When a Taxpayer Should File Married Filing Separate…

Married couples typically have two options when it comes to filing status:  1) Married Filing Jointly or 2) Married Filing Separately.  Many times, CPA firms solely specializing in tax preparation will encourage taxpayers to file married filing jointly because it results in lower tax for the household as a whole.  While this is not always the case, a married filing jointly return can result in lower tax for households with one partner who makes a significant amount more than the other partner.  For example, if one partner makes $200k and the other partner stays at home, the highest tax rate this household would face filing married filing jointly would be 28%.  However, if the partner who earns $200k files separate, he or she could face a high tax rate of 35%.  Apart from the varying tax rates, there are other restrictions that could result in a higher tax for married filing separate return  — if one partner itemizes deductions, then the other one must also and forgo their standard deduction.

But regardless of whether the married filing separate return results in a higher or lower tax, there are times when a taxpayer should go separate.  One major reason has to do with liability.  If a spouse signs a married filing joint return with a balance owed due to under-withholdings by the other spouse, both spouses are now jointly and severally liable for the total tax assessment.  Therefore, if a tax accountant prepares a return that shows an insurmountable tax debt to the household, it may be best for the couple to file married filing separate returns so the tax liability is only limited to one member of the household (if possible).

Also, by signing a married filing joint return, the taxpayers are not just agreeing to the total tax assessed on just that return at the present moment, but they are also opening themselves up to liability resulting from an additional tax assessment on that specific tax year.  Therefore, if one partner is not sure all his or her income was properly included or if an error may have been made, then it is best for the household to filing married filing separate. (This being said, the taxpayer may be eligible for innocent spouse relief depending on the circumstances and, if granted, the IRS will not hold them accountable for their partner’s tax liability.)


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