Married versus married filing separate...whats the difference?

Question

My hubby and I like getting a lot back each time tax season comes around, its kind of like getting a bonus for us. We have been filing as married filing separate, but wondering if we are losing out on a lot? For example, I can't deduct student loans when we file separate. Also, since I started my last job (4 months) I have put "married" instead of the usual married but separate. Did I just totally screw up our taxes? We use Turbotax each year and it always asks how we filed. Not sure how to put that I filed two different ways this year (2 different jobs). Would appreciate some advice!

Answer 1

Ok, here is a short answer to your question...when you file married filing seperate you cannot claim most of the credits you could receive if you filed jointly. I would suggest you gather yours and your husbands things, go to H&R Block and have them fill out the taxes. There is a special section in their program that allows them to show you everything in detail if you file MFJ or MFS.

Admittedly it is more expensive, however you get better service. They will stand behind you if you were to ever receive a letter from the IRS or even an audit. They also know a lot more about taxes and could possibly get you more money back (a larger refund) by finding credits you can't find out about by using Turbo Tax.

Answer 2

Filing separate is good if the situation is that there is a diversity of income between the married couple. That way one person doesn't have to pay much tax (not much income) and the other person hopefully will get a refund anyway. If you each make a substantial amount of money, over $100,000 say, then it's important to file jointly and itemize deductions. An online tax preparation program, like H&R Block provides, will help you determine which is better, filing jointly or separately. As you pointed out, it all depends on what kind of deductions you can (jointly) take.

As far as putting married on your W-4 form, that just determines how much is deducted in taxes from your paycheck. When you tally up your paid taxes to what you owe, that should determine how you fill out a new W-4 form. If you owe money, have more taxes taken out. Filing jointly is what I would put in the Turbotax reply.

Answer 3

Don't sweat the withholding as you describe. If you are in line to get refunds anyway, it won't matter.

You already know there are differences between MFS and MFJ. If you have no children and don't itemize, there usually isn't much difference between MFS and MFJ. The MFS standard deduction is exactly 1/2 the MFJ deduction. If all you've got for exemptions are yourselves, then MFS and MFJ are the same on this as well.

It's when you itemize and when you have children that MFS and MFJ can make a difference.

If you think you can increase refunds in 2003, 2004, and 2005 by changing to MFJ, you can amend your returns up to three years after the due date of the return.

Get a program that will do your return both ways and decide what is best for you.

Answer 4

SInce you use TurboTax anyway, take the extra time to put it in both ways, and see how you do better. You will probably be better off filing jointly.

As someone else said, if you find it makes a significant difference, you can go back three years and amend your returns to "joint", and get back what you would have saved.

Filing your W-4's different ways won't be a problem.

Answer 5

Injured companion (type 8379) comes into play in case you document mutually, certainly one of you has a premarital debt (tax, baby help, scholar loan) and the different might desire to get some a refund rather than paying the debt. in case you document one by one, the type isn't mandatory and because it rather is not used, does not upload time to the processing.

Answer 6

In most cases, filing jointly offers the most tax savings, particularly where the spouses have different income levels. The "averaging" effect of combining the two incomes can bring some of it out of a higher tax bracket. For example, if one spouse has $75,000 of taxable income and the other has just $15,000, filing jointly can save about $1,500 in taxes versus filing separately.

But, remember that filing separately doesn't mean you go back to using the "single" rates that applied before you were married. Instead, each spouse must use the "married, filing separately" rates. These rates are based on brackets that are exactly half of the "married, filing jointly" brackets, but are still less-favorable than the "single" rates. This means that the "marriage penalty" can't necessarily be eliminated simply by filing separate returns.

The Upside
There is a potential for tax savings from filing separately -- when one spouse has significant medical expenses, casualty losses, or miscellaneous itemized deductions. These deductions are reduced by a percentage of adjusted gross income (AGI). Medical expenses, for example, are deductible only to the extent they exceed 7.5% of AGI, and only the portion of casualty losses that exceeds 10% of AGI is deductible. Miscellaneous itemized deductions, which include a variety of deductions such as investment expenses (other than investment interest), non-reimbursed employee expenses, and tax return preparation costs, are deductible only to the extent their combined total exceeds 2% of AGI (often referred to as a "2% floor").

If these deductions are isolated on the separate return of a spouse, that spouse's lower (separate) AGI, as compared to the higher joint AGI, can result in larger total deductions. For example, if one spouse has $7,000 in medical expenses and the couple's joint income is $90,000, then only $250 is deductible on a joint return, because 7.5% of $90,000 is $6,750 (and $7,000 - $6,750 = $250). But, if the income of the spouse with the medical expenses is only $15,000, the deduction increases to $5,875 on a separate return, because 7.5% of $15,000 is only $1,125 (and $7,000 - $1,125 = $5,875).

The Downside
On the other hand, the amounts you can claim for exemptions and itemized deductions, including miscellaneous itemized deductions, are phased out (i.e., reduced) once your AGI goes above a certain limit, depending on your filing status. The limit is higher for joint returns than for separate returns.

For example, in the case of the phase-out of personal exemptions, the AGI threshold in 2000 for joint returns was $193,400, but only $96,700 for separate returns. Thus, if you file a separate return, your deduction for exemptions is phased out if your AGI exceeds $96,700. But if you and your spouse file a joint return, your deduction for exemptions doesn't begin to phase out until your AGI exceeds $193,400. Check IRS Publication 553 each year for recently updated information. http://www.irs.ustreas.gov/forms_pubs/pubs/p553toc.htm

Answer 7

Actually no. Even if you are married technically you can file seperatly. Your tax income credit increases though. When you file jointly your taxable income decreases. Seperated does not mean divorced.