When you are married, there are a few different options that you can choose for your tax return. Most married couples will choose to go with married filing jointly at tax time. They can both claim head of household and get the deduction from that as well as the earned income credit and it is a lot easier to take care of all your assets and other things all in one place rather than trying to do change it all out. This is often the easiest one that you can choose and most couples will go with this one.
But this is not the only option that you can go with when you are married. Some couples will choose to go with married filing separately. While this one is going to take a bit more work, there are times when this will be really beneficial and can help to keep things in their proper place for each couple. If you are interested in learning more about the difference between filing married jointly or filing separately and which one is going to be the best for your financial situation, make sure to talk to a tax professional in your area.
For Business Purposes
One of the most common reasons that you may choose to file separate tax returns when you are married is for business purposes. It can be really nice to keep one tax return that is all for business purposes and one for all your personal information during tax season. You won’t have to worry about how each is going to affect the other and you can always keep some files for our business that doesn’t have other things mixed into it.
When it comes to separating things out like this, you should keep them completely separate. When you are working on the business return, keep all of your personal stuff out or you could find that it is going to get really difficult and convoluted. Just pick out the business expenses and don’t put anything else but this on. The same should go when you are working on your personal tax return as well.
While you are working on your tax returns, make sure that you are working with a good tax professional. They will be able to find all of the information that you need to work on both tax returns and get the most out of your tax season this year without all the trouble or hassle.
Liability Issues
Some couples choose to file their tax returns separately in order to keep liability on just one person. When you file a tax return together, both of you can be held liable if one spouse or the other does something wrong on the tax return. While there are ways to protect yourself if this happens, you need to be able to prove that you had no knowledge of the wrong that was being committed. For example, if one spouse launders money or has an overseas account they don’t disclose on the tax return, both spouses could be in trouble if the IRS finds out.
But when you file your tax return separately, you will find that only one spouse will be held liable. Even if you trust each other, it can help to lower the issues if an audit does happen with one spouse or another.
Choosing the One for Your
Choosing the option that is right for you can sometimes be a challenge. You may like the idea of how easy it is to file jointly when you are married. You are able to put each of your assets and situations into just one return and it is much easier to deal with this all together. But in some situations, it is much better to file two different tax returns so you don’t have to worry about the information getting mixed.
If you have two different tax returns, you need to be careful. Before doing this process, decide who is going to be able to claim each asset. You will not be able to have children on both tax returns for example, or you will get in trouble with the IRS. Rather, you will need to figure out which spouse is able to claim the assets before getting started.
For those who are separating because of business purposes, this separation is pretty easy. The spouse that is claiming the business stuff will only claim the income and expenses that go with their business. Anything else, such as the home, children, and other personal deductions would then go to the second spouse. On the other hand, if you are just separating things because you would like protection from personal liability, you will need to discuss together, and perhaps with your tax professional, to find out the best way to separate the assets on your tax return.
To get started on your tax return, you need to make sure that you are finding the right tax return to work on this situation with you. This helps you to find out whether the filing status is going to work for you and then learn the best deductions and credits for your new situation. When you are ready to get started on your tax return and want to file married but separate, make sure to contact our offices to get started right away.
Patrick O'Hara, EA