 Income tax 2021-2022. Filing status, part two. Get ready to get refunds to the max, diving into income tax 2021-2022. Most of this information can be found in the form 1040 Instructions Tax Year 2021 found on the IRS website, irs.gov, irs.gov. Also remember that when we're thinking about filing statuses, you wanna think about what the impacts or have a general idea of what they will be on the tax return. Easiest to do that, visualizing the tax formula. Different filing statuses such as single, head of household, married filing joint will have major impacts on the standard deduction as well as the tax rates will be the progressive tax tables will be dependent upon the filing statuses. There also could be many other areas that would be impacted, including the phasing out of credits, for example, will have different phase out limits depending on the filing statuses and just the ability to be taking certain credits, especially the ones you wanna be considering are going to be those low income or refundable credits, things like the child tax credits, the earned income tax credit, what are they gonna be the implications if you have someone going say from single to married or married to say divorced or something like that. So we've got the 1040 up top is where the filing status will be checked off, single, married filing jointly, married filing separately, often referred to as MFS, married filing or, I'm sorry, head of household, often referred to as HOH and then we've got the qualifying widow, widower, QW. Remember the strategy will be you wanna have the general rules that will be in place and the general rules will include who qualifies for what usually fairly straightforward between the different filing statuses but then there could be a gray area such as is someone married at the end of the year, is someone divorced or separated, then of course you could start the more research for those areas. Also custody issues could be issues with regards to whether someone qualifies for head of household, for example, you could start your research on those areas by going to the IRS.gov, looking at the form 1040 instructions and go from there to pick up more information. They'll refer you to other areas such as publications that could help you in some of those gray areas. You also wanna know the general idea for with regards to the hierarchy of which filing statuses would be better so that when you're talking to clients about them, you can talk intelligently about it just in general and if they're asking you a question about what if I got married or didn't get married if there's a divorce, you can give some answers to that as well. There is an impact on the standard deduction. You can kinda get an idea of the standard deductions fairly easily in your mind by just remembering the main principal number of the single or married filing separate, which is the 12,550 and then double it for married, that would give you the 25,100. The head of household will typically be in between that at the 18,800 and then you could also have differences on age based on age and based on whether they're blind which could modify those items as well. Remember that the different tax brackets will be dependent upon, this is the tables here for your progressive tax brackets so you got the single filers versus the married filers and the married separately filers and the head of households. These are probably items that you may not be given or given this detail, you're not gonna memorize these tables in your head but you can get an idea of the percentages and you can give an idea of what would be happening to these brackets as you go from say single to married for example and then when you process returns in the software you can then talk about the average tax rate and the marginal tax rate and so on. So here are the statuses, last time we took a look at the married filing separately, the singled and the married filing joint, you can kinda, I think it's easiest to visualize these in two separate buckets and then branching out into those buckets. One, either single or non-married, let's say non-married versus married. If they're not married then they usually have the option of either being single or head of household, not so much the option where they would fall into one of those categories under the bucket of non-married and it would typically be dependent upon whether they have like a qualifying dependent, usually head of household would be the better filing status if qualified for. If married then they would usually be married filing joint but they might then file married filing separately in certain conditions, they can't generally jump back to single, that's the general idea. Then there could be gray areas in terms of was someone married at the end of the year? Were they legally married? If they lived together for long, on state laws those kinda questions were they separated or divorced? According to state law custody issues with regards to a child especially oftentimes in a head of household type of situation and then you've got the qualifying widow, widow were which is somewhat self-explanatory although it's a little bit more complex when you put it into practice because that would be the year of death of someone for example a spouse would typically still be married filing joint and then you've got the question of whether they would qualify for qualifying widow, widow or whether they would go back to single being dependent in part on whether there's gonna be a dependent again. So we're looking here at the head of household, we're looking this time at the head of household. Last time we look at single married filing joint, married filing separate. So head of household, you could 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 2021. So usually if they were never married then it's fairly straightforward. If they were married then they were divorced. That's fairly straightforward. If they were separated and there's not like a divorce per se but like a separation of some kind then it gets gray and you gotta go into the state law and see what not if it qualifies for separation and so on and so forth. You also might wanna consider and make sure that you're in alignment with the two spouses. If one spouse for example, files married filing joint or married filing separate even and the other spouse files as single or something like that or a head of household then that could be incongruous on the tax return side. You might get a letter about that or something like that. So in any case, but if at the end of 2021 your divorce wasn't final and an interlocktery decree, you are considered married. You are married but lived apart from your spouse for the last six months of 2021 and you meet the other rules under married persons who live apart later. So then you got again that kind of gray area you're married but you're living apart. You are married to 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. Check the quote head of household and quote Fox only if you are unmarried or considered unmarried and either test one or test two applies. Head of household test number one. So remember you only need to meet one of the tests it was an either or thing. And when you're looking at the tax law or instructions you wanna keep aware of when you're looking at different tests for example, does it say or or does it say and with regards to the test this is an or test. So one of the two needs to be applying test number one you paid over half the cost of keeping up a home that was the main home for all of 2021 of your parent whom you can claim as a dependent except under multiple support agreement. And so you got this kind of exception situation which is another kind of gray area. See who qualifies as your dependent later so we can expand on that if that gray area applies your parent didn't have to live with you. So we've got this kind of dependent test if you're qualifying for head of household and remember we're in the bucket of non married at this point in time with regards to filing status question then being do I have to file single or head of household head of household will typically be beneficial. Normally you need a dependent in that case and when you're talking about a dependent that's a parent it's a little bit kind of looser in terms of the conditions including this item down here which says your parent didn't have to live with you in order to qualify. So let's take a look at it one more time. You paid over half the cost of keeping up a home that was the main home for all of 2021 of your parent whom you can claim as a dependent. So typically they're gonna claim as a dependent but this is your parent rather than say a child except under a multiple support agreement. So then you've got that exception with the multiple support agreement in that instance gray area. You can see who qualifies as your dependent and you can get into that more detail. Your parent don't have to live with you. So you don't have the added requirement which is often in the case of having them to live with you. So now we have head of household test number two. Remember that this is an or type of thing not an and type of thing. So one of the two tests would need to be met possibly to be moving up from in a non married status from single to the head of household. So test number 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 you've got that second component that's going into place someone else lived for more than a half of the year. If half or less see exceptions to the time lived with you later. So you're gonna say, okay, what if I had someone that lived with me less than half of the year? Is there an exception in certain instances? That's gonna be a gray area where you could then go into the more detail and see if there's gonna be an exception in those cases. So one, any person who you can claim as a dependent. So they're gonna be someone you can claim as a dependent. That's gonna be the general rule, but don't include. So these are gonna be exceptions to the rule. Again, kind of like gray areas on here. So one or a your child whom you claim as a dependent because of the rule for children of divorced or separate parents under who qualifies as your dependent. You can see more on that exception later if you qualify in that or if that's one of the exception or B, any person who is your dependent only because he or she lived with you for all of 2021 or C, any person you claim as dependent under a multiple support agreement, see who qualifies as your dependent later. So that's gonna be another kind of gray area especially when you've got these kind of support agreements. You've got two people that have the support. Typically you would think that common ruling would be like a 50-50 support test. So then you've got the question of 50-50 support. What if there's a 50-50 living type of arrangement with the two parents, for example, then who would claim them as a dependent for tax purposes? These become gray areas that you gotta dig into. And you also wanna be in alignment. You wanna get these kind of straight in like the negotiations with regards to custody agreements and divorces and so on because that'll make it easier for the taxes. And if one person, for example, or if two people claim the same dependent on the tax return, then the IRS is gonna be able to catch that automatically because they're gonna see the same social security number or it might even bounce back the second tax return that is filed. And then you go through a whole rigmarole, a whole hassle that you would like to avoid by basically getting these arrangements down as best you can upfront. So ahead of Household Test 2, your unmarried qualifying child who isn't your dependent. So if it's an unmarried qualifying child that's not your dependent, then you may still be qualifying in that case to qualify for head of Household in the event that they're not the dependent. Again, a bit more 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 2021 return. That's an unusual type of situation. But you have a situation in that case where you have a qualifying child, but the only reason they're not dependent is because they're not meeting this one particular test, which is your married qualifying child who isn't your dependent, but only because you can be claimed as a dependent on someone else's 2021 return. And four, your qualifying child who even though you are the custodial parent, isn't your dependent because of the rule for children who divorced or separate parents under who qualifies as your dependent. You could take a look at more detail on that later. And again, another kind of gray area. So the general rule that you wanna have in mind once again, for head of Household is 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. And then you've got basically your exceptions and that would typically be a dependent that's test number two. And test number one is specific to like a parent where you have basically that different kind of living conditions. Then you've got all of the basically exceptions. Well, what if they're not a dependent, but they lived with me and so on or I can be claimed as a dependent then you get into the more detail. You can go to the form 1040 instructions to start looking into those items in more detail. If the child isn't claimed as your dependent, enter the child's name in the entry space below the filing status checkboxes. If you don't enter the name, it will take us longer to process your return. So if for example, you're filing head of Household and you fall into the situation where you could still qualify for head of Household but you have someone that's not a dependent that's gonna be a requirement to help you to qualify then it's not gonna be on the first page of the tax return where the dependent usually goes. So then you still wanna put that information in place so that they can check that box off or they can see that that qualification is met to meet for the head of Household. If you don't do that, it could cause some problems. So qualifying child to find out if someone is your qualifying child, you can see step one under who qualifies as your dependent and then we have the dependent to find out if someone is your dependent, see who qualifies as your dependent later. So clearly we've got this whole other topic in terms of well, who is a qualifying child and then who is a dependent. We'll talk about more of that in more detail later. Head of Household exception to time lived with you. So now we're looking into that exception where you're saying usually they have to basically live with you, we said for like half the year but what if they didn't? Are there any exceptions to that rule? So here we can go and dig into that. So temporary absences by you or the other persons for special circumstances such as school, vacation, business, medical care, military service or detention in juvenile facility count as time lived in the home. So these are kind of items where you can imagine well, they're not living with me here but it's not like they're living on their own and possibly like, you know, their own place or something like that. They're specifically going to school or they're having medical care or so on and so forth. Then you might still be able to qualify even though they didn't technically live in your home for that half of the year requirement. Also see kidnap child later under who qualifies as your dependent if applicable. If the person for whom you kept up a home was born or died in 2021, you still may be able to file as head of household. So what happens in the event that someone died in 2021? Well, they might not have lived with you for half the year but that's because they died in that so they were living, they could have lived with you the whole time of that year that they were there. So if the person is your qualifying child the child must have lived with you for more than half the part of the year he or she was alive. If the person is as anyone else you can see publication 501 on the IRS website you could find that. Similarly, if you adopted the person for whom you kept up a home in 2021 the person was lawfully placed with you for legal adoption by you in 2021 or the person was an eligible foster child placed with you during 2021. The person is considered to have lived with you for more than half of 2021 if your main home was the person's main home for more than half the time since he or she was adopted or placed with you in 2021. Head of household keeping up a home. So what does that mean? To find out what is included in the cost of keeping up a home you could see publication 501. So when you're saying, okay, well, what does it mean to be keeping up a home that seems kind of vague? In general, you can see, well, obviously and if it was a dependent child you would think it would be pretty straightforwardly met but you can imagine a lot of gray area there as well in that test. So you could take a look at that publication and find out on the IRS website for more information. Similarly, if you adopted the person for whom you kept up a home in 2021 the person was lawfully placed with you for legal adoption by you in 2021 or the person was an eligible foster child placed with you during 2021. The person is considered to have lived with you for more than half of 2021. If your main home was this person's main home for more than half the time since he or she was adopted or placed in custody. So now we've got head of household married persons who lived apart. Even if you weren't divorced or legally separated at the end of 2021 you are considered unmarried if all of the following apply. So now we've got the gray area of what does it mean for someone to basically be unmarried which could divorce would be a fairly straightforward condition of going back to unmarried which you would then go from married filing joint or married filing separate to the single filing or head of household. But you can imagine gray area in terms of what does separation mean which you might rely on state law to some degree to help you out with. You lived apart from your spouse for the last six months of 2021 temporary absence for special circumstances such as for business, medical care school or military service count as time lived in the home you file a separate return from your spouse you paid over half the cost of keeping your home for 2021. Head of household married persons lived apart your home was the main home of your child step child or foster child for more than half of 2021 if half or less see exception to time lived with you earlier. You can claim this child as your dependent or child or could claim the child except that the child's other parent can claim him or her under the rule for children of divorced or separated parents under who qualifies as your dependent and you can see more detail on that later. Head of household married persons who live apart you have adoption and foster and adopted child is always treated as your own child and adopted child includes the child lawfully placed with you for legal adoption a foster child is any child placed with you by an authorized placement agency or by judgment decree or other order of any court of competent jurisdiction.