married filing separate

[gman]

Taxpayer and spouse thinking of filing MFS. They have no children. W-2 income only, What would be the disadvantage to doing this.
One income is about 20,000. higher than the other.

[cathe]

I prepare them both ways and allow my clients to decide which way they want to file.

Cathe

[FEDUKE404]

Separate vs joint

Most tax software will automatically give you a comparison of MFJ versus MFS.

In the situation you mentioned, I doubt if there will be much difference, especially if they factor in paying you to prepare two tax returns.

The other issue is if spouse A gets refund and spouse B owes (happens all the time dependent upon employer withholding issues), then they might have to make a payment while waiting for a refund.

FE

[taxea]

Taxpayer and spouse thinking of filing MFS. They have no children. W-2 income only, What would be the disadvantage to doing this.
One income is about 20,000. higher than the other.

The income is not really what matters, it's the withholding that would be of issue. Look to see whether the tax rate is better for MFJ vs MFS. Did they give a reason for considering MFS? Is it a community property state? Have they filed MFJ in the past?

[FEDUKE404]

Pray tell

The income is not really what matters, it's the withholding that would be of issue. Look to see whether the tax rate is better for MFJ vs MFS. Did they give a reason for considering MFS? Is it a community property state? Have they filed MFJ in the past?

OK, I'm game.

How can withholding have a material effect on tax liability of MFJ versus tax liability of MFS ??

FE

[S T]

Relates to whether or not the T/p are in a Community Property State and whether or not the T/P are Living Together or Separately

I do not believe the With holding Amounts enter into the equation, until you first look at how the Income has to be allocated and what the Resident State Regulations are!

Sandy

[taxea]

Unless community property state, the withholding goes with the TP. If one TP did not withhold enough and the other too much a separate return may cause a payment due on one MFS, where it might be sufficient on MFJ to eliminate a tax liability.
Also check to see whether filing separately causes more taxes due than MFJ.

[ToledoEd]

Remember to consider state income taxes in deciding MFJ and MFS. In Ohio we file many returns MFS because it can save more than $500 even if the federal tax is the same.

[gman]

mfs

I am not sure why they are considering mfs, they have always filed mfj.---My software-drake shows a benefit of about 700.00 to file jointly so they are going with that. I was suprised it was that big of difference. I expected with the deductions and exemptions split that the mfs return would be a lot closer on the refund amounts.

[Lion]

MFS is the most expensive tax rate. Sometimes beneficial if one makes a whole lot more than the other, and the lower income spouse has just enough deductions to more or less zero out taxes while leaving lots of joint deductions for the higher earner. But, MFS eliminates a lot of credits, so not always best in the case I described. Also have to look at AMT that software might not distribute correctly. If your software generates a worksheet where you can actually make changes, move a dependent, reallocate joint mortgage interest, etc., you can refine the tax liabilities. Look at P&I if one is underpaid and the other over. Then, look at the states and also YOUR TAX PREP FEES FOR TWO RETURNS vs. ONE.

[Burke]

There are usually two areas where it might benefit. If one has high medical deductions, because 7.5% exclusion is less when income is filed separately; and the other is when one has business expenses subject to the 2% exclusion and can use more of them when income is filed separately. If social security is involved, and you file MFS there is no exclusion amt, so that might work the other way. Likewise, all the credits etc you can't use when MFS.

[Super Mom]

With my software, under "planning/analysis" when you prepare a return, you can open the MFJ and MFS comparison and all auto calculates from the return. People are almost always better with MFJ if they can file that. I think it has to do with seperate money mentality???? I don't know why so many people think that way, but when the see MFJ gets them more money, they are ok with that!

[taxea]

With my software, under "planning/analysis" when you prepare a return, you can open the MFJ and MFS comparison and all auto calculates from the return. People are almost always better with MFJ if they can file that. I think it has to do with seperate money mentality???? I don't know why so many people think that way, but when the see MFJ gets them more money, they are ok with that!

does it calculate if you haven't used T or S when inputting information?

[thomtax]

does it calculate if you haven't used T or S when inputting information?

Why would you shortcut and not put all the information in when filing a return?

[taxea]

Why would you shortcut and not put all the information in when filing a return?

Because 99% of the time I don't have a reason to separate on a MFJ return. Because it isn't required unless doing a "what-if" scenerio. Because it's a PITA.
need I go on?