We would look at the IRS Tax Filing Status, the various IRS tax rates for all statuses and how to choose the correct tax filing status.
Tax filing status is a category that defines the type of tax return form that a taxpayer must use when filing his or her taxes. Tax statuses are important because a person’s tax bracket is determined by marital status, number of children he or she has, occupation and many other factors. Every taxpayer must decide the tax status that applies to his situation. It is important to choose your tax status, because it will determine the taxpayer’s standard deduction when calculating personal income tax, calculating federal tax credit, the amount of tax to be paid and all tax refunds. You must also choose your status correctly because if found untrue by the IRS, it could be considered as a fraud and you may face unwanted penalties. Tax reporting status is divided into the following 5 statuses, they are:
Single – Unmarried people who don’t qualify for another filing status
Married filing jointly – Married couples
Married Filing Separately – Married people who feel their spouses may be hiding income or people whose spouses may have issues with tax liability
Head of Household – Unmarried people paying at least half the cost for housing and support of other people.
Qualifying Widow or Widower with Dependent Children – People who have lost their spouses and are supporting children at home
NOTE
If the same amount of personal income is used for different reporting identities, the taxable range and tax rate will be different.
If a taxpayer meets more than one tax filing status at the same time, he can choose the lowest tax filing status to declare.
TAX RATES
A tax rate is the percentage at which an individual or corporation is taxed. The United States (both the federal government and many of the states) uses a progressive tax rate system, in which the percentage of tax charged increases as the amount of the person’s taxable income increases.
There are different tax rates for different tax filing statuses in the United States. The federal income taxes in the United States are calculated based on tax rates that range from 10% to 37%. We would take a look at the tax rate for different tax brackets in each status explanation. We would take a look at the federal income tax brackets for 2020.
SINGLE
These are the people who are unmarried or people who have lost their spouses. For those who married and got divorced, you must be unmarried on the last day of the year or legally separated from the spouse on the basis of the divorce judgment or the separation maintenance judgment, and does not meet other tax status qualifications. People who file the single status possibly get lower taxes if they make a lot of money. This is because at very high tax brackets, the income levels that determine the tax brackets for married people filing jointly are less than double the income levels that determine the tax brackets for single people. The IRS may call this “the marriage penalty,” and it simply means that married people end up in higher tax brackets faster than single people do. This is why the IRS in most cases offers the married jointly status to people so they can get remarried or go back to their exes in the following tax year. Here is the tax bracket and income for tax return for single people in 2020
Tax rate of 10% – $0 to $9,875
Tax rate of 12% – $9,876 to $40,125
Tax rate of 22% – $40,126 to $85,525
Tax rate of 24% – $85,526 to $163,300
Tax rate of 32% – $163,301 to $207,350
Tax rate of 35% – $207,351 to $518,400
Tax rate of 37% – $518,401 or more
MARRIED FILING JOINTLY
Both the spouse and the spouse agreed to file a joint tax return. Report the combined income of the husband and wife on the joint tax return and deduct the combined expenditure of the two. Even if one of the spouses has no income or deductions, they can still use the spouse’s joint tax status. The IRS considers you and your spouse both responsible when you file jointly. You are both responsible for your taxes, interests and penalties when they arise. The advantage of filing jointly is that you will both get lower tax bills and you can also get deductions and credits that are not available if you file separately. A joint tax return can also guarantee a bigger tax refund. The tax brackets and tax return income for married people filing jointly in 2020 are as follows:
Tax rate of 10% – $0 to $19,750
Tax rate of 12% – $19,751 to $80,250
Tax rate of 22% – $80,251 to $171,050
Tax rate of 24% – $171,051 to $326,600
Tax rate of 32% – $326,601 to $414,700
Tax rate of 35% – $414,701 to $622,050
Tax rate of 37% – $622,051 or more
MARRIED FILING SEPARATELY
If couples want to pay taxes individually, or if the tax amount calculated in this way is less than the joint tax return, it is more advantageous to choose this status for tax return. If the spouse is unwilling to file a joint tax return, the taxpayer must choose this status to file tax returns, unless the status of the head of the household is met. There is an advantage filing separately when one spouse has huge medical expenses or miscellaneous itemized deductions. The tax bracket for single people filing and the tax bracket for married people filing separately are very similar except for the 35% and 37% tax rates. Here are the tax brackets and tax return income for married people filing separately
Tax rate of 10% – $0 to $9,875
Tax rate of 12% – $9,876 to $40,125
Tax rate of 22% – $40,126 to $85,525
Tax rate of 24% – $85,526 to $163,300
Tax rate of 32% – $163,301 to $207,350
Tax rate of 35% – $207,351 to $311,025
Tax rate of 37% – $311,026 or more
HEAD OF HOUSEHOLD
If you meet all the following eligibility requirements, you can file a tax as the head of the family:
On the last day of the year, you are deemed unmarried.
You paid more than half the cost of keeping up your house, and that house was your child’s main home. The cost of keeping up a home includes the property taxes, mortgage interest or rent, utilities, repairs and maintenance, property insurance, food and other household expenses,
You have a “qualifying person” living in the same house as you for more than half a year. The qualifying person could be a child under 19 or 24, a student, your parents, your siblings. Your parents don’t have to live with you in your house. You just have to show that you provide for their needs. The tax brackets and income tax return for household head are shown below:
Tax rate of 10% – $0 to $14,100
Tax rate of 12% – $14,101 to $53,700
Tax rate of 22% – $53,701 to $85,500
Tax rate of 24% – $85,501 to $163,300
Tax rate of 32% – $163,301 to $207,350
Tax rate of 35% – $207,351 to $518,400
Tax rate of 37% – $518,401 or more
QUALIFYING WIDOW OR WIDOWER WITH DEPENDENT CHILDREN
The year of the spouse’s death is the last tax year in which the taxpayer can file a joint tax return with the deceased spouse. In the next two years after the death of the spouse, the widow or widower who raises the child may use this as his or her tax status. He or she may also claim a standard deduction for a married couple IRS Tax filingjointly if he or she cannot continue to claim an exemption for the deceased spouse. The tax bracket for qualifying widows and widowers is the same as that for married couples filing jointly.
