Question

Kate and Brian Little married in 2002, however, the couple started having marital issues in 2016. Although they are not legally separated, they consider themselves completely estranged as of now. The two of them have considered divorcing, but due to financial issues, they have not filed. Further, their financial issues have meant that Kate and Brian cannot afford to live in separate homes. Thus, although they consider themselves separated, they and their three boys all reside in a single-family home in Pittsburgh, Pennsylvania.

            Although Brian earns much more than Kate, last year both contributed funds to maintaining their house and supporting their boys. In one of their discussions this past year, they decided that Brian had provided much more than Kate to the ongoing maintenance of the house and the support of their children. Therefore, Brian has decided that for the current tax year, they will need to file separate Federal tax returns, and he wants to claim head-of-household status. Even though they live under the same roof, Brian feels that he and Kate should maintain separate households, including finances. This factor, and him providing more towards the support of their boys, is why Brian feels he is eligible for head-of-household filing status. As the tax preparer and advisor, provide insight into which filing status is most appropriate for Brian in the current year. Brian’s address is 14 Mull Circle, Pittsburgh, PA, 15227.

Required: In a 1-2-page Word document, answer the following prompts about this scenario:

• Evaluate the situation and identify the relevant tax issues.
• Recommend which filing status Brian should use to file his Federal taxes. Explain the reasoning behind your choice.
• Explain how your chosen filing status benefits both individuals overall.

Answer 1

According to current situation Brian can file as Head of Household and Kate could maintain a single taxpayer status.

As Brian is qualifying following conditions required to be eligible for Head of the Household:

1. The individual is unmarried or leagally seperated or married but living apart from the spouse for last 6 months.
2. The individual is maintaing over half of the cost of the dependents and maintainig the household for more than half taxable year.
3. The Individual is not a non-resident Alien.
4. The individual is not a qualifying Widow(er)

Brian could get to pay lower tax as he will be having larger standard deduction and wider tax brackets.

For Kate she will not be enjoying any benefits compared to Brian as she is a single taxpayer now, as she is divorced and has planned to maintain sperate household.