FAQ

Tax Filing Status

Single Filing Status

Single filer status is for unmarried people who do not qualify for another filing status. Most single people who can claim qualifying widow(er) or head of household status will find it advantageous to file under that status rather than as a single filer.

Head of Household

The Head of Household filing status is for individuals that are the main providers of the household for themselves and a qualifying individual. This filing status allows you to take a higher standard deduction, possibly be eligible for a lower tax bracket, and perhaps qualify for the Earned Income Credit. If you are single or separated, check to see if you qualify for the Head of Household filing status.

Married Filing Jointly

If you are married, you may choose to file a Married Filing Jointly or Married Filing Separately return. On a joint return, you report your combined income and deduct your combined allowable deductions. You may file a joint return even if only you (or your spouse) had income.

Married Filing Separately

If you are married, you may choose to file separate returns. This may be advantageous if this results in less tax liability or if either of you prefers to be responsible only for your own tax liability. You may not claim your spouse as a dependent when you file with this status. If you were separated during the entire last half of the tax year, one of you may qualify as Head of Household if certain conditions are met.

Qualified Widow

Taxpayers who do not remarry in the year their spouse dies can file jointly with the deceased spouse. For the two years following the year of death, the surviving spouse may be able to use the Qualifying Widow(er) filing status.

Self Employment

Tax Obligations

Like Social Security and Medicare taxes withheld for most employees, self-employment taxes are the Social Security and Medicare amounts withheld on income primarily for individuals who work for themselves. You must pay self-employment tax if your net earnings from self-employment (not church related) are $400 or more, or if you made $108.28 or more as a church employee. Special self-employment tax rules for caregivers, or individuals who work in the homes of elderly or disabled individuals, can be found in Publication 926.

The self-employment tax rate is 15.3%. The rate consists of two parts: 12.4% for social security (old-age, survivors, and disability insurance) and 2.9% for Medicare (hospital insurance).

For 2023, the first $160,200 of your combined wages, tips, and net earnings is subject to any combination of the Social Security part of self-employment tax, Social Security tax, or railroad retirement (tier 1) tax. (For SE tax rates for a prior year, refer to the Schedule SE for that year).

If you use a tax year other than the calendar year, you must use the tax rate and maximum earnings limit in effect at the beginning of your tax year. Even if the tax rate or maximum earnings limit changes during your tax year, continue to use the same rate and limit throughout your tax year.

All your combined wages, tips, and net earnings in the current year are subject to any combination of the 2.9% Medicare part of Self-Employment tax, Social Security tax, or railroad retirement (tier 1) tax.

If your wages and tips are subject to either social security tax or the Tier 1 part of railroad retirement tax, or both, and total at least $160,200, do not pay the 12.4% social security part of the SE tax on any of your net earnings. However, you must pay the 2.9% Medicare part of the SE tax on all your net earnings.

You are liable for an additional 0.9% Medicare Tax if your wages, compensation, or self-employment income (together with that of your spouse if filing a joint return) exceed the threshold amount for your filing status:

Filing Status	Threshold Amount
Married filing jointly	$250,000
Married filing separate	$125,000
Single	$200,000
Head of household (with qualifying person)	$200,000
Qualifying surviving spouse with dependent child	$200,000

You are considered self-employed if

• You carry on a trade or business as a sole proprietor or an independent contractor

• You are a member of a partnership that carries on a trade or business
• You are in business for yourself and receive payments for products or services you provide but you are not an employee

End of Year

Since an employer is not withholding taxes from your income on your behalf, you may need to make quarterly estimated payments by filing Form 1040-ES, Estimated Tax for Individuals. Last year’s tax return is needed to fill out the form. Payments can be made by mail or online using either the IRS’s Electronic Federal Tax Payment System or Electronics Fund Withdrawal.

Avoiding Tax Problems

Not staying up-to-date on the tax code. Research the latest changes to the tax code before filing your own taxes. New laws, such as the Affordable Care Act (also known as Obamacare), will affect many taxpayers and are constantly changing. Under the ACA, uninsured Americans who are not exempt from the law will be penalized. If you don’t have health insurance, you could pay the penalty, which will be the greater of 2% of your income or $325 per adult and $162.50 per child.

Not claiming all earned income. You must report all earned income on your tax return. When money is found that you did not report, you could owe interest and penalties in addition to the tax owed on that income.

Number errors. Whether it’s a Social Security Number or a number for income, incorrect number transfers on any form could cost you. Be mindful when entering bank account information when opting for direct deposit. The last thing you want is for someone else to receive your refund. You should double check all numbers entered on your tax return.

Math errors. Many taxpayers use tax software, and most will not catch errors for incorrect data entry. You should double check your numbers and then double check your calculations.

Filing under an incorrect status. With five different filing status options available, the most accurate one for a taxpayer’s situation may not be easily determined. Each filing status could have an impact on the tax liability.

Mismatched names. This is a common mistake for newlyweds, typically when the wife takes a new last name and has not notified the Social Security Administration. The same issue may pop up for same sex marriages now that the federal government recognizes their union. The opposite applies as well – divorcees who have a name change need to notify the Social Security Administration. If your name does not match the name and Social Security number the IRS has on file for you, the tax return could be rejected or the refund could be delayed.

Paying multiple state taxes. Don’t forget that income earned in another state must be reported. If you reside in one state and work in another, a nonresident tax return must be filed in the state in which you work. Only the money earned in that state needs to be reported. However, if you fail to file this return, you could face interest and penalties, in addition to the taxes owed.

Forgetting to sign the forms. It is an all-too-common mistake to forget to sign on the bottom line. While this may not cost you money upfront, it will cause a delay in receiving any anticipated refund. For those who owe the IRS and wait until the very last minute to file, forgetting to sign their tax return could cost them a late fee and penalty when the IRS sends it back for signature and April 15th has passed.

Falling for tax schemes. One of the fastest growing concerns for the IRS is tax refund fraud and identity theft. Taxpayers have lost hundreds of thousands of dollars because criminals tricked them into believing they owed the IRS. The IRS will never send an unsolicited email or contact you through social media channels. The IRS does not ask for personal or financial information. If you believe you may be at risk for identity theft, you should probably contact the IRS Identity Protection Specialized Unit by calling their toll-free number at 1-800-908-4490.

Missing a deduction or credit. While penalties and fees mentioned above could cost you plenty, missing a deduction or tax break could cause you to owe more than you actually should or get a lower refund than what you earned.

Making IRS Payments

Education

Educator Expenses - Deduction

If you are an elementary or secondary school teacher, instructor, counselor, principal, or aide and you have worked at least 900 hours during a school year, you may deduct the cost of books, supplies, computer equipment (including software and services), and other materials used in the classroom. You may deduct up to $250 of these expenses directly against your income, without itemizing deduction. Each qualified taxpayer may deduct up to $250 in expenses on a joint return. Remaining expenses can be deducted as a miscellaneous itemized deduction on Scheddule A, subject to the 2% of adjusted gross income limit.

Coverdell Education Savings Account (Education Iras)

An education savings account, Coverdell ESA, can be established for a child under he age of 18. Any individual (including the child) can contribute to the account during the year if they meet certain income limitations. The total annual contributions per beneficiary are limited to $2,000. Withdrawals will be tax-free when used to pay education costs (elementary school, secondary school, or a post-secondary school such as a college) for the beneficiary.

Education Expenses - Tuition Payment Verification

Students attending eligible higher education institutions need more than Form 1098-T, Tuition Payments Statement, if challenged to prove paid educational expenses. Receipts from the educational institution showing the amount actually paid for tuition and fees are adequate for verification. Canceled checks or bank statements are also good records. If payments included amounts for charges other than tuition and fees, you should save a copy of billing documents from the school that break down the charges individually.

Student Loan Interest

You may be able to claim a deduction of up to $2,500 for interest paid on a qualified student loan. Only the amount of interest actually paid during the year may be deducted. You cannot claim the deduction in any tax year in which another taxpayer claims you as a dependent. You do not need to itemize to claim this interest. This amount is subject to a phaseout, which begins at $60,000 of income for a single person and at $125,000 for a married couple filing a joint return.

Tuition and Fee Deductions

If you are unable to claim the American Opportunity or Lifetime Learning Credits, you may be able to claim a tax deduction for qualified higher education expenses. You can take a deduction of up to $4,000 for qualified tuition and related expenses as an adjustment to income, even if you do not itemize your deductions. Certain restrictions apply.

Lifetime Learning Credit

This is a nonrefundable tax credit for payments of qualified tuition and related expenses for post-secondary education. The allowed credit is 10% of the qualified tuition, fees, and expenses you, your spouse, or a dependent paid for courses. You do not have to be in a degree program, a full-time student, or in the first four years of post-secondary education to qualify for the Lifetime Learning credit. The maximum credit allowed per return is $2,000.

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