Jackson Hewitt® Advises to Choose Wisely in Selecting Tax Filing Status

PARSIPPANY, N.J., Feb. 14, 2012 /PRNewswire/ -- Choosing a filing status is usually one of the first steps when preparing a tax return, and it can be one of the most confusing decisions for taxpayers. With so many credits and deductions available, Jackson Hewitt advises filers to be especially careful when selecting the appropriate filing status, as the wrong filing status can significantly impact the amount of a tax refund or tax liability.

"Your filing status is used to determine which tax rates and standard deduction amounts apply to your tax return," said Mark Steber, chief tax officer, Jackson Hewitt Tax Service Inc. "Choosing the correct filing status may be straightforward for some taxpayers, but it can be confusing for those who have more complex circumstances. If you're unsure which status best suits your situation, be sure to speak with a knowledgeable tax preparer to determine the most appropriate option."

Steber offers some common considerations to help taxpayers determine the right filing status:

• Married Filing Jointly: The Married Filing Joint status often provides the largest standard deduction and the lowest effective tax rate. You can use this status even if you are married and living apart or if only one spouse is working. Keep in mind that many tax benefits have a "phase-out" range (when the amount of credit available gradually reduces as the taxpayer approaches the income limit to qualify) that is greater under Married Filing Jointly; these include deductible IRA contributions, tuition and fees deduction, and the student loan interest deduction.  This status also offers higher phase-out ranges for many credits such as the Earned Income Tax Credit (EITC), Additional Child Tax Credit and various education credits.  

• Married Filing Separately: Many married couples assume that they must file jointly, but in some cases, completing separate returns may be a better option. These include when couples have a similar income and are in the middle income range, or when one spouse has high medical expenses for the year. The Married Filing Separately filing status allows the highest effective tax rate and the lowest phase-out range for deductible IRA contributions, itemized deductions and personal exemptions. Keep in mind that deductions for education expenses and the EITC are not allowed. The Child Tax Credit is one of the few credits allowed when using this status.

• Head of Household: Filing as Head of Household offers a higher standard deduction than Single or Married Filing Separately, with a lower effective tax rate.  If you are married, you may be considered unmarried for filing purposes and claim the filing status if you meet certain requirements. To qualify as Head of Household, you must pay more than half the cost of a household for you and a qualified dependent that lived with you more than half the year and you must not have lived with your spouse during the last six months of the year.  Spouses separated due to military, or other working conditions, do not qualify.

• Single: You can file as single if you are unmarried and do not qualify for any other filing status. Under the Single filing status, you are eligible for all tax credits and adjustments and have a lower standard deduction than married filing jointly. Unlike Married Filing Separately, you are allowed to claim the EITC. However, unmarried taxpayers who have a dependent should check to see if they qualify for the Head of Household filing status, as that will provide more tax benefits.

To learn more about determining the right filing status, please visit www.jacksonhewitt.com or call 1-800-234-1040 to find a local Jackson Hewitt office.

About Jackson Hewitt Tax Service Inc.

Based in Parsippany, NJ, Jackson Hewitt Tax Service Inc. is an industry-leading provider of full service individual federal and state income tax preparation, with nearly 6,500 franchised and company-owned locations throughout the United States, including 2,800 located in Walmart stores nationwide. Jackson Hewitt Tax Service® also offers an online tax preparation product at www.jacksonhewittonline.com. For more information, or to locate your neighborhood Jackson Hewitt® office, visit www.jacksonhewitt.com or call 1-800-234-1040. Jackson Hewitt can also be found on Facebook and Twitter.

Contacts:

David G. Weselcouch                                                   
Jackson Hewitt Tax Service Inc.                                 
(973) 630-0809
[email protected]                        

Melissa Connerton                                                                 
CooperKatz & Company
(917) 595-3039
[email protected]    

SOURCE Jackson Hewitt Tax Service Inc.