Income Tax 2021 2022 filing status part one, get ready to get refunds to that Max diving into income tax 2021 2022. Most of this information can be found on the form 1040 instructions tax year 2021, which can be found on the IRS website, irs dot g o v irs.gov.
When thinking about filing status ease, such as married filing joint single head of household, we also want to consider the major impacts that are going to 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 going to be impacted directly by filing statuses such as married filing joint or single for example, you would think if they’re just going to give you a standard deduction, then you would think that married filing joint would have to basically be double.
Otherwise, there’s going to 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 going to 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 going to be dependent upon the filing status as well.
So when you’re adjusting this or thinking about different changes, if someone singled and two people are considering getting married, or divorced, or so on and so forth, you want to 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 singles, 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 going to 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 going to be the most clear that would should be like to first 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 this status indicated up top single, married filing jointly married filing separately,
which can be designated as M Fs Head of Household often indicated H O H and qualified widow widow or Q w this is obviously 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 want to 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 want to basically have the general rule.
So you could just basically fill out the tax return as the situation comes up. You also want to have a general idea of what the impact will be on the tax return.
Because as a tax preparer, that’s often what what the questions are going to 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 can also say, Hey, this is this is what’s going to happen. 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 as as to whether there is a divorce or separation taking place or not. And they can 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 point. And things like joint custody situations with a dependent can cause a lot of confusion if the dependents being claimed on one return versus another returned. And the amount of support that’s happening from the spouses in or the people involved could also cause some complexity.
So you want to know the general rules here, and then dive into more detail on those kinds of areas where there’s more confusion with regards to the filing statuses. So we have the finally 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 stat filing standard deductions as well. But in general, you got the single or married filing separate 12,005 50 You don’t 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 going to be taking the itemized deductions, that’s going to help you to determine that if you if you just get a general idea of whether they’re going to 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 12,005 50. And then you could just double it usually, to get to the married filing, filing joint or qualifying widow widow word.
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 12,005 50,
and then double it for the married filing joint for the 25 100. Now that 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,
it’s going to 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 going to 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 want to explain it in terms of their brackets and their margin 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 can find those on the 1040 instructions. And then they’re 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 can see here on the 10%, zero to nine 950.
And the 10%. married filing joint, we’ve got the 10% is zero to the 19 900. 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, are the calculations of the software.
So here’s 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 going to 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 our people married or not married. So you might ask questions. For example, if two people are single, and are there any way without a formal marriage,
that they would qualify as married because of living conditions, and so on so forth, in that sense, so that you have a gray 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 going to 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 going to be more of a rare filing status. If they’re not married, typically single or head of household, head of household gets 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 conditioner, 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 going to 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 filed 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 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 credit. So there could be a big difference with regards to refundable credits, on like the child tax credit, the earned income tax credit, the stimulus payments, and so on, and so forth, depending on the income level.
So you do want to give some consideration and make sure you have that idea in mind. If you’re if you’re single and getting married, you want to have it 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 want to 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 can see publication 501,
you can find that on the IRS website, irs dot govt single the single filing status, you can check the quote single box on the top of form 1040 or 1040 ASR if any of the following was true on December 31 2021.
Notice when the cutoff date is the end of the year, December 31 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 interlocutory decree, you are considered married and can’t check the box. So that’s going to 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 Will did the marriage happen in the year of 2021,
even if it happened at the end, December 31 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. But you could have a cut off time frame, when does the actual divorce take place is that something that took place within the tax year 2021 taken you for married back to single or not. And then you were widowed before January 1 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 widow were 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 going to be a condition added to it. And that includes the qualifying child.
So we’ll get into that that’s another kind of gray area. situation that’s a little bit more complex than the straightforward just some you know an unmarried person, you got the widow widow worse situation, but she got that dependent kind of case that would be involved, if you would qualify for the qualifying widow widow where it would be beneficial or better filing status than single or head of household.
So you can see instructions for qualifying widow widow were 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 check the quote, married filing jointly and quote box at the top form 1040 or 1040 s or 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 is that the end of the year so if the marriage took place, the formal marriage took place at December 31 2021, then you’re considered married for the tax year 2021.
So your spouse died in 2021. And you didn’t remember 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 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 or 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 here. So generally, for taxes the traditional thought would be without they’re married. You have 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 Turn, when Mary so you can see what the benefits are on that.
And just remember, or the the pros and cons, there’s pros and cons of that. And just remember, what are the what are the changes that you would expect?
Well, major changes that you would expect would be that the standard deduction is going to 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 almost have too 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 going to get w two income, revenue work, and so on. So you might have a different, you know,
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 income,
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 I’m going to 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 do 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 where you have an innocent spouse,
you know, relief of some kind, but generally you’re in a partnership. And so if so if one partner doesn’t pay the taxes, then you know the other partner 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 America,
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 to to alleviate some liability to yourself, maybe you could you could you could file a separate return. So you believe you don’t want to that would be married filing separately.
You don’t want to be responsible for any taxes do if your spouse doesn’t have enough tax withheld or doesn’t pay enough estimated tax at 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, you know, their their spouse was completely responsible for all the man’s you know, the money situation and whatnot. And the 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 what it’s, is there some kind of innocent spouse relief 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 we’re 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 s are 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.
And the space for spouse’s social security number on form 1040 or 1040. s are if your spouse doesn’t have and is it required to have a social security number or itin enter in our a and the entry space below the filing status checkboxes married filing separately for electronic filing. Enter the spouses name or an RA if the spouse doesn’t have a social security number or itin 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’re responsible only for the tax on your own income, different rules applied to people and 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 want to you want to 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 vet, 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 right?
To to take advantage of some of these big credits, these refundable credits that have phased out and income limitations and so on. So you can imagine that if you had a partner, and you’re saying, okay, I can 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 the other spouse perfectly qualifies for all of the all of all of the refundable credits, like the Earned Income, credit, and so on and so forth. Well, that’s not really fair, because she’s really one entity for taxes.
So you would think you know that you can’t really do that or sustained, you can’t really, you want to allow that.
So they kind of remove some of these big credits. So you also can’t take the standard deduction if you’re if your spouse itemizes deductions. So you can imagine another situation where you can say,
Okay, we’re going to put all the itemized deductions on one spouse, and the other spouse is going to 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 you get any kind of credits, which might be applicable due to refundable credits.
Again, I are saying no, that’s not we, we shouldn’t be allowing, you know, that kind of, kind of thing. So you may be able to file as head of household if you had a child living with you, and you’ve lived apart from your spouse during the last six months to 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, what if I was separated? Well, what a 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.