If you are still married on December 31, 2019, you may file MFJ (married filing jointly) or MFS (married filing separately). It’s best to calculate your taxes both ways to determine which way yields the best tax advantage; it may make sense to you to file separate tax returns, but it’s usually not advisable due to the large number of tax credits you won’t qualify for as an MFS filer.
If you know your spouse is kind of “winging it” on certain items, doesn’t have adequate back-up material needed to support specific deductions he or she wants to take, and/or just have an overall uneasiness of jointly filing when things are messy in the current status of your relationship, filing separate tax returns may be your best option.
Review the pros and cons of each filing status to see which one is best. Do you want to only be responsible for what is on your tax return? Does a joint tax return give you a higher tax return? Which has the greater advantage?
Who is Eligible to File a Married Tax Return?
The IRS defines marriage in Revenue Ruling 2013-17, stating, “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.”
Your marital status as of the last day of the year determines your marital status for the entire year – for tax purposes. Therefore, if you were married on December 31, 2019, you are to file married either jointly or separately for the entire 2019 tax year.
While you do have the option of filing married or separate, your spouse must agree with this decision. If you are in the middle of a divorce or are separated, this could prove to be a challenge. You may have to litigate the subject of which filing status to use because you must both sign the joint married tax return if you decide that is how you wish to file.
Even if you have filed for divorce on the last day of the year, you are still legally married according to the IRS. If you do not have a divorce decree or judgment on December 31, you are legally married for the entire 2019 tax year. And if you are legally married according to the IRS’s definition, you must both agree (or litigate) on how to file.
What does Filing a Joint Married Tax Return Mean?
When filing taxes jointly, a married couple can combine their respective incomes, tax deductions, credits, and exemptions on the same tax return. Most married taxpayers file their taxes together because it is usually the more advantageous way to file; typically, you have a greater tax benefit when filing a joint return.
What are the Benefits of Filing Separate Tax Returns?
- Legal Responsibility – Filing separate returns ensures that you are only legally responsible for what is on your tax return. Filing a joint married tax return means both spouses are completely liable for everything on the tax return. If you are separated or are going through a divorce, this can be a sticky situation especially if you are not on good terms with one another.
- Back-up Documentation – Also, in the case of an audit, both taxpayers are required to have all back-up documentation ready for the IRS agent. Again, this can be problematic if you do not trust your soon-to-be ex-spouse and/or vice versa.
- Tax Payment Responsibility – Each spouse is equally responsible for all taxes, penalties, and interest owed. If you file separate returns, you are only obligated to pay taxes, fees, and interest on your income tax return. This can be quite a relief if you know your spouse or now ex-spouse will not be paying their end of any taxes the two of you may owe (and need to split).
What are the Benefits of Filing a Joint Married Tax Return?
With a joint tax return, if you are on good terms with your spouse or ex-spouse, you have many tax advantages if you file MFJ. The biggest one is that you may be able to take tax deductions and credits that are available for those who file joint married tax returns.
Examples of some of the deductions and credits that you may be able to take include the child tax credit, the child and dependent care credit, the earned income tax credit, the elderly and disabled credit, the American Opportunity for Lifetime Learning educational credits, certain tuition and fees deductions, and the student loan interest deduction.
By filing a joint tax return, you typically come out ahead. Usually, you get a higher standard deduction which results in lower tax liability or a larger tax refund. Also, it’s easier and much more convenient to just file a joint married return. It’s more straightforward and usually cheaper. Filing separate tax returns may double the cost of tax preparation if you are using tax professional services.
However, just because the tax preparation is cheaper and easier, that doesn’t mean that’s how you should do it. Even if you are still happily married or on good terms with your spouse or ex-spouse, you should always run the numbers both ways to see which way gives you a greater advantage.
Also, keep in mind that even if filing a joint tax return is the better tax option, that doesn’t mean you should do it. You are liable for everything your spouse has recorded on the tax return and you are responsible for anything owed to the IRS, so be sure you agree on which way to file. Each spouse must sign the joint tax return, so you must agree on how to file (or litigate the issue if need be).
What are the Tax Rates Affected by the Marital Filing Status?
The tax rates for the 2019 tax year for both types of file status are listed here:
The 2019 Tax Rates for MFJ (Married Filing Jointly):
$0 to $19,400
$19,401 to $78,950
$78,951 to $168,400
$168,401 to $321,450
$321,451 to $408,200
$408,201 to $612,350
The 2019 Tax Rates for MFS (Married Filing Separately):
$0 to $9,700
$9,701 to $39,475
$39,476 to $84,200
$84,201 to $160,725
$160,726 to $204,100
$204,101 to $306,175
For more information on the different filing statuses, you may be able to use such as the Head of Household filing status, check out this blog post about filing statuses.
What are the Spousal Relief Programs?
If you do file a joint married tax return and your spouse reports some fraudulent activity or does not report things he or she should have, the IRS offers spouse relief programs that can help alleviate or eliminate your tax debt. However, these programs are difficult to qualify for relief; limitations and hurdles come with each one.
The most well-known tax relief program is called the “Innocent Spouse Relief.” This option may help you by forgiving the full amount of the tax debt you owe. If you qualify for this program, the entire tax debt will fall on the shoulders of your spouse. It is hard to meet the qualifications for this program, so usually, it is not a viable option.
Another tax relief program is called “Separation of Liability.” This option only applies to married couples who have understated income on their joint tax return. If you qualify for this option, the tax debt is split between you and your spouse. This program is also very difficult to qualify for as it has strict conditions.
The “Equitable Relief Program” is also a tax relief option. If you do not qualify for one of the above programs, this may be the right option for you. For this option, you must provide all the facts and circumstances that explain why you should not be held responsible for the tax debt. Again, it is not easy to qualify for because you have to explain your tax situation to the government.
Since all of these programs are difficult to qualify for, it’s best to file separate returns if you suspect fraudulent activity will be reported on your joint tax return. If you have already filed and are made aware of such activity after the fact, it’s best to talk with a tax professional about your situation so that he or she can advise you of the best action for you to take next.
Are you still unsure of how to file? The IRS offers a free tool that may be able to help you decide which way to file. Discuss your findings with your spouse or an attorney since your spouse or former spouse will need to agree on which way to file. (They must sign the joint tax return).
Talk it over with your spouse. Show him or her the results of the IRS’s “What is my filing status?” tool and review the benefits of both filing statuses.
Typically, you will want to file in a way that gives you the best tax advantage. If you are in the middle of a separation or divorce, filing separately may be the smarter option though, even if it yields the less advantageous tax result.
If you need help filing your taxes, don’t hesitate to reach out to a tax specialist. Check out these steps to find a tax accountant if you don’t already have one.
If you need tax or accounting assistance, we can help you with every part of your taxes. We specialize in tax returns, financial planning, and more.
To see how we can help you with your tax returns, contact us today! Borshoff Consulting can help you with one-on-one audit assistance, support, and representation. You can trust Indiana’s tax expert!