Tax question: Married, file Jointly or Separately?

Discussion in 'Off Topic [BG]' started by BurningSkies, Feb 13, 2014.


  1. BurningSkies

    BurningSkies Supporting Member

    Joined:
    Feb 20, 2005
    Location:
    Seweracuse, NY
    Hey...

    This is the second 'tax season' I've gone through married. Last year we filed separately...when with our limited knowledge it looked like we would really end up with the same refund amount within 50 bucks either way.

    So, this year I'm coming to the experts. TB. :crying: (just kidding)

    What we have:

    -Total income of about 60K :crying: :crying:
    -Both have single full time jobs.
    -No children.
    -No investments or other complicated situations.
    -We are not home-owners.
    -We have always taken the standard deduction.

    It amounts to a basic straightforward 1040 filing.

    What's the 'best' situation thing to do? Words of advice? We don't have an accountant because we've never needed one with such a straightforward money/living situation.
  2. GregC

    GregC Johnny and Joe Gold Supporting Member

    Joined:
    Jan 19, 2007
    Location:
    Chicago
    I got married last year, I'm going to tune in for this one. We will probably just run the numbers both ways and see what works out best.
  3. iamlowsound

    iamlowsound

    Joined:
    Nov 30, 2005
    Location:
    Listowel/KW Ontario
    What is the difference between the two? Also, I think that with turbotax or the like it would be easy and quick to do it both ways.

    lowsound
  4. BurningSkies

    BurningSkies Supporting Member

    Joined:
    Feb 20, 2005
    Location:
    Seweracuse, NY
    We've been able to do the TurboTax free filing for the past few years, and I've tried to walk through it both ways and it looked close to a wash. I want to see if that's fairly correct or if there's something we're missing. We could use any extra dollars towards our house savings, yet we're also not going to do anything dishonest.
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  6. Jared Lash

    Jared Lash Casting out the nines Supporting Member

    Joined:
    Aug 21, 2006
    Location:
    Northern California
    We have used TaxAct's free online service the last few years (I'm sure Turbo Tax is very similar) and it lets you input everything and then toggle your filing status to see the difference. Really simple.

    FWIW, we're in a fairly different position (different total earnings, mortgage, three kids, California etc) but the last couple years the difference for us was huge in terms of federal taxes and less so but still substantial in terms of state taxes.

    This year filing separately would have meant owing around $1500 (my wife would have earned a refund of $1000 and I would have owed $2500 or so) and filing jointly meant a refund of $4200. I have no idea why the disparity.

    And while this year is an extreme, it seems that filing jointly always benefits us.

    In fact the only time I saw the opposite being true was for my wife (then girlfriend) when she filed taxes for the year in which her divorce was finalized. Her ex-husband got laid off the previous summer and refused to find work so he was on unemployment the entire year. In divorce mediation he requested that they file as married filing jointly because he paid no tax that year on his unemployment benefits and figured he'd get hammered by the IRS.

    My wife ran the taxes and found that filing jointly they got a refund of $1600 but filing separately he owed about $1000 and she would have received over $6000 as the head of household etc. But idiot that he is he refused to file separately and each get $2500 and instead demanded she uphold the agreement so they both got $800 instead. Weird.
  7. bassgod0dmw

    bassgod0dmw Supporting Member

    Joined:
    Mar 1, 2007
    Location:
    White Plains
    We've done joint for the past few years.
  8. BurningSkies

    BurningSkies Supporting Member

    Joined:
    Feb 20, 2005
    Location:
    Seweracuse, NY
    Interesting. Do you find that most of the difference was based on the children? I'll look into 'TaxAct' and see what that works like. TurboTax makes you back out, clear your info and re-enter it. If the difference was in the thousands range, it would be well worth it.

    Any reason for you?
  9. Jared Lash

    Jared Lash Casting out the nines Supporting Member

    Joined:
    Aug 21, 2006
    Location:
    Northern California
    I honestly have no idea.
  10. bassgod0dmw

    bassgod0dmw Supporting Member

    Joined:
    Mar 1, 2007
    Location:
    White Plains
    My wife does all of it...but I think she checks out both ways and it's been beneficial to file jointly every time. I believe that she runs it both ways every year just to be sure.
  11. BurningSkies

    BurningSkies Supporting Member

    Joined:
    Feb 20, 2005
    Location:
    Seweracuse, NY
    Someone I work with just volunteered to grab me a copy of the actual TurboTax software. I've always used the free online, and he's saying that the purchased software is more thorough and complete for comparisons. He also owes me some money that I never thought I'd see, so it ends up being basically free.
  12. fdeck

    fdeck Supporting Member

    Joined:
    Mar 20, 2004
    Location:
    Madison WI
    Disclosures:
    HPF Technology: Protecting the Pocket since 2007
    I'm not an accountant, but AFAIK the only major difference is if you and your spouse are in different brackets.
  13. iamlowsound

    iamlowsound

    Joined:
    Nov 30, 2005
    Location:
    Listowel/KW Ontario
    Is filing jointly like income splitting? Aka, average your incomes to get into lower tax brackets?

    lowsound
  14. headband

    headband Supporting Member

    Joined:
    Oct 18, 2013
    Location:
    Indiana
    The tax code is written to favor couples filing jointly. Usually, if both parties have normal income and normal deductions, it works out that joint filing is better. The taxes owed are less, and the deductions are higher. From what I understand, the usual reasons for filing separately are:
    - you are separated or getting a divorce, or maybe some other reason, where you want to protect yourself from potential liability of your partner. Maybe you think your soon to be ex is doing something unethical or illegal, and you want to make sure you the IRS can't drag you in. Filing separately gives you protection. When I divorced, my ex would not complete the income taxes on her personal business. I was concerned (for a lot of reasons) and ended up filing separately so that I could protect myself.

    - one parties situation is greatly different from the other - maybe high medical expenses, or low earnings plus an Earned Income Credit for dependent care, etc. These things usually are pretty complicated and the only way you will know for sure which is best is to calculate both ways. The following is a quote "In general, couples with no dependents or education expenses can benefit from filing separately if one has high income and the other has substantial deductions."
    Hope this helps. I've been doing complicated tax returns (including foreign income - what a mess) for a long time.
  15. BurningSkies

    BurningSkies Supporting Member

    Joined:
    Feb 20, 2005
    Location:
    Seweracuse, NY
    We don't really have much in the way of complications. She's got student loans with a very very low interest rate, other than that, its straightforward 1040's.

    I think I'll explore both carefully and see what works best this year. Last year we did that twice and it was a wash, I remember the days of 'marriage penalty', so I wasn't too surprised. I'd love to net extra dollars.


    We're pretty close (aka both poor!). I make more by about 5K, so that shouldn't be a problem.
  16. blastoff99

    blastoff99 Supporting Member

    Joined:
    Dec 17, 2011
    Always file jointly unless there is a compelling reason (wide, and I mean wide, disparity in income is one) to file separately. MFJ is by far the most advantageous tax strategy for MOST people.

    CYA: I'm a volunteer with the local tax-assistance-for-low-income-people program. Although I am not a professional tax accountant, do not know the details of your return, and cannot provide specific advice without having you in front of me, you have zero reason to file separately.
  17. Jared Lash

    Jared Lash Casting out the nines Supporting Member

    Joined:
    Aug 21, 2006
    Location:
    Northern California
    I've never understood the married filing separately option myself. I've always chalked it up to another example of an overly complicated tax system but I'd love to hear a logical answer for why it exists if there is one.

    A coworker tried to convince me a couple years back that it was for married couples that kept their finances separate. She said that she and her husband always filed that way because they liked having their own accounts, bills etc.

    I tried to explain that married filing jointly could net them a bigger return and they could still split it but she was clearly decided in her mind and wasn't really listening.
  18. bassman4d521

    bassman4d521 Supporting Member

    Joined:
    May 26, 2005
    Location:
    Cleveland, OH
    make sure to look at any state and/or local tax filings - here in Ohio you can get a very different answer between filing statuses.
  19. bigfatbass

    bigfatbass Supporting Member

    Joined:
    Jun 30, 2003
    Location:
    Upstate NY
    Disclosures:
    Endorsing Artist: Karl Hoyt Basses
    Jenn and I filed jointly for the first time last year, and it made a big positive difference in our returns.

    The best person to ask locally is Big Apple Phil (won't use his full name here, but you know who I mean, and I can get you a number). He is the tax accountant of note for the musician's union local, and he can answer your question in 2 minutes with only your most basic info.

    One question is do you itemize and deduct all your musical stuff?

    Jenn makes more money (obviously, lol) but she has massive student loan payments. I make much less, and leverage it down even more with gear and other deductions against the band/my DBA.

    Basically between her loan payments, and my massive gear depreciations and deductions, filing jointly lowered us a whole tax bracket.
  20. blastoff99

    blastoff99 Supporting Member

    Joined:
    Dec 17, 2011
    MFS is the *least* advantageous filing status, behind MFJ, Head of Household, and even Single. People use MFS for lots of reasons, most of them ignorantly wrongheaded.

    It is useful if you can't agree with your spouse on something related to joint taxes - if your spouse wants to do something you think is cheating, for example. Very rarely, MFS will result in lower overall tax, and I'm not an expert on the implications of state income taxes, as I live in a state with no income tax.

    If you have kids, MFS makes even less sense. I realize this is not you.

    If your spouse has debts or other issues that you don't want any part of, you still can file MFJ. Go to irs.gov and check out "injured spouse." (Not "innocent spouse;" that's something else.)

    You may want to re-think last year's returns if you filed separately. I'm very surprised it was within $50 either way. You can file an amended return for three years.

    Check out Publication 17 on the IRS's website. Page 22 deals with everything you need to know about MFS.
  21. BurningSkies

    BurningSkies Supporting Member

    Joined:
    Feb 20, 2005
    Location:
    Seweracuse, NY
    We'll look carefully this year. Again, last year was the first year we were married, so it's a learning experience. Neither of us has a huge liability issue that either needs to 'shelter' from. I don't have student loans, but she has two totaling under 10K, and both are extremely low interest.

    Hey Steve, I don't deduct gear, and this year I haven't purchased enough that it would be worthwhile. The band income has been so limited for a few years, and it was almost all cash payment with no record, so it hasn't made too much sense to set up a band entity or DBA it. This next year might be different because we've been gigging more and out paydays have gotten better, although most of those are still paying cash with no paper trail.

    I'm not sure we really want to re-visit last year, but we'll certainly be looking closer this year. We did TurboTax online last year and fell into the 'free filing' bracket, and We did walk throughs in both the MFS and MFJ and it did suggest that the end difference was negligible.

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