Video: Example of Choosing the Correct Filing Status

In this lesson, Nick Palazzolo, CPA, dives into the intricacies of choosing the correct filing status, a topic often tested on the exam. He uses the scenario of Jane, a single taxpayer with two dependent children, to illustrate the key considerations one must evaluate when deciding between filing as single or head of household. Nick clarifies the qualifications necessary for the head of household status, such as marital status, household composition, and income thresholds. By breaking down these factors and juxtaposing the potential outcomes and benefits of each filing status, Nick helps demystify the process, ensuring the grasp of these concepts is clear and actionable. He also reviews scenarios which could affect a taxpayer's eligibility, providing valuable insights on how to navigate these tricky decisions effectively.

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Video Transcript

Instructor: Nick Palazzolo

Nick Palazzolo is head instructor of ExamPrep.ai CPA Review. Nick's teaching style is engaging & upbeat, combining practical Big 4 tax & assurance expertise with years of 1-on-1 coaching. His lessons are concise and emphasize what you need to know to pass. Whether you're a recent grad or working full-time, we’re confident you can conquer your CPA exams with Nick’s review.

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All right, got an example here, choosing the correct filing status. We're going to see a lot of these questions in the exam, so make sure you are quite familiar with how to answer these. Let's say that Jane is a single taxpayer with two dependent children. Her gross income for the year is $55,000. She's wondering if she should file as single or head of household. Now, head of household, that's going to be a more preferential tax status, but what is the correct status? She can't just claim that if she doesn't qualify for it. To determine the correct filing status, Jane needs to consider a few factors such as her marital status, household composition, meaning are there dependents, children, anything like that, and income. In this case, Jane's not married, but Jane has two dependents, and her gross income is below the threshold for the head of household filing status. Any thresholds, anything like that you need to memorize, we will have included on the lessons in the resources. Here are the requirements for the head of household filing status. The taxpayer must be unmarried or considered unmarried on the last day of the year. Lastly, the household composition, the taxpayer must have paid more than half the cost of maintaining a household for a qualifying person. A qualifying person could be a child, parent, or other relative who has lived with the taxpayer for more than half the year. Again, this will come later on in our lesson. We'll talk about the criteria for those. In this case, since Jane meets all the requirements for the head of household status, she is unmarried and has two dependents. By filing as head of household instead of single, Jane will likely qualify for lower tax rates and a

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Federal Taxation of Individuals: Filing Status, Gross Income, & Adjustments

Module: 3 Concepts, 54 Videos

Filing Status Overview

0:26

Introduction to Filing Status

4:27

Tax Filing Options

12:16

Married Filing Separately vs. Filing Jointly