When Filing Joint Tax Returns Might Not be the Best Option for Married Folks

by Milton G. Boothe 2 years ago in advice

Married folks should never assume that filing jointly is always the best option.

When Filing Joint Tax Returns Might Not be the Best Option for Married Folks

Under tax law, married taxpayers are required to file their taxes using one two filing statuses: Married Filing Jointly (MFJ) or Married Filing Separately (MFS).

People are considered married for tax purposes if at the end of the tax year they are legally married, regardless of what point in the year the marriage actually took place.

Married folks filing jointly enjoy the lowest rate, and are also the recipients of many tax breaks that would not be available they if they were to file separate returns.

Filing MFS usually puts you at a disadvantaged position, and usually means paying more taxes individually than the amount you would pay jointly when filing MFJ. This is so because the MFS filing status has the highest tax rate. Filing MFS also disqualifies you from many tax credits and deductions that are available for the other filing statuses. All things being equal, a married couple would expect to pay more combined tax on separate returns than on a joint return, because of the tax disadvantages associated with the MFS filing status.

Consequently, most married folks will typically choose the Married Filing Jointly (MFJ) filing status, and they do so, obviously, because of the favorable tax treatment the IRS allows married couples who choose this option. In filing a joint return, both spouses are required to combine all their income, exemptions, credits and deductions on one joint tax return.

If one spouse died during the tax year and the other did not remarry, the surviving spouse can still file jointly with the deceased spouse. However, if you remarry during the year, you may file jointly with your new spouse, but your deceased spouse’s filing status would have to be Married Filing Separately.

Please note also, that both spouses do not need to have individual incomes for the year in question, in order to file a joint tax return for that year; they only need to be married to each other at the end of the tax year. Note, however, that both spouses are responsible for the contents of the joint return, and both must sign the return.

Although filing a joint return generally produces lower taxes, folks need to be very careful and not assume that filing MFJ will always yield the best results. Taxpayers need to be aware that based on the circumstances for a particular tax year, there may be certain situations where filing jointly with your spouse might not be the best option.

For example, consider the scenario where both spouses are high earners, and both also have large deductions. In this case, there might be the possibility that filing MFS could result in a lower tax bill, as separating the incomes will invariable place both parties in a lower tax bracket. When you file MFS, you report ONLY your own income, exemptions, credits, and deductions on the return.

It might be financially prudent, before finalizing your taxes, to figure your taxes both on a joint return and on separate returns, and then choose the filing status that gives you the lower combined tax liability.

Another scenario where MFJ might not be the better option is this: If one spouse dies during the year and has a tax liability, for example, because there was not enough tax withheld from his or her salary; if the couple were to file MFJ, the surviving spouse would be responsible for the entire tax bill. In this case, filing MFS would probably be the wiser option.

Note that if you file MFS, you are required to enter your spouse’s full name on line 3 of Form 1040, and also your spouse’s Social Security number in the heading section of Form 1040.

Note also that you can change a MFS return to a MFJ return within three years, by filing an amended return. You cannot change from MFJ to MFS however, so careful thought should be given before you go ahead and file MFJ.

Milton G. Boothe
Milton G. Boothe
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Milton G. Boothe

Milton G Boothe is a federally-authorized tax practitioner who has technical expertise in the field of taxation and who is empowered by the U.S. Department of the Treasury to represent taxpayers before all administrative levels of the IRS.

See all posts by Milton G. Boothe