get redirected here Using the Married Filing Joint Status while disjunction
An area that needs to be examined while you are going straight through the separation process is determining the tax filing status that will be the most advantageous to you. During the pre-divorce year(s), you have a join of options that can growth or sell out your tax liability depending on which filing status you utilize.
Using the Married Filing Joint Status while disjunction
In your pre-divorce year(s), you have the choice of filing under the following statuses:
Married Filing Jointly (Mfj),
Married Filing detach (Mfs), or
Head of Household (Hoh)
Once the separation has been finalized or you have been legally separated in inevitable states, you will have the choice of filing under the following statuses (unless re-married):
Head of Household (Hoh)
Single (S)
The marital status for the tax year is thought about by your marital status on December 31st of the current year. Your marital status is thought about by state law.
If you have not received your separation conclude or are not under a conclude of detach maintenance by December 31 of the current year, you are thought about married for federal revenue taxes purposes. In that case you and your spouse have the choice to use the married filing joint status. You will join your income, expenses, and taxes on one return. Both you and your spouse must sign the return and once you file a joint return, you can't amend the return and turn the status to married filing separate.
Disadvantages to Electing the Married Filing Joint Status
Before you consent to filing a joint return with your spouse, it is important to understand the following disadvantages:Joint and some tax liability - when a joint return is filed, you and your spouse are jointly and severally liable for any understated revenue taxes or unpaid taxes for the year filed. What this means is that the Internal revenue service can go after whether spouse for 100% of the tax owed regardless of the party who under-reported revenue or over-reported deductions for the year a joint return was filed.
Marriage tax penalty - for higher revenue earning joint filers, the marriage tax penalty still comes into play and can growth your overall federal revenue tax over separate tax filing statuses. Changes to the tax code in 2003 with extensions filed in 2004 to continue straight through 2010 in case,granted relief to married taxpayers, thus making the marriage tax penalty less of an issue for taxpayers in the 10% and 15% brackets.
Advantages to Electing the Married Filing Joint Status
In most instances, if you elect to file a joint return with your spouse, you and your spouse will typically pay less in combined taxes than you would if you had filed detach returns. There are some tax related items you are entitled to if you meet definite requirements.
Tax deductions and credits eligible if married filing jointly but not married filing separately comprise the following:
The joint tax brackets are higher and can corollary in lower taxes.
You would have the capability to claim the following related child deductions or credits (if qualified):
The student loan interest deduction
The tuition and fees deduction
The child and dependent care expenses tax reputation (in most cases)
The higher schooling tax credits (Hope and Lifetime learning credits)
As you can see, the tax advantages of the married filing joint status should be thought about - especially if you earn significantly more revenue than your spouse. The tax brackets for the married filing joint status are more suitable than the filer using the married filing detach status. You will need to procure your spouse's consent to file jointly. If you can work together and trust that your spouse is accurately reporting his/her tax related items, using the married filing joint status can save tax and leave more money to split when the separation is final.
If you file married filing jointly you should comprise a tax liability indemnification clause in your separation language to provide some legal recourse in the event of later tax related issues.
We will cover the advantages and disadvantages of other tax filing statuses in time to come articles. Married filing jointly is one choice to consider. Married filing separate, Head of Household, and the single statuses should be thought about as part of your separation financial plan.
If it is likely that the separation will be final before year-end, you will want to present separate tax strategies to see if it would be beneficial to finalize the separation in the current year, or postpone the separation until the next year. We recommend that you present your financial situation with your remarkable tax consultant to help in determining the best strategy for you. Each situation is separate and changing the fact pattern for each scenario can have a material impact on determining which financial strategy would be best for you.
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