SOME 1040 BASICS

Over the years I have been, on occasion, asked about “filing as married for half the year” or “claiming my son for half the year”.

Below is a review of basic tax law, a part of Taxes 101, which addresses these types of questions.

(1)  Your filing status for the year is determined by your marital status on the last day of the year.  If you are legally married on December 31^st you are considered for tax purposes to have been married for the entire year.  You must file your return for that year as either Married Filing Joint or Married Filing Separate (or possibly, in certain situations, Head of Household). 

Conversely, if you are not legally married on December 31^st, for example your divorce is final in December, you are considered for tax purposes to have not been married for the entire year.  You will file your return for that year as either Single or Head of Household.

(2)  If a person is alive for at least one day of the year he/she is considered for tax purposes to be alive for the entire year, and receives all the appropriate tax benefits, whether a dependent or an independent filer, for the entire year.

If your spouse goes on to his/her final audit at any time during the year, including January 1^st, you can file as Married Filing Joint for that year.

If a child is born at any time during the year, including December 31^st, you can claim that child as a dependent, with all the applicable tax benefits (Child Tax Credit, Earned Income Credit), for that year.

If, God forbid, a child is born on May 1^st and passes away on May 2^nd you can claim the child as a dependent for that year.

This suggests some very unique tax planning.

(1)  The marriage tax penalty is alive and well in our Tax Code.  In many cases a married couple will pay more federal, and perhaps state, income tax filing as married then if they could file two Single returns.  Filing separately could save some tax, but it is still generally not as beneficial as filing two Single returns.

It is “more better” in most cases to tie the knot early in the year instead of in the fall or winter.  As long as you are going to pay the price of being married for the entire year you might as well enjoy all the benefits (?) of marriage for as much of the year as you can.

And, if you are in the process of a divorce, it is “more better” in most cases to complete the process in November or December of 2012 instead of waiting till January or February of 2013.  This way you will be able to file as Single or Head of Household for 2012.

(2)  If your wife is pregnant and due soon – it would be to your benefit tax wise if the child was born before the ball dropped at Times Square and the new year was rung in.  If the child is born at 8PM on December 31, 2011, instead of 6AM on January 1, 2012, you get all of the associated tax benefits of a dependent child on your 2011 Form 1040. 

I am, however, not quite sure exactly what you can do to achieve this tax planning goal.  Some websites suggest eating spicy food, going for a walk or marching up stairs, or having sex to induce labor.   

TTFN