Typically, married couples file their Income Taxes using Married Filing Joint status without any thought. For most couples, the combined tax burden of the household will be lower when using Married Filing Joint (MFJ) status vs. using Married Filing Separately (MFS) status, so it makes sense to do so. A number of deductions and credits are limited or lost when filing using MFS status. Also, it’s one less tax return for the family when filing jointly so it reduces their time and cost. However, there are consequences of filing jointly and it might be wise for married couples to give their filing status some thought.
Why Filing MFS May Make Sense
As someone who represents taxpayers with tax problems in my Richardson, TX office, I often see the other end where a taxpayer is responsible for a tax debt incurred by filing a joint return and they wish they could go back in time. When taxpayers make a decision to jointly file a tax return, they are making a decision to be responsible jointly and severally for any tax debt. This means that both spouses owe the IRS for the full amount of the debt until it is repaid.
I would suggest that taxpayers consider filing separately whenever filing jointly creates a tax debt that was primarily the result of one spouse. Once example might be where Spouse 1 is self employed and paid no estimated taxes and Spouse 2 is a W-2 employee that had proper withholding. While Spouse 1 might be the cause of a large IRS tax debt, Spouse 2 will also be responsible if they sign the tax return.
Another example is where a spouse knows or believes the other spouse is hiding or understating income or overstating expenses. If the IRS finds the problem and corrects the return, the IRS will hold the other spouse responsible. Based on the facts and circumstances, if the other spouse was not aware of the omission or error, they may be able to get relief through “Innocent Spouse” relief, but they will need to request relief and prove they were not aware of the issues.
Can you amend your return to file separately?
One question I’m often asked is whether taxpayers can amend their returns and file separately. Unfortunately, you can’t. The IRS permits taxpayers to file MFS and then go back and amend their return to MFJ at a later date, but they can’t do the reverse. Once a tax return is filed MFJ and signed by both taxpayers, both taxpayers are on the hook for the debt. The reality is that signing join
Do You Need Help?
If you need help with your tax return, tax planning, or an IRS Collection issue, we’d be happy to meet with you. Please give me a call at (972) 821-1991 or email me at bob@jablonskyandassociates.
