Taxpayers tax filing status is extremely important. They are 1) Single, 2) Married Filing Jointly, 3) Married Filing Separately, 4) Head of Household, and 5) Qualifying surviving spouse.
Your filing status determines your filing requirements, your tax rates, your tax credits, and your standard deduction.
- If you were single at the end of 2023 and under 65, you must file a return if your gross income was at least $13,850. If you were over 65, you must file if your income was at least $15,700.
- You must file a return if you are married and filing jointly when both spouses are under 65 if your combined gross income was at least $27,700. If 65 or older (one spouse) $29,200 or (both spouses) $30,700.
- Married filing separately regardless of age must file if gross income in 2023 was at least $5.
- If you qualified for Head of Household and you are under 65, you must file if your gross income for 2023 was at least $20,800, and $22,650, if over 65.
- A qualifying surviving spouse under 65 must file if gross income was at least $27,700. A qualifying surviving spouse 65 or older must file if gross income was at least $29,200.
Individuals may choose to file even when they made less than the filing requirement because they may get some refund. This could apply when 1) they had federal income tax withheld from their pay, 2) they made estimated tax payments, 3) they qualify to claim some of the available tax credits.
Taxpayers should use the correct tax filing status to avoid audit issue. Taxpayers must openly discuss their specific situation with their tax preparers and provide adequate information to determine their tax filing status.
Married taxpayers could legally file married separately if they could not agree on filling a joint return. Married filing separately could be better for certain married taxpayers. If you live apart from your spouse because you are considered unmarried and meet certain tests, you may be able to choose head of household filing status.
Many married taxpayers illegally claimed the Head of Household status and they have been audited by the Internal Revenue Service because they illegally claimed either the earned income tax credit (EITC) and child tax credit (CTC) or other credits for the children they claimed on their tax return. In many cases, the credits were disallowed because the child or children did not meet the residency test for the tax year the parents claimed the child or children.
Many divorced and separated parents often agree in divorce settlement, decree or separation agreement that they will alternate who claim the child or children for tax filing purposes. By doing so, some taxpayers believe they could legally claim the Head of Household filing status. The divorce or separation agreement or settlement does not confer a legal right to the non-custodial parent to claim the Head of Household filing status.
Per IRC section 152(e), a child may be treated as a qualifying child of the noncustodial parent rather than of the custodial parent when certain criteria are met. For the child to be the qualifying child of the noncustodial parent, the custodial parent must sign Form 8332 or another writing conforming to the substance of Form 8332 releasing the custodial parent’s claim to the dependency exemption deduction. The noncustodial parent must then attach the Form 8332 or equivalent writing to his or her Federal income tax return.
The Tax Court, in Jackson M. Browning v. Commissioner of Internal Revenue (T.C. Summary Opinion 2012-121), stated that “section 152(e) was intended by Congress to preclude the IRS and the Federal courts from becoming embroiled in disputes between parents over child support issues and the like“.
The Court has concluded in several cases that a noncustodial parent who fails to attach a Form 8332 to his or her return as filed is ineligible to claim the dependency exemption.
In David Charles Katz and Mary Joan Wright v. Commissioner of Internal Revenue (T.C. Summary Opinion 2013-98), the Court upheld the IRS disallowance of the child tax credit because Form 8332 or its equivalent was not attached to taxpayer’s tax return at the time of filing or within the time that the return could be amended.
Petitioners contended that according to their divorce decree they were each entitled to claim one child as a dependent for tax purposes and that a Form 8332 or its equivalent was not even required. The court concluded that it is the Internal Revenue Code, and not State court orders or decrees, that determines a taxpayer’s eligibility for a deduction for Federal income tax purposes.
You cannot legally claim the Head of Household filing status on your tax return even when the custodial parent releases the child through a legal separation agreement or a divorce settlement/decree, unless the child or children lived with you for more than half of the year.
A qualifying taxpayer must be unmarried or “considered unmarried” on the last day of the year and pays more than half the cost of keeping up a home for the tax year. Under the Head of Household filing status, a taxpayer is considered unmarried if the spouse did not live in the home in the last 6 months of the tax year and they file a separate return. Further, there must be a qualifying child who lived with the taxpayer for more than half of the year.
The custodial parent may claim a child as a qualifying child, a child of divorced or separated parents, for Head of Household filing status even if the other parent claims the same child.
The noncustodial parent can only claim the child as a dependent and as a qualifying child for the child tax credit or other dependent credit. However, the noncustodial parent cannot claim the head of household filing status, the exclusion for dependent care benefits, the credit for child and dependent care expenses, and the earned income credit.
The Internal Revenue Code in section 24(g) imposes some restrictions on taxpayers who, in prior year, improperly claimed the credit. No credit is allowed for any taxable year during the disallowance period.
The disallowance is 1) the period of 10 taxable years after the most recent taxable year for which there was a final determination that the taxpayer’s claim of credit under this section was due to fraud, and 2) the period of 2 taxable years after the most recent taxable year for which there was a final determination that the taxpayer’s claim of credit under this section was due to reckless or intentional disregard of rules and regulations.
As per IRC section 24 (g)(2), in the case a taxpayer who is denied credit under this section for any taxable year as a result of the deficiency procedures under subchapter B of chapter 63, no credit shall be allowed under this section for any subsequent taxable year unless the taxpayer provides such information as the Secretary may require to demonstrate eligibility for such credit.
Regardless of the agreement stipulation, a parent must be the custodial parent to claim all the tax benefits for the child or children, except the child tax credit or credit for other dependents.
- Publication 501.
- Charles Katz and Mary Joan Wright v. Commissioner of Internal Revenue (T.C. Summary Opinion 2013-98)
- Jackson M. Browning v. Commissioner of Internal revenue (T.C. Summary
- Deficit Reduction Act of 1984, Pub. L. No. 98-369, sec. 423(a), 98 Stat. at 799
- IRC sections 1, 24.
- IRS Treas. Regs. sec. 1.152-4(e).
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