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Federal Employees News Digest : March 11, 2013
March 11, 2013 Vol. 62, No. 32 7 Visit us on the Internet at www.FederalDaily.com As federal employees prepare their 2012 fed- eral income tax returns, it is important that they select the correct filing status. Determining the correct filing status can affect the tax benefits an individual receives and the amount of taxes an individual will pay. A filing status may even impact whether an individual must file a federal income tax return. This column discusses the five filing statuses available to individuals. Single. An individual is considered single for 2012 federal income tax filing purposes if the individual was unmarried or separated from a spouse---either by divorce or a separation main- tenance decree---as of Dec. 31, 2012. A widow(er) whose spouse died before Jan. 1, 2012, is single unless he or she meets the tests for qualifying widow(er) (see below). Married Filing Jointly. Married individuals may file jointly for 2012 if, as of Dec. 31, 2012, they were: (1) married and living together; (2) married and living apart but not legally separated or divorced; (3) separated under an interlocutory (not final) divorce decree; or (4) living in a common-law marriage, if com- mon-law marriages are recognized in the individual couple's state of residence or in the state where the couple was married. Some additional information about married filing jointly: • If one spouse died during 2012 and was alive for at least one day of 2012, then the surviving spouse can file jointly with the decedent for 2012. This is true only if the couple met one of the above four conditions on the date of death and the survivor did not remarry during 2012. • Same-sex couples. In accordance with the Congressionally- passed Defense of Marriage Act (1996), only a man and woman can be considered a married couple. Same-sex couples cannot file jointly or even married filing separately, even if a state sanctions such marriages. Registered domestic partners (RDPs) in California, Washington and Nevada, and same-sex spouses in California are subject to the community property rules that require community income to be divided equally between the partners. Married Filing Separately. An individual married at year end can elect to file separately. Among the reasons to file sepa- rately: (1) no joint tax liability---a spouse who files separately is not responsible for reporting or paying tax on income-produc- ing items belonging to the other spouse; and (2) some couples pay less tax filing separately compared to filing jointly. In par- ticular, tax brackets and the standard deduction for married filing separately are one-half of those of married filing jointly. Spouses with equal incomes will generally owe the same tax under either filing status unless one spouse has significant medical expenses, casualty losses or employee business expenses that are subject to a percentage limitation based on adjusted gross income. A couple in this situation may pay less overall tax by filing sepa- rately because these expenses are limited by the adjusted gross income of only one spouse. Among the disadvantages of married filing sepa- rately: (1) lost tax credits, including the child and education tax credits; (2) lost education-oriented tax benefits and (3) net capital loss deduction is limited to $1,500 per spouse. Head of Household. To qualify as head of household for 2012, an individual must meet all of these condi- tions: (1) the individual was not married as of Dec. 31, 2012; (2) the individual paid more than half the cost of keeping up their home during 2012; (3) the home was the principal residence for more than half the year of either of the following: (a) the individual's qualifying child (note that a married child cannot be considered a qualifying child unless the individual can claim the child as a tax dependent); or (b) the individual's qualifying relative who is the individual's tax dependent; and (4) the indi- vidual was a U.S. citizen or resident during 2012. An individual and their qualifying person are considered to live together even if one or both of them are temporarily absent from the home due to special circumstances such as illness, education, business, vacation, military service or detention in a juvenile facility. A parent does not need to live in the individual's home for the child to qualify as head of household. A child can qualify for head of household filing status by paying more than half the cost of keeping up the parent's home. That home must be the parent's main home for the entire year. Qualifying Widow(er). To qualify for the qualifying widow(er) filing status for 2012, an individual must meet all of the following tests: (1) the individual's spouse died in 2010 or 2011; (2) the individual was entitled to file a joint return for the year the spouse died; (3) the individual did not remarry before Jan. 1, 2013; (4) the individual paid more than half the cost of keeping up their home during 2012; and (5) the individual's home was the main home of the individual's dependent child or stepchild for all of 2012. Edward A. Zurndorfer is a Certified Financial Planner and Enrolled Agent in Silver Spring, MD. He is also a registered representative with FSC Securities Corporation, branch address: 833 Bromley St. - Suite A, Silver Spring, MD 20902. Phone: (301) 681-1652. Securities offered through FSC Securities Corporation,member FINRA/SIPC. EZ Accounting and Financial Services and FSC are independent companies. Informed Investor Use correct filing status when filing income taxes
March 4, 2013
March 18, 2013