Q. My payroll person told me that the filing status on the W-4 doesn’t necessarily mean the same thing as my marital status. Is that true? What is filing status?
A. Yes, it’s true. The filing status box on the W-4 and filing status on your tax return are not necessarily the same thing. The Form W-4 is a document designed to tell your employer how to withholding federal tax from your paycheck. The IRS issues withholding formula for each filing status each year. There are only two to choose from: married and single. The box you check on the Form W-4 determines which formula your employer uses. In certain situations, people who are considered married for tax purposes and who choose this option on their W-4, will not have enough withholding at the end of the year. This could be from both spouses working, having two jobs or even enjoying lots of non-wage income from investments or real estate. By switching over to the single withholding formula, additional withholding takes place. Check with your tax preparer or accountant for help if you can’t figure out how to complete the rest of the document. On an interesting note, the IRS already accommodates people in this situation if the box entitled “Married, but withhold at the higher single rate.”
Some companies use the Filing Status field on the Form W-4 to determine the marital status of their employees. This is not a good policy. It is really none of the employer’s business what the marital status is of the employee. From an HR perspective, this could lead to discrimination claims. Also, if an employer receives a lock-in letter for a specific employee, he/she may be directed to withhold at Single with zero allowances regardless of the marital status of the employee. Lock in letters come when an employee consistently is under-withheld and probably is not making an effort to either file a tax return or pay the amount they owe.
On your tax return, the rules are different. You are only allowed to claim married if you are in fact married based on the laws in your state. If you are married, you cannot claim single. There is a special status called married filing separately for those who wish to use it. Certain situations may warrant this for better tax treatment. The key here is that your marital status on the last day of the tax year determines your status for the tax return for that year.