I need some guidance pls

[ladyazymith]

2020 - I got laid off from the pandemic, engaged, delivered my 1st baby. Filed my taxes as single. 

2021 - I filed as head of household and my income at that time was the unemployment I have received. I also own a home (under my name only) and have a little savings in the bank (prior to knowing my fiance I already have them). Delivered my 2nd baby. Fiance filed on his own. 

2022 - I am no longer receiving unemployment. I opened up a side home business making handmade crafts. I filed at my local county for sole proprietorship (assumed name) license and been paying quarterly sales taxes (if applicable). Since my kids are still very young, I have only been selling locally whenever I can. So it's a hit or miss with sales. Still not married to my fiance. 

My question is: 

Is it okay to file again as head of household for 2022 and claim both the kids without a steady income? But still owns a home and earning some bank interest from my savings? Or let my fiance file as head of the household this time and claim our 2 kids? His only source of income is his job. No savings or credit history. 

I appreciate any advice. Thank you so much! Happy New Year! 

[NCperson]

@ladyazymith - 

You can't "let" your fiance file HOH; he has to meet the qualifications.  You have to meet the qualifications also; even for you it is not an "automatic".

there are two rules to file HOH 

1) you must provide for at least 50% of the expenses of your household.  It isn't clear whether you and your fiance are living together, and if so, only one of you could provide more than 50%.

2) Is there a qualifying dependent that lived with you for at least 6 months?  I presume both children live with you,  so you should be able to meet this test easily.  But it is not clear whether your finance could meet this test (does he live with the children?).  Further,  if child #1 is not his, then he could only claim this child  as an 'other dependent' if the child lived with him for all 12 months of the year.  The problem is that until you two are married, there is no legal or biological connection between the fiance and child #1

if you can answer 'yes' to both tests, you can claim HOH.(which means be won't be able to answer yes to both)

if your fiance can answer 'yes' to both tests, he can claim HOH (which means you won'tbe able to answer yes to both) and claim child #1 as an 'other dependent', assumming the additonal requirement of living with the child for all 12 months of the year is met.  Child #2 would be his qualifying dependent.

it is possible that neither of you can answer 'yes' to both tests, in which case neither of you can claim HOH.  You both would file single (and presumably, you would claim the children or each of you would claim one).  

this is complicated and best to use the official IRS calculators. Do the dependent calculator first and then do the Filing Status calculator. Should take 15 minutes at most 

https://www.irs.gov/help/ita/whom-may-i-claim-as-a-dependent

https://www.irs.gov/help/ita/what-is-my-filing-status

[Critter-3]

Ok  ... bottom line ... if the kids are his as well and you all live together then either of you can claim the dependents  but both of you cannot claim the same child.   Due to the EIC & CTC rules going back to normal the person with the higher income (even if they cannot file HOH) will usually get more for the kids  BUT  before either of you file you really need to review both returns to see where the kids to the most good for both of you combined.  Cooperation is key here for the best results all the way around. If you can use the downloaded program so you can easily flip flop between the 2 returns and do NOT file until you are absolutely sure the returns are as you want them.  Remember unless you are putting one child on each return the person not claiming a child should have not have the child anywhere on the return at all ... if you live together you cannot split up a single child  even though you can each take one if you have more than one. 

[NCperson]

@ladyazymith alternatively, once you figure out the options for filing status and dependency, this is a good calculator to figure out the best outcome.  this is complicated. 

what makes everything simpler to determine is

1) finance is father to both children

2) all 4 of you lived together for the entire year,.

https://www.dinkytown.net/java/1040-tax-calculator.html

[rjs]

This discussion has gone off on some tangents, and I'm afraid everyone is losing sight of your basic question and of an important requirement for filing as head of household. Your question was whether you can file as head of household.

If your fiance is the father of both children, and you all lived together all year, you have a choice about who claims the children as dependents, but you do not have a choice about who can file as head of household. One of the requirements for filing as head of household is that "you paid more than half the cost of keeping up your home for the tax year." Only one of you paid more than half the cost of keeping up your home, either you or your fiance. The other must have paid less than half. The one who paid more than half the cost can file as head of household. The one who paid less than half cannot file as head of household. And since the year has already ended, it's too late to change which one of you paid more than half the cost.

Whether you have a steady income, own a home, or earn interest have no effect on whether you can file as head of household. Whether your fiance has a steady job and has no savings or credit history have no effect on whether he can file as head of household. The answer to your question comes down to who paid more than half the cost of keeping up your home.

[Critter-3]

Fixation on HOH filing status is immaterial if your income is so low that the SINGLE filing status will zero out your income.  The IRS can question the HOH filing status and make you prove you qualify however you will never be audited if you use single.   AND  another misconception is you must file HOH to claim the kids or the child related credits which is a falsehood ... you get exactly the same using single.   So with my clients, if they don't need HOH it is never used ... why give the IRS a reason to audit you and the HOH audit is one of the worst.

[ladyazymith]

I know it's already late to respond to this but thank you to everyone who responded to my question. 🙂