Filing your taxes with the correct tax filing status is critical to avoiding penalties and ensuring compliance with IRS regulations. For married individuals, filing as single instead of using a married status can trigger significant consequences, including fines, disallowed deductions, and potential legal issues. The IRS requires married taxpayers to choose either “married filing jointly” or “married filing separately,” depending on their circumstances.
Our Raleigh-area CPAs from Steward Ingram & Cooper, PLLC are sharing important information regarding tax filing status options and the penalty for filing single when married. Join us as we provide insight into why choosing the correct filing status is essential.
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Understanding Filing Status
Filing jointly combines both spouses’ incomes, often resulting in lower tax rates and liability. Filing separately uses individual incomes and tax brackets, which are typically less favorable, potentially leading to higher taxes. However, filing separately may benefit couples with significant individual deductions or liabilities. Lets review the tax filing status options now.
Tax Filing Status Options and Guidance
The IRS defines tax filing status as a classification that determines how you file your tax return and impacts your tax rates, deductions, and credits.
There are five primary tax filing status options:
Single
Individuals who are unmarried or legally separated as of the last day of the tax year.
Married Filing Jointly
Married couples who choose to file a combined tax return, report all income, deductions, and credits together.
Married Filing Separately
Married couples who file separate returns, keeping their financial responsibilities and tax liabilities distinct.
Head of Household
Unmarried individuals who provide significant financial support for a dependent and meet other specific requirements.
Qualifying Widow(er)
Individuals who lost their spouse in the last two years and have a dependent child.
What is Married Filing Separately?
Married filing separately (MFS) is a tax status where each spouse files their own return, reporting their income, deductions, and credits individually. While it limits access to some tax benefits, it can be useful in situations like high medical expenses or significant itemized deductions. It’s often chosen to reduce liability or separate financial responsibilities.
How Married Filing Separately Works
Each spouse files their own tax return and is taxed based on their individual income under the IRS’s MFS tax brackets. Both must use the same deduction method—either itemized or standard—and certain tax credits may not be available. This option can provide financial privacy and protect one spouse from the other’s potential tax issues.
Can I File As Single When Married?
For married taxpayers, the IRS requires them to select either “married filing jointly” or “married filing separately” unless they meet the strict qualifications for head of household.
Filing as single when you are married is not permitted and can lead to penalties, as it misrepresents your marital status and can distort your tax liability. Understanding these rules is essential to ensure compliance and avoid unnecessary complications with the IRS.
Penalties for Filing Single When Married
Filing single when you are married violates IRS regulations and can lead to significant consequences. The IRS takes accurate reporting seriously, and choosing the wrong status can result in fines, loss of benefits, or even legal trouble.
Below are the key penalties for filing single when married, along with an explanation of how they can affect your financial situation.
Financial Penalties
Filing single when married can lead to financial penalties, including additional taxes owed and fines. If the IRS identifies the error, they will recalculate your tax liability based on the correct filing status, which may result in a higher tax bill. You may also face late payment penalties or interest on the adjusted amount.
Loss of Deductions and Credits
Filing single when married may disqualify you from valuable tax deductions and credits available to married couples. For example, you could lose access to higher income thresholds for deductions or credits like the Child Tax Credit or Education Credits. This can significantly increase your tax burden compared to filing correctly as married.
Increased Risk of IRS Audits
The IRS closely monitors discrepancies in filing statuses and filing single when married raises a red flag. This increases the likelihood of an audit, where the IRS may scrutinize your return and potentially uncover additional errors. Tax audits can be time-consuming and costly, often resulting in further penalties.
Potential Fraud Charges
If the IRS determines that filing single when married was an intentional act to reduce your tax liability, it may be classified as fraud. Tax fraud carries severe consequences, including substantial fines and, in extreme cases, criminal charges. Even unintentional errors can create a challenging situation requiring corrective action.
Revised Tax Liability
When the IRS identifies the error, they will correct your filing status and recalculate your taxes. This adjustment can lead to a higher tax bill, which may be due immediately. If you cannot pay the revised amount, additional interest and penalties may accrue until the balance is resolved.
Why Would a Married Person File As Single?
Filing single while being married is a common error, often driven by misconceptions or specific personal circumstances. While some may not realize it’s against IRS rules, others might intentionally choose this option to achieve financial goals or resolve complex situations.
Below are the most common reasons people may file single when married.
Misunderstanding IRS Rules
Some people are unaware that being married requires choosing either “married filing jointly” or “married filing separately.” They may assume filing single is allowed if they manage finances independently or are temporarily separated, leading to an unintentional error.
Attempt to Maximize Tax Refunds
Some taxpayers believe that filing single might result in a larger refund or reduce their tax liability. This is often based on incorrect assumptions about tax brackets or available deductions and credits, which can backfire if the IRS adjusts their filing status.
Desire for Financial Independence
Couples who manage separate finances may feel filing single better reflects their situation. This is particularly common in cases of financial disagreements or mistrust between spouses. However, the IRS requires the use of a married filing status, even in these scenarios.
Legal Separation Confusion
Taxpayers who are separated but not legally divorced may mistakenly think they qualify to file as single. Unless a formal decree of legal separation exists by the end of the tax year, the IRS still considers them married for tax purposes.
Intentional Misrepresentation
In some cases, individuals file single to hide income or avoid financial obligations tied to a spouse. This deliberate misrepresentation constitutes tax fraud and can lead to severe penalties, including fines or legal action.
Correcting Filing Errors
If you’ve mistakenly filed as single when married, it’s important to act quickly to correct the error and minimize potential penalties. The IRS allows taxpayers to amend their returns, and taking the right steps can help resolve the issue efficiently.
Let’s look at the best course of action when needing to correct filing errors with the IRS.
File an Amended Return (Form 1040-X)
The first step is to complete and submit Form 1040-X to amend your return. This form allows you to change your filing status to married filing jointly or married filing separately and update any associated income, deductions, or credits. Be sure to attach any required supporting documents.
Understand Deadlines for Amendments
The IRS generally allows taxpayers to amend their returns within three years from the original filing date or two years from the date the tax was paid, whichever is later. Acting within this timeframe and adhering to tax deadlines is crucial to ensure the IRS processes your corrections.
Pay Any Additional Taxes Owed
If the correction results in a higher tax liability, pay the difference as soon as possible to avoid accruing further interest or penalties. The IRS may also adjust your balance automatically after processing your amended return.
Communicate Promptly with the IRS
If you receive a notice from the IRS about the incorrect filing status, respond promptly. Addressing the issue early can prevent further penalties or complications. The IRS may provide instructions for correcting the error, which should be followed carefully.
Seek Professional Guidance
Working with a tax consultant can simplify the amendment process and help you accurately complete your return. At Steward Ingram & Cooper, PLLC, we can inform you of deductions and credits available under the corrected filing status. By working with our Raleigh-Durham CPAs, we can help you stay in compliance with the IRS and select the correct tax filing status.
Get Tax Filing Status Assistance from Our Raleigh-Durham CPAs
At Steward Ingram & Cooper, PLLC our tax planning CPAs understand that navigating tax rules and filing requirements can be complex. However, you don’t have to face these challenges alone. Our team of CPAs helps clients ensure compliance, avoid penalties, and select the correct tax filing status.
Contact our CPAs serving Raleigh, Durham, and Chapel Hill today to check our availability and see if we are taking on new clients. Get started now by calling us at (919) 872-0866 or filling out the contact form below.