Selecting the wrong filing status
There are five types of tax filing statuses, you have to choose from:
- Single
- Married filing jointly
- Married filing separately
- Head of household
- Qualifying widow(er) with dependent child
“This choice determines almost everything on your tax return and is made at the beginning of the process, yet most people don’t understand the basic options available to them,” said Ryan McInnis, founder of Picnic Tax.
If you’re single and don’t have any children, your filing status is quite clear. But for married couples, single parents and caretakers, choosing the right filing status might be trickier.
For instance, McInnis said most married couples select “married filing jointly,” even though it isn’t the right choice in many cases. “Say you or your spouse have a large amount of out-of-pocket medical expenses and one spouse has a much higher gross income than the other spouse. Because you aren’t able to deduct medical expenses until they exceed 10% of gross income, it may be better to file separately so that the spouse with the lower income can deduct the medical expenses on their own return,” he explained.
