As married couples prepare to file their income tax returns, the question of filing status is one that must be addressed, particularly for newly married couples. Should you file under “married filing jointly status”? What are the benefits and potential drawbacks? While there are tax advantages, it will also create joint and several liability which could cause one spouse to seek innocent spouse reliefin the future if the marriage doesn’t work out and if one spouse incurs a significant tax burden. In this article we will look at a few of the things that should be considered before this pivotal decision is made.
What are the Requirements of Married Filing Jointly Status?
Two people can choose to file their tax return as married filing jointly status if they are considered married and both spouses agree to file a joint return. On a joint return, spouses report their combined income and deduct combined allowable expenses. Spouses can file a joint return even if they have no income or expenses.
What are the Advantages of Spouses Filing Jointly?
Many married taxpayers choose to file their tax returns jointly because joint filing status affords certain benefits. According to IRS Publication 501, “If you and your spouse decide to file a joint return, your tax may be lower than your combined tax for the other filing statuses. Also, your standard deduction (if you do not itemize deductions) may be higher, and you may qualify for tax benefits that do not apply to other filing statuses.” The IRS gives joint filers one of the largest standard deductions afforded to taxpayers, allowing them to deduct a large amount of their income immediately. Joint filers also may qualify for certain tax breaks with higher income due to higher income thresholds for certain taxes and deductions. Couples who file together may be able to qualify for multiple tax credits, including Earned Income Tax Credit, the American Opportunity and Lifetime Learning Credits, the exclusion or credit for adoption expenses, and the Child and Dependent Care Credit because the IRS allows them to deduct two exemption amounts from their income.
What is a Joint Tax Return?
On a joint tax return, both spouses report all income, deductions, and credits on one tax return to be signed by both spouses. By signing the joint tax return, both spouses assume full responsibility for the accuracy and completeness of the information contained in the return. If spouses wish to file their tax return as Married Filing Jointly, they can use Form 1040. If the spouses have taxable income of less than $100,000, then they can use Form 1040A. To elect to file as MFJ, spouses should check the box on line 2 on Form 1040 or 1040A.
Joint and Several Liability
One of the primary features of Married Filing Jointly status is joint and several liability for the spouses. IRS Publication 501 contains the following cautioning language: “Both of you may be held responsible, jointly and individually, for the tax and any interest or penalty due on your joint return. One spouse may be held responsible for all the tax due even if all the income was earned by the other spouse.” This means that if the tax is unpaid, each spouse can be held personally responsible for payment. Also, if the tax return is selected for audit, both spouses have the responsibility to provide documentation to support the accuracy of the information contained in the return. If one spouse incorrectly reports the tax, both spouses may be responsible for any additional taxes levied by the IRS. This is true even if all the income is earned by one spouse.
When To Seek The Advice Of A Tax Lawyer
The average tax preparer may not understand the intricacies of the law and may be unable to offer sound advice based on your specific situation. If you have questions about the legal repercussions of these types of decisions, it is advisable to seek the counsel of an experienced tax attorney.
The Tax Lawyer – William D Hartsock has arepresented clients in all areas of tax law since the early 1980’s, and offers free consultations. Call to schedule your free consultation today!