The IRS (Internal Revenue Service) allows married couples to decide if they want to file joint married or to file separately though married. There are pros and cons that come with either option. Although most people just file joint without giving it much thought, it’s wise to consider both options that the government offers to you.
According to Forbes Magazine, 95% of married couples file taxes jointly. This is because generally, it’s the better option; it can provide you more tax relief. However, there are cons to filing jointly.
You may get a bigger tax refund or have to pay less tax if you file jointly, but it does affect other things. This article will explain the reasons why you may wish to file separate tax returns regardless of how much money it saves you.
It’s a smart idea to calculate your taxes both ways to see which option is best for you financially. Determine what makes the most sense for both of you. You may find benefits in filing separate tax returns.
Check out the pluses and minuses of doing either option before committing to one. You may save more than money by taking this extra step.
Who is Eligible to File a Joint Married Tax Return?
Your marital status as of December 31 of the tax year determines your marital status for the entire year. Therefore, if you were married on December 31, 2019, you will need to file “married” in 2020 for the tax year 2019. You then have the choice of filing a joint return or a separate one.
The IRS defines marriage in Revenue Ruling 2013-17, which states: “For Federal tax purposes, the terms ‘spouse,’ ‘husband and wife,’ ‘husband’ and ‘wife’ do not include individuals (whether of the opposite sex or the same sex) who have entered into a registered domestic partnership, civil union, or other similar formal relationship recognized under state law that is not denominated as a marriage under the laws of that state, and the term ‘ marriage’ does not include such formal relationships.”
Even if you have filed for divorce before December 31, you are still legally married according to the IRS. If you don’t have a divorce decree or judgment on the last day of the year, you are legally married for the 2019 tax year. Regardless of your situation, if you are legally married, you must both decide whether you want to file a joint married return or not. In addition, you both must sign the joint married return if that’s how you decided to file.
What Does Filing a Joint Married Tax Return Mean?
When filing taxes, a married couple can combine their respective incomes, tax credits, tax deductions, and exemptions on the same tax return. They can do this on the joint married tax return. Most married couples do this because it makes the most sense and usually saves them the most money.
How Does Filing a Joint Married Tax Return Affect Your Tax Rate?
When filing your taxes together as a married couple, you have essentially determined which standard deduction amount you will have to take and which tax rate you will fall under depending on your joint income amount. The current tax rate table for the 2019 tax year for those filing joint married tax returns is as follows:
Tax Rate Tax Bracket
10% $0 to $19,400
12% $19,401 to $78,950
22% $78,951 to $168,400
24% $168,401 to $321,450
32% $321,451 to $408,200
35% $408,201 to $612,350
37% $612,351 and above
It can be a little overwhelming to see a tax table like this and not understand how it works. Here are a couple of applicable examples:
One example would be a couple who has a taxable income of $19,401. The first $19,400 would be taxed at 10%, and the remaining $1 would be taxed at 12%. They would thus have $1,940.12 in tax liability.
A couple who has $20,000 of taxable income would fall under two tax rates according to the table. They would have 10% of $19,400 first, which would be $1,940. Then, they would have 12% of the remaining balance of $600 ($20,000 minus $19,400), which would be $72 (12% of $600). That means their total tax liability would be $2,012 ($1,940 plus $72).
The Pros of Filing a Joint Married Tax Return
Typically when filing a joint married return you get more deductions or a higher standard deduction which results in lower tax liability or a larger tax refund. Also, it’s easier and more convenient to file a joint married return. It’s just more straightforward, not to mention the cost. Filing separately may double the cost if you are using tax professional services.
The Cons of Filing a Joint Married Tax Return
There may not be any cons in filing a joint married tax return; it just depends on your circumstances. However, there may be disadvantages that you are not even aware of, so it’s a good idea to weigh all options and look at these cons before committing to a joint tax return.
1. Each spouse is legally responsible for taxes, penalties, and interest owed.
2. You will be legally responsible for your spouse’s misdeeds; you are liable for what is and what is not on the tax return.
3. You are BOTH responsible for providing documentation if you are audited.
4. You may not be able to take advantage of deductions for medical costs.
5. You may end up in a higher tax bracket meaning you will have to pay more taxes.
Innocent Spouse Relief and Other IRS Tax Relief Options
The IRS does offer relief options that can help separated or divorced taxpayers reduce or eliminate their tax debt. However, these programs are harder to qualify for than many people think. There are hurdles and limitations that come along with each one.
The most well-known tax relief program is called the Innocent Spouse Relief program. This relief program will forgive the full amount of the tax debt; if the spouse qualifies for this tax relief, the whole tax debt will fall on the shoulders of the other spouse. However, it is difficult to meet the qualifications for this program, so usually, a spouse cannot claim the Innocent Spouse Relief.
The Separation of Liability tax relief program only applies to couples who have understated the income on their taxes. If you qualify for this program, the tax debt is separated between you and your spouse. It is also difficult to apply for this program as it has strict conditions you must meet.
The final tax relief option is the Equitable Relief program. If you don’t qualify for the Innocent Spouse Relief or the Separation of Liability, this may be the option for you. To qualify for the Equitable Relief program, you must provide all of the facts and circumstances proving you cannot be held responsible for the tax debt.
You can file a joint married tax return in 2020 with your spouse if he or she passed away during the 2019 tax year. According to the IRS, “If your spouse dies during the year, you are considered married for the whole tax year and can choose married filing jointly as your filing status.”
Taxpayers who are in “registered domestic partnerships” or “civil unions” are not considered married according to the IRS. They can file their tax returns using either single or head of household filing status. This means they cannot file joint married or married filing separately.
The IRS offers a Free Tool that can help you determine which way to file is best for your tax circumstances. This can help you decide on which tax status to use. Discuss it with your spouse or lawyer to get their opinion as well since they will have to agree to file joint married if that is what you want to do.
Just calculate your taxes both ways in order to find out what works best for you. Run the numbers both way just to be sure and consider which way will benefit you the most. Keep in mind the pros and cons of filing joint married before you make the final decision to do so.