Filing status

Filing status is an employee’s tax classification that determines how much federal income tax is withheld from their paycheck.

Homebase Team

Min Read

What is filing status?

Filing status is an employee’s tax classification that determines how much federal income tax is withheld from their paycheck. Employees select their filing status on Form W-4, which directly impacts their tax rate, deductions, and potential tax refunds.

Homebase payroll helps employers accurately determine and apply the correct filing status, ensuring proper tax withholdings and compliance with IRS regulations.

Different types of filing status

The IRS recognizes five main filing statuses:

Single – For unmarried individuals who do not qualify for another filing status.
Married filing jointly – For married couples who choose to file one tax return together, often resulting in lower taxes.
Married filing separately – For married couples who prefer to file separate tax returns, usually for financial or legal reasons.
Head of household – For unmarried individuals who support a dependent and pay more than half the household expenses, offering lower tax rates than the single status.
Qualifying widow(er) with dependent child – For individuals who recently lost a spouse and have a dependent child, allowing them to use the same tax benefits as married filing jointly for up to two years.

How filing status impacts payroll

An employee’s filing status determines:

How much federal income tax is withheld from their paycheck.
The number of allowances and deductions they can claim on their W-4.
Their overall tax rate when they file their annual tax return.

Selecting the wrong filing status can result in too much or too little tax being withheld, leading to an unexpected tax bill or a larger-than-necessary refund.

Employer responsibilities for managing filing status

When an employee submits a new W-4 form:

Enter the information into your payroll system for accurate tax withholding.
Update records promptly if they submit a new W-4 due to marriage, divorce, or other life changes.
Keep W-4 forms securely, as the IRS may request them for verification.

If managing tax withholdings manually feels overwhelming, Homebase payroll automates tax deductions, ensuring accurate withholdings and IRS compliance.

Simplify tax withholdings with Homebase—get started today.

Common mistakes employees make when selecting filing status

Employees may not always choose the correct filing status, leading to withholding issues. Common mistakes include:

Choosing single instead of head of household, missing out on a lower tax rate.
Not updating their W-4 after marriage or divorce which can lead to incorrect withholding.
Filing separately when filing jointly could result in lower taxes.

Encourage employees to review their filing status regularly, especially after major life changes, to ensure the correct amount of tax is withheld.

Simplify tax withholdings and payroll compliance with Homebase

Keeping up with tax laws, employee W-4s, and payroll deductions can be time-consuming, but Homebase payroll makes it easy. With Homebase, you can:

Automatically calculate federal tax withholdings based on an employee’s filing status.
Update tax settings in real-time when employees submit a new W-4.
Ensure compliance with IRS rules to avoid penalties.
Keep payroll records organized and accessible.

Sign up for Homebase today and take the guesswork out of tax withholdings and payroll compliance.

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