The IRS allows married taxpayers to file joint tax returns or separate ones. Most married couples file their taxes together. It’s usually easier, and it typically yields a higher tax refund or a lower tax liability. However, there are instances when filing together is disadvantageous.
The married filing separately (MFS) tax status has its benefits for some married taxpayers. It just depends on the circumstances. Since the IRS gives married couples the option of choosing how they wish to file, it’s a good idea to calculate taxes both ways to see which option would provide the best outcome.
Who is eligible to file a married tax return?
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.”
Basically, your marital status on the last day of the year determines how you can file your taxes. Even if you are in the process of a divorce, you are still considered married if the divorce is not final as of December 31. This means you will need to file ‘married’ in 2020 for the tax year 2019, but you do have the option of filing joint or separate tax returns provided your spouse agrees. You may have to litigate the subject if you are in the process of a divorce.
You are required to file a separate tax return if your spouse is unwilling or unable to file a joint tax return. However, if your spouse is deceased, you may still file a joint married tax return provided the death occurred sometime in 2019. If you are in the middle of a divorce or are separated, you will probably want to file separate tax returns. In those cases it is most likely more advantageous for you to do so; it’s cleaner and easier.
If you and your soon to be ex-spouse are on good terms and trust each other, you could probably file a joint tax return with no problems. It’s usually better to file separately when things are messy because you are liable for what is and is not on your joint married tax return.
What are the benefits for married taxpayers filing separate tax returns?
When filing a joint married return both spouses are completely liable for all information on the tax return. Plus in the case of an audit, both spouses must have all documentation necessary available for the tax agent. Each spouse is responsible for all taxes, penalties, and interest owed.
Luckily, married taxpayers can file separate tax returns. By filing MFS (married filing separately) you don’t have to worry about these legal responsibilities. You are only accountable for the information on your tax return, and you are only obligated to pay the taxes due on your income tax return.
Another major benefit of not filing a joint married return is the possibility of filing the ‘head of household’ status. You may qualify for this if you and your spouse have been separated for at least six months. To claim this status, at least one of your children or dependents must have been living with you during the time of separation.
Those are a few of the qualifications you must meet to file ‘head of household’. However, if you are lucky enough to claim this status, you are able can claim the tax deductions and credits that would have been available to you if you had filed a joint married tax return. If you file a separate married tax return, you are not allowed to claim those tax deductions and credits.
What are the drawbacks for married taxpayers filing separate tax returns?
The biggest disadvantage of filing separate tax returns is the forfeiture of many tax deductions and credits that are available to those who file joint married returns. Some examples of these are the child tax credit, the child and dependent care credit, the earned income credit, the elderly and disabled credit, the American Opportunity or Lifetime Learning educational credits, the “tuition and fees” deduction, and the student loan interest deduction.
How does filing a separate tax return affect your tax rate?
The following tax rate table is in effect for those who are married but file separate returns in 2020 for the tax year 2019.
• 37% for all MFS income of $306,751 and above;
• 35% for all MFS income exceeding $204,101;
• 32% for all MFS income exceeding $160,726;
• 24% for all MFS income exceeding $84,201;
• 22% for all MFS income exceeding $39.476;
• 12% for all MFS income exceeding $9,701; and
• 10% for all MFS income $9,700 or less.
While most married taxpayers do file joint tax returns, there are benefits in filing separate tax returns. For those who are separated or going through a divorce, it just makes things easier to separate taxes, penalties, or interest that may be owed to the IRS. It may allow one or both spouses the opportunity to file as the ‘head of household’ status as well.
Filing separately allows each spouse to be responsible and liable for that which is on their individual tax return. Conversely, if the married taxpayers allotted to file a joint married return they would both be liable for everything on it, and they would both be responsible for all taxes, penalties, and interest due. If their spouse or soon-to-be ex-spouse understated income, they would be just as liable for what is incorrect on their joint tax return.
Not sure how to file? The IRS has an interactive tool that helps you determine what your tax status is. It only takes 5 minutes to use the tool, so if you are still confused as to how you should file, you should try it. It’s very easy to use.
For more information on filing your taxes in 2020, check out this article:
Filing Taxes in 2020