Married individuals enjoy the ability to file income taxes either as individuals or as a couple. Both the married and filing separately status and the married and filing jointly status offer benefits to taxpayers in specific situations. Calculating your income tax return using each filing status might be necessary to determine which is best for you.
Ease of Filing
Tax filing software and e-filing has simplified the tax filing process for many Americans, but filing two tax returns is still double the work. When a couple chooses to file separately, each taxpayer must file his return. If tax preparation software is used or an accountant hired to prepare the income tax return, the fees for the filing are also doubled. However, these fees become a tax deduction during the next filing year and may seem minimal when compared to the savings that may occur when filing separate returns.
Adjusted Gross Income and Tax Brackets
In relationships with income discrepancies, a joint income return usually saves money as a married couple may earn double the income of an individual filer within the same tax bracket. On the other hand, couples with widely divergent levels of deductible expenses may find that filing separate returns can make more sense, as many deductions and adjustments to income require expenses to exceed a certain portion of gross income before they are deductible. For example, a medical expense must be greater than 7.5 percent of the adjusted gross income on a tax return to count as a deduction. The combined income of two married workers may prevent such thresholds from being crossed while filing a separate return might allow the deductions to be claimed if one member of the couple incurred most of the expenses. The only way to determine if a savings will occur is to calculate the taxes owed both ways and compare the totals.
Consistency Across Filing
Should your pre-filing calculations determine that separate returns result in a savings, both spouses must claim deductions in the same manner. If the wife itemizes deductions, the husband must also itemize deductions.
Protection from Debt
Income tax refunds are subject to seizure by the IRS. The IRS can seize the full refund amount on a joint return to cover unpaid tax debt as well as funds owed on a defaulted student loan. Filing separately may protect an individual's income tax refund from seizure.
Protection From Liability
Filing jointly means accepting joint responsibility for the accuracy of an income tax return filed as well as joint responsibility for the taxes owed on that return. If your spouse runs a small business and claims tax deductions for unqualified purchases, you become liable for taxes, penalties and interest owed if an audit uncovers your spouse's errors. This remains true even if you and your husband were divorced prior to the discovery.
Filing separately might not do you much good if you live in one of the nation's nine community property states -- Washington, Texas, California, Arizona, Idaho, Louisiana, New Mexico, Nevada or Wisconsin -- because they will require you to divide your income and deductions 50-50 when you file your separate returns. In any case, filing separately will disqualify you from taking many significant benefits, including the child and dependent care credit; several deductions and credits for college tuition expenses; and, in many cases, the right to make a Roth IRA contribution.
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