Head of household tax filing status is error prone, in part due to the complexity of the requirements to file as head of household. Also, head of household status provides a lower tax rate and a higher standard deduction than filing as single or married filing separately. Even some paid tax preparers will sometimes incorrectly recommend that a taxpayer file as head of household. About a fifth of income tax returns claiming head of household status do so incorrectly.
An incorrect tax filing status can affect a student’s eligibility for federal student aid.
When both of a dependent student’s parents file federal income tax returns as head of household, the U.S. Department of Education requires the college’s financial aid administrator to consider the tax filing status to be conflicting information. The financial aid administrator may not disburse federal student aid until the conflicting information is resolved. The conflicting information may be resolved by documenting that the head of household status is correct. It may also be resolved by the parents filing amended federal income tax returns (IRS Form 1040X) to correct the errors in their tax filing status.
To file a federal income tax return with head of household status:
The cost of keeping up the taxpayer’s home includes amounts paid for property taxes, mortgage interest (but not principal payments) or rent, utilities, repairs and maintenance, property insurance, food eaten in the home and other household expenses.
To be considered unmarried on the last day of the tax year:
If the taxpayer has a nonresident alien spouse and does not elect to treat him or her as a resident alien, then the taxpayer is considered unmarried. However, the spouse cannot count as a qualifying person for head of household purposes. The taxpayer must have another qualifying person and satisfy the other requirements for head of household status.
A qualifying person may include the taxpayer’s qualifying child or grandchild, if the child or grandchild is single. A qualifying child or grandchild who is married may also count as a qualifying person, if the taxpayer can claim him or her as a tax exemption.
A qualifying person may also include a dependent parent, if the taxpayer can claim an exemption for him or her. If the qualifying person is a dependent parent, the qualifying person does not need to live with the taxpayer, if the taxpayer paid more than half the cost of the home where the parent lived and the taxpayer can claim an exemption for the qualifying person.
For a child to be considered a qualifying child, the taxpayer and child must satisfy five tests:
A child can be considered a qualifying child of only one person. Thus, both of a child’s parents cannot both file federal income tax returns as head of household using the same qualifying child. They must each have a different qualifying child.
Internal Revenue Service (IRS) tiebreaker rules will treat a child as a qualifying child of the parent with whom the child lived the most during the tax year. If the child lived equally with both parents, then the IRS will treat the child as a qualifying child of the parent with the higher adjusted gross income (AGI) during the tax year.
The following are some of the more common errors involving head of household status:
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