When entering a tax return, the very first thing you have to determine filing status, and while you may think that this is a white and black thing, just like everything else, there are exceptions to rules.  Unfortunately, making a mistake in selecting the correct filing status can result in a variety of problems. 
To Learn about the Different Filing Statuses click image for PDF or this link for PowerPoint presentation 
Use Your Tools!!   PUB 4012 Tab-B
PUB 4012 is available online --search for PUB 4012 in Google or follow this link: irs.gov/pub/irs-pdf/p4012.pdf
PUB 4012 gets updated online in October and updated print copies are available in print early-mid November 
Click image below to see the Decision Tree and Interview Tips**For Footnote #6 under Decision Tree--incarceration refers to "detention in a juvenile facility" per PUB 17 pg 24
What if a spouse died during the tax year? Remember, taxpayers whose spouses died during the tax year are considered married for the entire year, provided they did not remarry.
The surviving spouse is eligible to file as Married Filing Jointly or Married Filing Separately.
Surviving spouses who have remarried must file with the new spouse, either jointly or separately. The deceased spouse’s filing status becomes Married Filing Separately. Surviving spouses who have an eligible child may be able to use the Qualifying Surviving Spouse status in the two tax years following the year of the spouse’s death. This is discussed later in another lesson.  (Copied from PUB 4491)
An awesome Quiz on Filing status to get you thinking and applying tax law.. thanks for sharing Bill form Pasco County!
Click here for answers to the above quiz--Thanks Bill!
A great article on Head of Household Filing Status I found, thank you Mr Penz!

Head of Household is the filing status that can be the most confusing.

It is also selected incorrectly by many tax preparers--intentionally or in error. 

Interesting fact: I have had to do quite a few amended returns because of tax preparers selecting this filing status incorrectly.  A lot of times it is caught by colleges when a student applies for (FAFSA) Free Application for Federal Student Aid. Others were caught by the IRS.

Unfortunately, all of these tax payers had to pay back quite a bit of money for refund amounts they shouldn't have received, plus interest, and in some cases penalties-- all because of tax preparer error. 

Married Filing Separate ​Special Rules


From PUB 17 2018 (my comments in green)
If you choose married filing separately as your filing status, the following special rules apply. Because of these special rules, you usually pay more tax on a separate return than if you use another filing status you qualify for.
1. Your tax rate generally is higher than on a joint return.
2. Your exemption amount for figuring the alternative minimum tax is half that allowed on a joint return.
3. You can’t take the credit for child and dependent care expenses in most cases, and the amount you can exclude from income under an employer's dependent care assistance program is limited to $2,500 (instead of $5,000). However, if you are legally separated or living apart from your spouse, you may be able to file a separate return and still take the credit. For more information about these expenses, the credit, and the exclusion, (see chapter 31 of PUB 17. If living apart do they may qualify for Head of Household)
4. You can’t take the earned income credit.**As of 2021 there is now an exception for this--please review PUB 4012 section I to see what the qualifications are for someone filing Married Filing Separate to get the EITC.--if the taxpayer qualifies for this credit, you MUST indicate it on the demographic page
5. You can’t take the exclusion or credit for adoption expenses in most cases.
6. You can’t take the education credits (the American opportunity credit and lifetime learning credit), or the deduction for student loan interest.
7. You can’t exclude any interest income from qualified U.S. savings bonds you used for higher education expenses.
8. If you lived with your spouse at any time during the tax year:
      a. You can’t claim the credit for the elderly or the disabled,
     b. You must include in income a greater percentage (up to 85%) of any social security or equivalent railroad retirement benefits you received.
9. The following credits and deductions are reduced at income levels half of those for a joint return.
        a. The child tax credit and the credit for other dependents.
        b. The retirement savings contributions credit.
10. Your capital loss deduction limit is $1,500 (instead of $3,000 on a joint return).
11. If your spouse itemizes deductions, you can’t claim the standard deduction. (so unless you itemize as well, your standard deduction is zero)
12. If you can claim the standard deduction, your basic standard deduction is half of the of the amount allowed on a joint return. (It is the same as a Single Person)
13. Married Filing separate is not entitled to Marketplace subsidy so...If you get Marketplace Health Insurance, and its subsidized (meaning Marketplaces pays a portion or all of your insurance premiums) the subsidized premiums have to be repaid--luckily there is a cap on the amount they ask you to repay though.***This is an important thing to note because for some Married couples, it might actually benefit them to file Separately if they have a large Marketplace repayment when filing joint. If your clients are facing a large repayment and only one spouse (or one spouse and dependent) are on the policy, try filing them both as separate and see if that has a better outcome. For some (not all) it does since there is a repayment cap for MFS filing status based off of their income level.  
There are many reasons a married person may choose to file separate; occasionally the combined refunds or balance due may be more in the clients favor to file separate, but generally it is not. My husband and I keep our finances totally separate and file separate returns--its just our preferred choice. 

If you file separate from your spouse, neither one can be held liable for the other's tax return.

If you have a client that is choosing to file separate because the IRS will garnish their refund due to their spouse's  past debt (say child support or school loans), make sure they are aware of the Injured Spouse Form and how it can prevent their portion of the refund from being garnished to pay the other's debt.  Remember, filing separate disallows EITC in most cases, Education Credits, and more--so it may be beneficial to file joint with the injured spouse form 8379)  ***It does take 16 weeks to process the return if an 8379 is filed, but the benefits can be worth it.
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AARP'S TCE Tax program has some marvelous resources. One of them is their Decision Tree for Determining Tax Credits.  (multiple pages and trees) A fantabulous resource shared with me by several wonderful AARP volunteers who wanted me to share with you!

**Make sure you ALWAYS start from page 1 and follow charts in order as directed)
Community Property States have their own set of rules. I am not familiar with these rules, so please seek guidance from an experienced person. 

For More resources on Filing Status...

From IRS  PUB 4491 covers tax Law for the VITA/TCE volunteer 
  • Link & Learn interactive training modules  for Filing Status -updated mid-November usually-- -click image on right
 
Topics like this one are pretty much the same year after year and can be reviewed anytime.
Prosperity Now's Taxpayer Opportunity Network (TON) has some helpful resources; slide shows and quizzes that you might find helpful. Here is the link for their Module 2 prosperitynow.org/resources/module-2-filing-status-and-dependency  (each image is also a link to their most current PDFs on each topic)
Filing Status & Dependency Practice
From Lancaster VITA--informative training Video
 A helpful document-- Did your client's return reject because their dependent was already claimed by someone else on a return, or is the IRS questioning their Head of Household filing status?  If the rejected dependent was used to qualify the client for Head of Household filing status, here is a list of supporting documents you may want to consider sending in when you paper-file the return. You can try to speed up the process as much as you can by being pro-active and sending in supporting documents (and keep a set of everything sent in in case they ask for it again). Click image to get PDF from IRS.gov (visit the dependents page to find a list of supporting documents to claim a dependent); there are also similar supporting document lists on the credit page for EITC and Child Tax Credits, and on the Education webpage there is a document for American Opportunity Credit.
Remember your PUB 4012  is your 'Bible'-please refer to it, get familiar with it both in print and online. PUB 4012 and PUB 4491 should be your go to guide for tax questions.
​*As always, if you see an error or have a suggestion, please let me know. I am human, I make mistakes, and I am in no way a tax expert. 
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You can contact me at maryvitataxes@gmail.com 
Please note: I, Mary Meador, AM NOT a certified accountant or tax law expert. I volunteer with VITA providing free tax preparation for individuals and families whose income is less than $66,000 a year. We deal with simple returns at our sites.  I cannot guarantee the accuracy of all the information on this site as tax laws change and I may not have a clear understanding of complicated issues. I am trying to provide basic tax preparation information for our volunteers to get started--remember Publication 4012 is your go-to resource for questions, as well as irs.gov and Publication 17.  I hope you find this information useful and easy to understand. Thanks for being a VITA/TCE volunteer!

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