A joint return is a tax return filed by married taxpayers whose filing status is married filing jointly (MFJ) or by a widowed taxpayer whose filing status is Qualifying Widow or Widower (QW) with the Internal Revenue Service (IRS) on Form 1040, 1040A, or 1040EZ. A joint return affords taxpayers the opportunity of combining their tax liability and reporting their incomes, deductions, and credits on the same joint return.
A joint return allows eligible taxpayers to file their taxes using favorable joint return tax brackets, tax benefits, and tax rates. Therefore, couples who file joint return often pay a lower overall tax than couples that file returns separately.
To file a joint return, the taxpayers' filing status must either be Married Filing Jointly (MFJ) or Qualifying Widow or Widower (QW). For married filing jointly (MFJ) filing status, the taxpayers must be legally married on or before the last day of the tax assessment year and both must agree to file jointly, hence must sign the Joint Return. For Qualifying Widow or Widower (QW), the taxpayer’s spouse must have died in either of the two prior tax assessment years and the taxpayer must keep a household for a dependent child.
The benefits of Joint returns are:
Leveraged benefits: Should both spouses be offered benefit packages on their jobs, they can pick the most valuable benefits from the two plans. The right mixture of benefits from two plans while hence increase a couple’s tax savings in other ways. Using the child care as an illustration; if the married partners have dependent children, they can benefit from the dependent care plans. Also, it is often the case that a partner would not have a plan, but the other would have. Hence, the both partners leverage on each other’s benefits.
Individual Retirement Account (IRA): A partner can contribute to an individual retirement account (IRA) while he or she does no work. The rate by which income based IRA benefits are repealed are substantially higher for the married than they are for the singles. Therefore, a taxpayer who is unable to fund an IRA when single can take advantage of Joint returns and save many thousands of dollars for his or her retirement, while also receiving some tax benefits.
Less time consuming and cost effective: This is a simple one: Joint returns make spouses file a tax
return jointly. This means that it will take less amount of time to assemble the paperwork, and also cost less to have it prepared.
Tax shelter: While it is not advisable that anyone seek out a partner particularly because he or she has a loss making business, it's however essential to note that the loss made by one partner in a marriage can help both spouses when filing tax returns. The partner who is losing money might not take advantage of some deductions, including those relating to real estate properties, but the other partner whose business is making money may use the loss as a tax write-off. High medical expenses can also be subjected to the same treatment.
Protection of estates: Being married can help a wealthy person protect the assets he leaves behind when he dies. Under federal tax laws, you can leave any amount of money to a spouse without generating estate tax, so this exemption protects the deceased’s estate until the spouse dies.
Greater charitable contribution deductions: According to tax policies and as pronounced by tax professionals as accountants, there’s absolutely a limit to the amount of charitable contributions that may be deducted in a year, based on income of the taxpayers. However, having a spouse can raise that limit. How? If a partner makes very large charitable contributions but doesn't have income of at least double of that amount, the excess contributions are carried over to the following year. In a jointly filed return, the spouse's income is added in determining the currently deductible amount. So current taxes are saved.
Both the husband and wife that agree to file jointly are responsible for any penalties incurred from that tax return unless one of the parties can claim innocent spouse relief or similar tax reliefs. Should one of the spouses justifiably claims innocent spouse relief, he or she would be relieved of paying interest on tax, tax, and associated penalties if the other partner (or former partner) reports items improperly or omits items on the joint return.
CONTINENTAL TAX AND ACCOUNTING SERVICES