Married With Taxes: Deciding Whether to File Jointly or Separately

Sara Hammarback/freeimages
Sara Hammarback/freeimages

As a married taxpayer, you aren’t limited to filing a joint tax return with your spouse. Depending on your unique tax situation, it may benefit you to file separately. Here’s an overview of the benefits and drawbacks of the filing options available to you.

Married, Filing Separately

In most cases, it isn’t a good idea to use this filing status as a married person. One significant reason is that by filing under this status, you will automatically disqualify yourself from nearly every tax credit, such as the Earned Income Tax Credit (EITC) and the Child Tax Credit, even if you do meet the income guidelines.  You’ll also be facing an additional headache if you do file separately: you’ll have to divide all of your income and expenses on your tax form, which can be tiresome and nerve-wracking if you’re not very detail-oriented or are up against the tax filing deadline.

However…

As with any tax matter, there is always another angle. If your spouse is burdened with a sizable tax debt to which you have no connection, it would be to your advantage  to file separately. Doing so will allow you to not shoulder the burden of your spouse’s tax obligation. Instead, your tax returns would be treated as separate entities.

Benefits of Filing Jointly

If you or your spouse aren’t saddled with a separate tax debt, it would be to your benefit to file your tax returns jointly. The IRS encourages married couples to do so by offering a standard deduction that is twice that single standard deduction. You’ll also be able to claim a higher charitable contribution as a married couple, both of which could reduce your overall tax liability at the end of the year.

As with any tax matter, there is always a caveat, so it’s best for you and your spouse to meet with a qualified tax advisor at least once, especially if this will be your first year of marriage. Your tax advisor can assess your current financial situation, including any back taxes owed by either you or your spouse. From there, you’ll get a plan of action for filing your taxes: separately or jointly as a married couple.

Choosing the appropriate filing status for you is one of the key tax decisions you’ll make as a married person. Know and understand your options, and check in with a tax advisor to get answers to your specific questions. Marriage has its share of joys and headaches. While taxes certainly can’t be counted as one of the joys of marriage, they shouldn’t be a headache, either.

 

Love, Honor, and Pay Tax Debt? When Your Spouse Owes Taxes

freeimages.com
freeimages.com

A married couple is seen as a singular entity in the eyes of the law, sharing assets, property, income and debts.  However, the government sees spouses as single entities when it comes to tax debt. After all, your marital vows didn’t include a promise to “love, honor,  cherish…and pay their tax debt.” Here are some ways you can protect your tax refund from tax debt collection when your spouse owes on a tax debt.

Change Your Filing Status

You can elect to file your return as “married filing separately” to protect any refund from your spouse’s tax debt collection. Downside: You may lose out on EIC credit and your refund could be less under the “married filing separately” option.

Injured Spouse

The Injured Spouse is one way you can protect your upcoming tax refund. This option ensures your tax refund will be issued to you and not to you and your spouse as a whole. Here are some of the criteria for the Injured Spouse option

  • Proof that the tax debt occured before your marriage.
  • You’re entitled to the EIC credit as a couple
  • Paying the tax debt would cause undue financial hardship, e.g. unable to pay rent and tax debt at the same time
  • The debt is owed because of your spouse’s outstanding student loan, child support or spousal support obligation.

If you and your spouse elect to use this option and are filing a paper return, you must write “injured spouse” at the top of your returns and then complete IRS form 8379 at the same time.

Innocent Spouse Option

If the Injured Spouse option isn’t a possibility in your case, you can try to utilize the Innocent Spouse option. This option can apply under the following circumstances:

  • The court has ordered your spouse to pay their ex-spouse’s outstanding debt.
  • The tax debt occurred before you and your spouse were married
  • Divorce due to domestic abuse
  • Paying the tax debt would create an extraordinary financial hardship for both of you.
  • One of you doesn’t speak English as your primary language.

Change Your Withholding Status

By changing your withholding status, or the number of exemptions claimed on your taxes, you are reducing the amount of your refund. At the same time, the government will withhold more taxes from your take-home pay. Increasing your exemptions would mean less taxes deducted from your pay.

There is no simple solution for avoiding liability for a spouse’s outstanding tax debt; the options above are just a few of the ways you can take action to avoid being liable for your spouse’s tax debt.

As with any tax matter, a qualified tax pro will able to fully assess your tax scenario, and offer you the best options based on your and your spouse’s unique circumstances.

Marraige can mean sharing many moments together, both good and bad. It doesn’t have to mean sharing your spouse’s tax debt. We have tax pros on staff who can help you both decide which option is best for your unique situation.

Get started today by clicking the white “Start Chat” button in the upper right-hand corner of any of our webpages. You don’t need to go it alone. We can help.