When it comes to preparing a tax return, the most crucial decision is determining the client's filing status. There are five different filing statuses: single, married filing jointly, married filing separately, head of household, and qualified surviving spouse. It's worth noting that the IRS recently changed the designation from "qualifying widow or widower" to "qualified surviving spouse." Although the new status is reflected on the new 1040 form, most of the instructions still refer to the old designation.
The filing status has a significant impact on every aspect of the tax return. It affects the filing requirements, including the allowed standard deduction and eligible credits. Ultimately, it determines the client's tax calculation. While some filing statuses are straightforward, others can be more complex, particularly in unusual circumstances. Understanding the intricacies of filing status is crucial.
Consider this: filing jointly for a married couple is an election, not a requirement. It may not always be the optimal choice for both clients. Divorcing couples, for instance, have various filing status options, such as married filing separately or head of household. Additionally, if a client is a U.S. citizen married to a nonresident alien, can they file jointly? A decision that may seem simple at first can turn out to be more complex than anticipated.
Join us in "Determining Filing Status for Your Clients" as we explore the nuances of the filing status decision, providing examples that illustrate the different options available.
Amy M. Wall, EA, MBA, is a Canopy CPE/CE course instructor.READ MORE BY Amy