are, but those tiers are gonna be dependent upon the filing status as well. So when you're adjusting this or thinking about different changes of someone single and two people are considering getting married or divorced or so on and so forth, you wanna consider the impact on the tax return in those instances. These are the major impacts. Now note there could be various other impacts. Another key area you want to keep in mind is credits, especially refundable credits. So if you had two people that were single and they get married and there was involved refundable credits when they were filing as single such as an earned income tax credit, child tax credit and so on, those could have impacts when they get married as well. The phase outs could be impacted in terms of when credits are gonna be phasing out. And so there could be a whole lot of impacts that are on the tax return, but these are the ones that are gonna be the most clear that should be like the first they come to mind as you think of the filing statuses. So here's the form 1040, when we indicate the filing status on it, we have the status indicated up top, single, married filing jointly, married filing separately, which could be designated as MFS, head of household often indicated H-O-H and qualified widow, widow or Q-W. This is obviously a more rare filing status that we would see on the right, hopefully, hopefully so. And then the strategy we want to be considering here is that we basically wanna know the general rules when it comes to these kind of filling out the documents. And then we want to do research on more complex situations. And the irs.gov form 1040 instructions is often the place that we can go for more research. So as you're filling out the tax return, you wanna basically have the general rule so you could just basically fill out the tax return as the situation comes up. You also wanna have a general idea of what the impact will be on the tax return because as a tax preparer, that's often what the questions are gonna be, especially when you get into more complex tax returns, you're not just there to do the rote data input on it so much as possibly, and more so, and you have more value, if you could also say, hey, this is what's gonna happen or this is what the difference is, this is why I need to report it this way, this is what the difference on the tax return is going to be. So you would think the filing statuses are pretty straightforward and usually they are. You could say, okay, someone is single, I get that, someone's married, when they get married, usually they filed married filing joint, but you could get into some complex issues such as divorce situations as to whether there is a divorce or separation taking place or not, and you could also have situations where the head of household versus single can be quite complex because it's often dependent on a dependent, a qualifying dependent in some way and things like joint custody situations with the dependent can cause a lot of confusion if the dependent's being claimed on one return versus another return, and the amount of support that's happening from the spouses or the people involved could also cause some complexity. So you wanna know the general rules here and then dive into more detail on those kind of areas where there's more confusion with regards to the filing statuses. So we have the filing, if you look at the actual 1040 on the left-hand side, you've got the standard deductions related to the filing statuses. Now, there's a little bit more detail than that because there could be if they're over 65 and blind, you have different filing standard deductions as well, but in general, you got the single or married filing separate, 12,550. You don't need to memorize that number, but it's a good number to kind of have an idea about because if you talk about people that are itemizing and whether they're gonna be taking the itemized deductions, that's gonna help you to determine that if you just get a general idea whether they're gonna be paying taxes or not, it's a good idea to have a general idea of what the standard deduction is because that'll at least get you to the taxable income. And it's easiest to think of it as let's first think about the single filers, 12,550, and then you could just double it usually to get to the married filing joint or qualifying widow-wyr. So if they get married, you would think it would make sense that you would have to double the standard deduction, which is the case here. So that makes it easier to kind of think about it and remember it instead of just remembering two numbers, you can remember the single number, 12,550, and then double it for the married filing joint for the 25,100. Now the head of household is somewhere in between. So even if you don't memorize that number, you kind of think, okay, it's between the 12,550 and double that, so 18,800 is gonna be in between. You also have to remember that if they're over over a certain age and or blind, you could have a variance that will increase the standard deduction there too. We'll talk more about that later. Now here are the income tax brackets and I'm just showing them here to show that there's differences between the filing status. So you have different brackets. This is gonna be the actual calculation when you're actually calculating the taxes, which is something often the computer will do. Also remember that you're thinking about these brackets when you're explaining it to somebody, you wanna explain it in terms of their brackets and their marginal rate versus their effective rate and so on and so forth. But when the actual calculation is done is usually pulling from the tables, that's what the software is doing. And you could find those on the 1040 instructions and they're just finding a number based on the income, but it's basically based off kind of these brackets. And there's different brackets then for the single filers you could see here on the 10% zero to 950 and the 10% married filing joint. We've got the 10% is zero to the 1900. So obviously you've got differences within the whole progressive tax system based on the different filing statuses. So it gets quite complex quite quickly, which is again a reason we use the tables generally or the calculations of the software. So here's the married filing separately and then here's the head of household. Filing status, check only the filing status that applies to you. The ones that will usually give you the lowest tax are listed last. So I'm just gonna go through them here and then I'll go into them in a little bit more detail. Married filing separately, single head of household, married filing jointly and qualifying widow, widower. So one way you can kind of think about these is I would group them into two main categories. One for the single file or the items that you could possibly qualify for if not married and the items that you might qualify for if married and then go into those two categories and go into drilling down a little bit more deep. Now note, you also have an issue with regards to are people married or not married. So you might ask questions, for example, if two people are single, are there any way without a formal marriage that they would qualify as married because of living conditions and so on and so forth in that sense so that you have a great area between whether they're married or not and with a separation situation like a divorce or a separation, it could come down to state law as to whether or not they might be separate or something like that and then possibly have access to different requirements. So that's like in the gray area. But in general, you'd say, okay, they're either married or they're not married. If they're not married, then typically we're gonna have the single filing status unless they have, usually one of the primary factors is some kind of dependent which may qualify them for the head of household status. So if in non-married category, that's usually what you're thinking about. Single, head of household, obviously qualified widow, widower would be a specialized kind of condition. We'll talk about that later, but that's gonna be more of a rare filing status if they're not married, typically single or a head of household. Head of household, it's quite complex because there could be a lot of gray area in terms of like custody issues with a child and support issues. Do they qualify for the support test and so on and so forth? So we'll talk more about that in the future. If they're married, then you can't go from married back to single unless there's some condition which is a separation condition or you fall into kind of like a gray area. In other words, people often think when they're single that if they get married, then you would have the benefit of either filing married filing joint or married or basically going back to single. Why couldn't you just go back to filing single like you were before? But you can't really do that because the idea of marriage was at least, it used to be that we're gonna be one entity from tax for taxes at least at that point in time. So it was thought that you'd file married filing joint and you can't really jump back to single what you can do, however, is possibly file married filing separate but married filing separately is not the same thing as going back to filing single. You might say, well, those two things sound kind of equivalent. So if I get married, now I can file married filing jointly or I can still file married filing separately which is the same thing as filing single. Well, it's not because the the IRS is skeptical of people filing married filing separate and they may remove some of the benefits that you might get when single and a lot of those have to do with those big refundable credits. So there could be a big difference with regards to refundable credits on like the child tax credits, the earned income tax credit, the stimulus payments and so on and so forth, depending on the income level. So you do wanna give some consideration and make sure you have that idea in mind. If you're single and getting married, you wanna have, you don't want these things to drive your decisions as to whether to be single or get married and whatnot, I would say but you do wanna keep in mind what the differences are going to be so you can plan for those items. Okay, so then the information for information about marital status, you could see publication 501, you could find that on the IRS website, irs.gov single, the single filing status. You can check the quote single box on the top of form 1040 or 1040 SR. If any of the following was true on December 31st, 2021. Notice when the cutoff date is the end of the year, December 31st, 2021 here, not the beginning of the year. You were never married, you were legally separated according to your state law under decree of divorce or separate maintenance. But if at the end of 2021, your divorce wasn't final and interlocktery decree, you are considered married and can't check the box. So that's gonna get into that gray area. So usually single is pretty straightforward. If you're talking about someone that was never married, then it's a straightforward kind of condition. If it's someone that's going to get married, then the question is, well, did the marriage happen in the year of 2021? Even if it happened at the end, December 31st, 2021, you would be basically could be considered on the married side and couldn't check the single component. And then there's a question of the divorce side of things, which you could have the cutoff timeframe. When does the actual divorce take place? Is it something that took place within the tax year 2021, taking you from married back to single or not? And then you were widowed before January 1st, 2021 and didn't remarry before the end of 2021. But if you have a child, you may be able to use the qualifying widow, widower filing status. So the other situation, your widow or widower, and then, but then there's a condition that with this filing status, the widow or widower filing status would be beneficial to a single filing status, but there's gonna be a condition added to it. And that includes the qualifying child. So we'll get into that. This is another kind of gray area situation that's a little bit more complex than the straightforward. Just some unmarried person. You've got the widow, widower situation, but you got that dependent kind of case that would be involved. If you would qualify for the qualifying widow, widower, it would be beneficial or better filing status than single or ahead of household. So you could see instructions for qualifying widow, widower later. We'll talk about that later. Married filing jointly. So this is the other major category that you would have if someone was single and then they went to married, then typically they would file married filing jointly. So you can chuck the quote, married filing jointly in quote box at the top of form 1040 or 1040 SR. If any of the following apply, you were married at the end of 2021, even if you didn't live with your spouse at the end of 2021. So remember it's at the end of the year. So if the marriage took place, the formal marriage took place at December 31st, 2021, then you're considered married for the tax year, 2021. So your spouse died in 2021 and you didn't remarry in 2021. So if there's a death that happened within 2021, then you would still file married filing joint and that would typically be the beneficial thing to do in the year of the death. After the year of the death took place, then the question is, do you qualify for the qualifying widow, widower or not? Or would you go back to single at that point? You were married at the end of 2021 and your spouse died in 2022 before filing a 2021 return. So if the death happened in 2022, even if you didn't file the return, you would think the event of the death happened in the tax year 2022. So a married couple filing jointly report their combined income and deduct their combined allowable expenses on one return. They can file a joint return even if only one had income or if they didn't live together all year. So generally for taxes, the traditional thought would be, well now that they're married, you had two separate people, now they are one with regards to taxes. You're typically filing the taxes and the income reported on the one return when married. So you could see what the benefits are on that. And just remember, or the pros and cons, there's pros and cons of that. And just remember, what are the changes that you would expect? Well, major changes that you would expect would be that the standard deduction is gonna have to basically be doubled because now you got two people and it used to be, remember the tax law was kind of developed when there was like a single income home. And so they've had to kind of make changes to the situation where now you could clearly, you almost have to many times have a double income home. And that's why you would think the standard deduction would still be double even though you're clearly, if you're raising a family and whatnot still possibly having a situation where one person does more work that at least is gonna get W2 income, revenue work and so on. So you might have a different, still big difference in terms of income depending on the cycle of the family cycle. But the idea would be that not to disincentivize marriage, then you would have the twice the standard deduction and they would also then have to adjust the tax tables to accommodate the fact that you could have two incomes. So all the progressive tax tables changing. However, both persons must sign the return. 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 you can't go back once file and say, oh, I'm gonna file it separate now after having filed it. So married filing jointly, joint and several tax liability. 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 you're in basically a partnership here and that means that you're jointly responsible in general. And so there could be some special circumstances where you have an innocent spouse relief of some kind, but generally you're in a partnership. And so if one partner doesn't pay the taxes, then the other partner's still liable because they're in a partnership on it. So, or if one spouse doesn't report the correct tax, both spouses may be responsible for any additional tax assessed by the IRS. You may want to file separately if you believe your spouse isn't reporting all of his or her income. So in a situation if you're in a marriage, if you see someone that will have someone in a situation where they're married and they're saying, I don't think my spouse is being honest on the taxes. And I'm kind of concerned about that. Then possibly to alleviate some liability to yourself, maybe you could file a separate return. So you believe you don't want to, and that would be married filing separately, 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. See instructions for married filing separately, also see innocent spouse relief under general information later. So you might be in a situation or see someone that saying, hey, their spouse was completely responsible for all the managing, all the money situation and whatnot. And so the other spouse is now liable for tax problems that could possibly take place, but they were kind of innocent in the fact that they weren't handling that at all. So is there some kind of innocent spouse reliefs you can get in that situation? So file, married filing jointly, 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 US citizen or resident alien at the end of 2021, you can elect to be treated as a resident alien and file a joint return, see publication 519 for details. You can find that on the IRS website, married filing separately. So this is the other option that you can have if married, you can't go back to single, but possibly you could file married filing separate, not usually beneficial, but could be beneficial in some instances. Check the married filing separately box at the top of form 1040 or 1040 SR. If you are married and file a separate return, enter your spouse's name in the entry space below the filing status check box. Be sure to enter your spouse's SSN social security number or individual taxpayer identification number, the I-10 in the space for spouse's 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 or I-10 enter NRA in the entry space below the filing status check boxes, married filing separately for electronic filing, enter the spouse's name or NRA if the spouse doesn't have the social security number or I-10 in the entry space below the filing status check boxes. 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 applied to people in community property states. And that's a big exception here. So if you're in a community property state, then you might have different kinds of requirements for married filing separately. So you wanna look into that. If you're thinking about filing married filing separately, then look into whether or not you're in a community property state. You can see publication 555 for more information related to that. However, you will usually pay more tax than if you use another filing status for which you qualify. Also, if you file a separate return, you can't take the student loan interest deduction or the education credits and you will only be able to take the earned income credit in very limited circumstances. So once again, the IRS is skeptical of married individuals giving them or granting them the capacity to in essence file as single after married, or in this case, married filing separately a similar status because they might do so or plan to do so jointly kind of collude as partners, to take advantage of some of these big credits, these refundable credits that have phase out and income limitations and so on. So you can imagine that if you had a partner and you're saying, okay, I can go back from married to single, why don't I, we can plan our situation. So one spouse earns all the income and the other spouse perfectly qualifies for all of the refundable credits like the earned income credit and so on and so forth. Well, that's not really fair because you're really one entity for taxes. So you would think that you can't really, so the IRS is saying you can't really, you don't wanna allow that. So they kind of removed some of these big credits. So you also can't take the standard deduction if your spouse itemizes deductions. So you can imagine another situation where you can say, okay, we're gonna put all the itemized deductions on one spouse and the other spouse is gonna take the standard deduction and not have any of the itemized. So I take advantage of the itemized deductions we have and the other spouse takes advantage of the standard deduction and you get any kind of credits that might be applicable due to refundable credits. Again, the IRS is saying, no, that's not, we shouldn't be allowing that kind of thing. So 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 2021. So you can see married persons who live apart later. And so there's always that kind of gray area. If you're married, then the question is, well, what if I was separated? Well, what does separated mean? We have a divorce, but what if you were separated in terms of the legal status of separation? You might have to go to the state law to look at the legal status of separation. And that could of course have income tax implications.