Why Do Newlyweds Believe Filing Separate Is Better?

[ToledoEd]

The difference in Ohio is the State return. We only have one tax table, there is no seperate tables for joint or seperate. So when you file a joint return, the one inomce gets added to the other and is taxed at a higher rate than if it was a seperate return. Also Ohio requires you to file the same way as you did on the federal.

[Burke]

That's what filing separate on one return did in VA before they changed their form. Only the TP's didn't have to file MFS on the federal.

[thomtax]

In Arkansas you do not have to file the same way as on the Federal. If both taxpayers have income, it usually better for them to file "Married, Filing Separately on the same return". This helps keep some of the income in the lower percentage brackets. Married, Filing Separately on different returns is another picture.

LT

[taxea]

The only time I would suggest filihg separately is if there are no dependents for which the TP would lose credits by filing separately and in cases where one spouse has a tax liability that was prior to the marriage.
I explain the options and the pros and cons and leave it to the TP to decide which option to take.

[powerage]

In my area, it seems a lot of people are just given bad information from someone who is not a tax pro. My software does a comparison, and once they see the difference, they can't wait to file jointly. One year I amended 3 years of returns for a couple who filed separate instead of jointly, and they ended up getting almost 2 grand back. Of course, they were given bad information.

[MRPLOW]

*** UPDATE ON MFS ***

Seems there is numerous posters on here that have never seen a MFS refund that is larger then a joint.

In my previous responses I indicated that due to Ohio tax laws its frequent in Ohio.

This is an update, every year besides the Ohio tax savings I run into a couple situations were MFS saves significantly on the Federal. I question if some of you are using your software correctly and doing a proper MFS comparison.


T/P's save $1335 in federal taxes doing MFS due to the following situation...

3 dependents, that qualify for child tax credit. MFJ reduces there child tax credit to only $500, due to income limitations.
Putting all the children on 1 of the spouses return, increases the child tax credit to $2,050. But takes away $220 dependent care credit.

$2,050
- $500
- $220
+ $5 (increased tax)
MFS federal tax savings = $1,335. (total MFS savings with Ohio return is $2,381)

[MRPLOW]

No comments on my previous post. I'll sum it up below.

I SAVED MY CLIENTS $1,335 IN FEDERAL TAXES BY FILING SEPARATE INSTEAD OF JOINT!.

[TaxmannEA]

Just last week i had a couple save $1300 by filing separately. This is the second time in 5 years that I have had MFS come out well enough to justify using it. Just doesn't happen that much.

[DaveO]

Not to extend this post beyond its usefull life but I've used MFS when one spouse has or will have a tax problem which is not the problem of the other spouse.

Had a couple come in with several years unfiled returns. Husband had cashed out some 401k accounts and the IRS had already prepared SFR's and had levied his bank accounts. Only the wife was currently working. Explained to them is they filed MFJ that his tax debt would be her tax debt and while the tax debt would be smaller her wages would be subject to levy as well.

We filed them seperate and she got refunds for all the open years. When the state tax collecters got ahold of them they chewed her out for filing seperate since that prevented them form levying her wages.

[JohnH]

You might run into tax preparers who agree with the state. From what I sometimes read on various tax forums, some tax preparers seem to take the view that it's our respnsibility to make thing easier for the tax collectors to do their job.

[Lion]

Mfs

I always compare MFJ with MFS, and every once in a while find a couple that can benefit by MFS from a tax standpoint. I also have couples (or one of a couple) who want the separation that MFS gives them. Some of those cases can be handled with an innocent spouse or injured spouse form. Others are for purely subjective reasons. I have some newlyweds coming in soon who want to file MFS as they just haven't yet dealt with their finances together, and he's been my client for years while she has had her own preparer. (It seems I lose the wives in that scenario but keep the husbands. Why do new brides feel they must go to their husband's preparer?)

[dtlee]

I always compare MFJ with MFS, and every once in a while find a couple that can benefit by MFS from a tax standpoint. I also have couples (or one of a couple) who want the separation that MFS gives them. Some of those cases can be handled with an innocent spouse or injured spouse form. Others are for purely subjective reasons. I have some newlyweds coming in soon who want to file MFS as they just haven't yet dealt with their finances together, and he's been my client for years while she has had her own preparer. (It seems I lose the wives in that scenario but keep the husbands. Why do new brides feel they must go to their husband's preparer?)

Like you, I compare MFJ with MFS for my returns. The software I use (Drake) does a particularly good job of evaluating the impact all the way to the state level. In New York especially for dual income households there are many times where the state return benefit can even overcome the loss of certain credits on the federal return due to the separate filing status. While Drake's "splitting" capabilities are limited and require planning on the part of the preparer in many situations, I find that they make a complicated job much easier (and isn't that what our computers are for).

[Bees Knees]

3 dependents, that qualify for child tax credit. MFJ reduces there child tax credit to only $500, due to income limitations.
Putting all the children on 1 of the spouses return, increases the child tax credit to $2,050. But takes away $220 dependent care credit.

Good catch. Anytime a MFJ return has the child tax credit phased-out due to the AGI limit, we should look at MFS to see if it makes a difference.

[AJsTax]

I must check every return also

Like you, I compare MFJ with MFS for my returns. The software I use (Drake) does a particularly good job of evaluating the impact all the way to the state level. In New York especially for dual income households there are many times where the state return benefit can even overcome the loss of certain credits on the federal return due to the separate filing status. While Drake's "splitting" capabilities are limited and require planning on the part of the preparer in many situations, I find that they make a complicated job much easier (and isn't that what our computers are for).

Just yesterday I did 5 married returns, four of them were better to go MFS by at least $250. That is an unusual day for sure, but a true example.
Now I know some firms charge an entire extra return when you split, so the benefit must be large to pay. We treat it as one extra form and 10 minutes of time, so even a mediocre return is worth it. And the software can make a big difference. We use Lacerte in the big office and it is quite good at it..I left Taxact because it did not have a decent split function, had to do the state by hand and that is the major reason to do the comparisons. Drake is my choice now and with some careful inputs, (like two schedule As , etc.) as you enter the info it is quite easy.

[MRPLOW]

In terms of fee's I charge either $50, $75, $100 for the extra return.

90% of the time it is a an $75 extra fee. Sometimes I charge more for complex returns, that require more input the following year, due to carryover losses and other unusual situations. Ocassionally less if it is a real easy return.

Lacerte just requires a press of the button to do MFS. Still with the associated extra assembly time and double check of figures it is still an additional 10 - 20 minutes of work.