The head of household filing status offers substantial tax benefits compared to filing as single or married filing separately. However, incorrectly claiming head of household can lead to penalties from the IRS if you don’t truly qualify. Here’s an overview of the head of household requirements, penalties for erroneous claims, and how to fix head of household errors on your taxes.
Head of Household Filing Requirements
To file as a head of household, you must be unmarried or considered unmarried on the last day of the tax year. In addition, you must have paid for more than half the cost of keeping up a home that was the main home for all year of:
- Your qualifying child, who is your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, or a descendant of any of them (for example, your grandchild, niece, or nephew)
- Any other qualifying relative, if you can claim them as a dependent
You are considered unmarried for head of household purposes if your spouse did not live in your home for the last 6 months of the tax year. If you are legally separated according to your state law under a decree of divorce or separate maintenance, you are not considered married.
In addition, you must have been a U.S. citizen or resident alien for the entire tax year. Nonresident aliens generally cannot claim head of household status.
Qualifying Child Requirements
For a child to be your qualifying child for head of household status, they must meet several tests:
- Relationship test: The child must be your son, daughter, stepchild, eligible foster child, brother, sister, half brother, half sister, stepbrother, stepsister, or a descendant of any of them (for example, your grandchild, niece, or nephew). An adopted child is treated the same as a natural child.
- Age test: The child must be under age 19 at the end of the tax year, under age 24 if a full-time student, or any age if permanently disabled.
- Residency test: The child must have lived with you for more than half of the tax year. Temporary absences for school, vacation, medical care, military service, or detention in a juvenile facility count as time lived at home. A child who was born or died during the year is considered to have lived with you for the entire year if your home was their main home while alive.
- Support test: The child cannot have provided over half of their own support for the tax year.
- Joint return test: The child cannot file a joint tax return for the year, unless it is only to claim a refund of taxes withheld or estimated taxes paid.
Qualifying Relative Requirements
For another qualifying relative to qualify you for head of household status, they must meet several tests:
- Relationship test: The person must be your relative or have lived with you all year as a member of your household (and your relationship cannot violate local law). Relatives include individuals such as your parent, grandparent, sibling, niece/nephew, in-law, or step-relative.
- Income test: The person’s gross income for the year must be less than $4,300.
- Support test: You must have provided more than half the person’s total support for the year.
- Joint return test: The person cannot file a joint return, unless the return is filed only as a claim for refund.
Penalties for Incorrect Head of Household Claims
The IRS takes head of household fraud seriously, assessing penalties on top of the extra tax you’ll owe for misclaiming the status. Here are some potential penalties:
- Accuracy-related penalty: This penalty is equal to 20% of the extra tax you owe for incorrectly claiming head of household. The penalty applies if the IRS finds you were negligent or disregarded rules and regulations.
- Civil fraud penalty: The civil fraud penalty is 75% of the extra tax you owe if the IRS proves you knowingly claimed head of household falsely and fraudulently. This is a steep fine meant to punish clear tax evasion.
- Criminal penalties: Willfully making a false statement on your tax return is a felony. If convicted, you may face up to 3 years in prison and a fine of up to $250,000.
You will also owe interest on any unpaid tax from the original due date of the return until you pay in full.
Statute of Limitations
Normally the IRS has 3 years from when you file your return to assess accuracy and fraud penalties. But if you substantially understate your taxable income by more than 25% by falsely claiming head of household, the IRS gets 6 years to audit your return and impose fines.
How to Fix Head of Household Errors
If you discover you incorrectly filed as head of household, take action to fix it and minimize penalties. Here are some steps to take:
- File an amended tax return on Form 1040X showing the correct filing status. Pay any additional tax and interest you now owe.
- Explain to the IRS why you originally claimed an incorrect filing status. For example, detail any ambiguity about who qualified you or any confusion on the head of household rules.
- Argue that you made an honest mistake rather than intentionally committing fraud. The burden of proof is on the IRS to show you knowingly falsified your return.
- Ask the IRS to abate penalties due to reasonable cause. For instance, you may qualify for first-time penalty abatement if you haven’t been penalized before.
- Provide proof that you qualify for head of household if you still believe you are entitled to the status upon a closer review of the rules.
Ideally, you should correct any improper head of household claims as soon as you identify your error. Although penalties will continue accruing until you file an amended return, the IRS may be more lenient if you take swift action to fix your mistake.
How to Avoid Head of Household Errors
With steep penalties on the line, double check that you fully meet the head of household requirements before filing. Here are some tips to claim head of household properly:
- Review the relationship, age, residency, support, and joint return tests for qualifying persons.
- Check that your dependent has lived with you for more than half the year.
- Ensure you provide more than half the cost of maintaining your home.
- Keep documents proving your qualifying child or relative status, like school and medical records.
- Make sure you were considered unmarried on December 31 of the tax year.
- Consult the IRS rules if you have a non-traditional family situation.
Claiming exemptions and credits properly as head of household can also be tricky. An experienced tax professional can help review your qualifications and ensure you file accurately.
Using the IRS Interactive Tax Assistant
The IRS offers an Interactive Tax Assistant tool to help determine if you qualify as unmarried or for head of household status. It will ask you a series of questions and provide answers specific to your situation.
The assistant asks questions such as:
- On the last day of the year:
- Were you married and living together?
- Were you married living apart?
- Were you divorced or legally separated?
- Were you widowed?
- Do you pay more than half the cost of keeping up a home?
- Did a qualifying person live with you for more than half the year?
Based on your responses, the tool will determine your proper filing status and provide next steps. Use this IRS resource if you have any uncertainty to avoid costly head of household errors.
Head of Household Filing Status Examples
Here are some examples of correct and incorrect head of household filing status claims:
Correct Head of Household Returns
Example 1
- John is unmarried.
- John’s 10-year-old daughter Sara lived with him the entire year.
- John provided all of Sara’s support and paid all the costs of keeping up the home.
John qualifies as head of household since Sara is his qualifying child dependent.
Example 2
- Mary is unmarried.
- Mary’s mother Nancy lived with her the entire year.
- Mary provided over half of Nancy’s support.
- Nancy had only $2,000 of income for the year.
Mary qualifies for head of household because Nancy is her qualifying relative dependent.
Incorrect Head of Household Returns
Example 1
- Lisa is unmarried.
- Lisa’s 25-year-old brother Victor lived with her for 10 months of the year while between jobs.
- Lisa provided over half of Victor’s support.
Lisa does not qualify as head of household because Victor did not live with her for the entire 12 months of the year.
Example 2
- Mike is married but has lived apart from his spouse for 2 months.
- Mike provides all the support for his 3 young children who live with him.
Mike cannot file as head of household because he is still considered married. He must file as married filing separately or jointly.
Conclusion
Claiming head of household improperly can lead to fines of up to 75% of tax owed plus interest and criminal prosecution. To avoid penalties, ensure you qualify by meeting all the relationship, residency, support, and other tests before filing. Double check your status and consult a tax expert if needed. Swiftly file an amended return if you discover you claimed head of household incorrectly. With sound tax preparation and knowledge of the detailed rules, you can properly earn the benefits of head of household status without the risk of penalties.