In her early 20s, Audrey Hepburn famously mused, “When I get married, I want to be really married.” She would, in fact, go on to be really married not once, but twice. But Hepburn’s point—that she couldn’t make a half-hearted commitment to marriage—is a sentiment shared by the Internal Revenue Service, though admittedly for less romantic reasons.
As simple as it feels to tick the box at the top of your tax return, your filing status is perhaps one of the most critical pieces of information that you report to the IRS. It informs your tax rate, the size of your standard deduction, whether you qualify for adjustments, deductions, or credits—and even whether you need to file at all.
For federal income tax purposes, you select one of five filing statuses: single, married filing jointly, married filing separately, qualifying widow(er) with dependent child, and head of household (HOH).
Your marital status is determined by state law as of the last day of the calendar year. With a few exceptions, it doesn’t matter what your status is for most of the year: if you are married on December 31, you are considered married for the year. You must file as married filing jointly or, if you coordinate with your spouse, married filing separately. That’s true even if you didn’t live with your spouse and even if you don’t feel really married.
If your spouse died during the tax year and you have a dependent, you can, for the next two years, opt to file as qualifying widow(er) with a dependent child so long as you don’t get remarried during that time.
If you’re not married because you were never legally married, or you were legally separated or divorced according to the laws of your state, then you can file as single or as HOH. Filing as HOH means, among other things, that you are entitled to a bigger standard deduction and more favorable tax rates.
Of all of the filing statuses, HOH probably results in the most confusion. That’s because, unlike the bright-line rule that applies to married versus single, several criteria apply when filing as HOH.
Just ask Claudia Yanira Magana, a medical assistant and mother of three. Magana represented herself in a recent Tax Court case where she challenged alleged deficiencies in income tax for 2014, 2015, and 2016, and an accuracy-related penalty under section 6662(a) for each year. The IRS conceded certain of the issues but challenged whether Magana was entitled to a $1,000 education credit for 2014, as well as HOH filing status for 2015 and 2016.
Magana couldn’t prove that she paid qualifying tuition in 2014, and therefore, the education credit was denied. But the Tax Court did find that she qualified as head of household.
Magana lived with her children and their father for the tax years 2014, 2015 and 2016. She was not married to her children’s father during those years. In 2014, she filed as single, but in 2015 and 2016, she filed as HOH. During that time, Magana paid most of the household expenses. The father of her children, who struggled financially, did not file as HOH and did not claim the three children as his dependents for the years at issue.
The Tax Court considered the applicable statute, IRC §2(b), which defines HOH. Generally, if you are unmarried and you provide a home for a dependent, you may be able to file as HOH. More specifically, you must be single, divorced, or considered unmarried at the end of the tax year and have paid more than 50% to keep a home for the entire tax year with your dependent or a parent who was a dependent.
You may be considered unmarried for purposes of HOH if all of the following apply: you file a separate tax return from your spouse; you paid over half the cost of keeping up your home for the tax year; you lived apart from your spouse for the last six months of the tax year (not including temporary absences for business, medical care, school, or military service); your home was the main home of your child, stepchild, or foster child for more than half of the tax year; and you can claim the child as your dependent.
You are also considered unmarried for HOH if your spouse was a nonresident alien. If that’s the case, however, your spouse isn’t a qualifying person for purposes of the HOH test; there must be another qualifying person in your household for you to be eligible.
Even though the rules for claiming HOH require a bit more calculus than merely providing proof of marriage (or divorce), they are not ambiguous. If the facts support HOH status, then the taxpayer may file as HOH. And that’s what happened here: The Tax Court found that the facts supported Magana’s claim of HOH filing status for 2015 and 2016.
While the Tax Court decision wasn’t heavy on details, it’s clear that Magana was able to provide documentation to support her HOH status. Among other things, the Court believed that she paid most of the household expenses and that the father of her children did not pay those costs.
It’s easy to overlook details when it comes to filing status. But this case is a good reminder that taking the time to confirm filing status is important. That’s true even though the case is a so-called “small tax case,” and under IRC §7463(b), the opinion can’t be treated as precedent. The fundamentals, however, still apply: since qualifying for HOH requires ticking so many boxes, it’s a good idea to document expenses and living arrangements, and keep excellent records to support the choice. That way, you’ll know that when you file as HOH, you’re really HOH. (I think Audrey would approve.)
The case is Claudia Yanira Magana v. Commissioner (T.C. Summary Opinion 2020-9).
This is a weekly column from Kelly Phillips Erb, the TaxGirl. Erb offers commentary on the latest in tax news, tax law, and tax policy. Look for Erb’s column every week from Bloomberg Tax and follow her on Twitter at @taxgirl.