Do You Wear the Pants in Your Family?

You might think so, but the IRS has the final say during tax season. The most grossly abused and misunderstood filing status on tax returns are individuals and even married couples who think that they qualify for the Head of Household status. Just being the head of your house or wearing the pants in the family does not necessarily qualify you for head of household status.

Generally, to qualify for head of household status you must be unmarried (single or legally separated), and not be eligible to file as a qualifying widow or widower, and have a dependent child. You must also have provided more than half the cost of maintaining, where you live as your main home for a qualifying dependent (generally a blood relative or adopted child).

You may also qualify if you are legally separated and your spouse was not a member of the household during the last six months of the tax year. You must have provided more than half of the cost of maintaining a household (main home) for a child who is a qualifying dependent.

A major problem faced by the IRS is when both separated parents claim head of household and both claim the child(ren). If a multiple support agreement exists, then the spouse listed in the agreement takes precedent. In the case where there is no agreement, the one maintaining the home will be granted the status. Both will be notified by the IRS to provide proof. School address records are the most fool-proof evidence of support.

There are special rules for claiming your parent(s) as a dependent(s). If your parent is a qualifying dependent, you may be eligible to file as head of household even if they do not live with you. However, you must be able to claim an exemption for them. Also, you must pay more than half the cost of keeping up their home. If the parent has no filing requirement and the only income that they receive is a minimal amount of Social Security, go ahead and claim them, even if you aren’t filing head of household. The IRS is hoping that you won’t since it would be considered a lost exemption. Lost exemptions save the IRS money and not you. If the parent is in a rest home or nursing home situation and you are paying a major portion of the costs, claim them and use the status if you are eligible. If you and your siblings are sharing support, take turns in claiming them.

Another important thing to remember is that U. S. citizens with a nonresident alien spouse are considered unmarried and cannot claim head of household. The IRS does not recognize the spouse as a qualifying dependent since they do not have their U. S. citizenship.

As most Baby Boomers can attest, prior to 1970, Head of Household meant the man of the house or the husband. This is evident with published census records which always listed the head of household as the husband. Recent Census Bureau statistics have proven this to no longer be true.

Amazingly, single parent demographics show that the percentage of children with single parents rose from 23% in 1980 to 31% in 2002. Here are some eye-opening statistics on the single family household:

· 26% of U. S. children under the age of 18 years old live in a single-parent home (Archived at: http://www.census.gov/prod/2005pubs/p70-104.pdf).

· 4.4 million is the number of U. S. male-maintained family household with no wife present. That’s 4.2 percent of all households. (Archived at: http://www.census.gov/prod/2005pubs/censr-20.pdf.

· 12% of U. S. family households are female-maintained with no husband present. That hasn’t changed for the past 15 years (Archived at: http://www.census.gov/prod/www/statistical-abstract.html.

· 4% of U. S. family households are male-maintained with no wife present – a one percent increase since 1990 (Archived at: http://www.census.gov/prod/www/statistical-abstract.html.

In 2006 the IRS began a strict enforcement of the Earned Income Credit and head of household status. A large majority of EIC filers are also claiming head of household status. The enforcement policy was enacted to stop the overwhelming nationwide abuse. Remember, this branch of the federal government has access to all public and private (financial institutes, banks, etc.) records and can easily verify your living arrangement. If audited and found to have erroneously filed, your social security number could be flagged for an indefinite period, and even though you may quality, you would not be allowed to claim either. The audit can also mean the assessment of penalties, interest and the repayment of any refunds received. These assessments far exceed any reduction in liability or refund you may have been trying to achieve. You may find yourself having to contact a tax resolution firm for tax debt help to negotiate payment plans or help release an IRS levy (What to do if you receive a Levy Notice) or to prevent garnishments.

Gentlemen, you can keep your “social standing” and wear the pants in your household but remember, Uncle Sam is not “gender specific” on who wears those pants when filing.

S. Raines, Sr. Tax Advisor/Preparer