Most people don’t like thinking about death, which is an inevitable part of human life. The passing on of a loved one is stressful and can be devastating, but the surviving spouse has to make major decisions that will definitely affect how he or she will pay his or her taxes in the future without the other party. Just like marriage and divorce, death of a spouse changes many tax aspects of the surviving spouse, some with serious tax consequences.
There are two distinct issues that will determine how a surviving spouse will file the tax returns with the IRS:
Example one: The married status of a surviving spouse will be a factor to consider in the first scenario. If for example, John married Betty but unfortunately, Betty passes way in February within the same year. If John marries again in October, he will have to either file married jointly or married but separately with the new wife. Betty’s tax returns filing can be filed as married but separately if need be.
Example Two: If John remains single, he and Betty can file jointly or separately as a married couple. But in this case, John will pick the best alternative since the IRS doesn’t stipulate any exemptions for surviving spouses who file their tax returns jointly as married even if their spouses died within the same fiscal year of tax return filing.
The following year after the death of a spouse, the surviving spouse will file their tax returns depending on whether they have dependants or not. If John has a child who fully depends on him and one who stays in his home for the whole fiscal year, then Qualifying Widow (Widower) can apply in John’s case. If he decides to use this option, then he gets the opportunity to benefit from the standard deductions on Joint Married Filing as well as using the tax tables.
However, if John does not have a dependant, he will file single status. But in case there is a dependent child, then he can qualify and benefit from the Head of Household filing status two years after the passing of a spouse but it is imperative to note that some states do not have such a special status for surviving spouses.
If one loses his or her spouse within a given fiscal year and they chose to remain single, he or she can file a joint return within that very year, and so long as he or she has qualified dependant(s), he or she can benefit from tax relief on the basis of a surviving spouse in the next two subsequent years. Although losing a loved one can be a devastating event, one should capitalize on every tax break with their new filing status in order to lessen the financial blow of losing a partner.