Claiming your wife on your tax return can save you money on your taxes. However, follow a few guidelines when you fill out your 1040 return to avoid erroneously claiming your spouse as a dependent when she is not. The IRS allows two basic types of filing when you're married.
Married Filing Jointly
Filing a joint tax return means that both you and your spouse file your taxes together, and you use the same tax return. Likewise, you are collectively responsible for any tax due on the amount of money you make. When filing jointly, you cannot claim your spouse as a dependent. Instead, your joint tax bracket is typically wider than the individual bracket, allowing you to make more money in any given tax bracket before being pushed into the next highest bracket.
Married Filing Separately
Married but filing separately allows you to claim your wife as a dependent in certain situations. The IRS allows you to claim your spouse if she earned no gross income for the year and she was not the dependent of another person. Instead of the normal filing procedure, use form 1040A or 1040 and check the box on Line 3 of either form to claim your spouse. You also must use the "Married Filing Separately" column of the tax table or Section C of the tax computation worksheet when you calculate the tax you owe for the year.
You might save money by claiming your wife on your tax return, but this really depends on how much money you earn and your tax bracket after all of your deductions. The benefit for you is that you have the option of calculating your tax both ways before filing jointly or separately.
Do not claim your wife when she has any gross income for the year. Also, do not try to claim your wife while filing jointly. Both of these actions result in your return being rejected and audited. If you under-report your tax liability because you took an illegal deduction, you'll pay penalties and interest on all of the tax you should have paid but did not. You'll also have to resubmit your taxes and pay the back taxes you owe. If you fail to do this, the IRS may enforce collection action, placing a tax lien on your property and seizing it for back-tax payments.
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