Is filing jointly really such a good idea for married couples? Many couples put little or no thought into filing statuses, and yet the standard choice of filing jointly can lead to a bevy of problems. For example, when you file jointly, each spouse is 100% liable for tax owed – not just half, no, that’s 100%.
If a spouse had unreported income, or if either of you have significant assets that could face business or tax risks, filing as “married filing separate” can save many headaches. Likewise, if a spouse has had past or current legal, credit, or tax problems, separate filings may save the day. It’s equally true for couples who each have separate property.
While 95% of married couples file jointly, this is not a decision to be made lightly. Is it really the best choice for you? There are five filing choices after all: Single, Married Filing Jointly, Married Filing Separately, Head of Household and Qualifying Widow(er) with Dependent Child. Head of Household status is often claimed in error. Head of Household refers to unmarried taxpayers where one party has paid more than half the cost of maintaining a home for him or herself and a qualifying person.
Note that your marital status on the last day of the year determines your marital status for the entire year. If more than one filing status could apply, you can pick the one that offers the lowest tax. But – you may not want to do so. You and your spouse may indeed pay lower taxes by filing “married filing jointly.” But sometimes even if you would pay less that wayin the short term, filing separately is by far the soundest option.
Why? For one thing, even if you pay less by filing jointly, keeping returns separate can make things easier in terms of keeping assets separate, should there be a divorce. And, even more importantly: separate returns prevents mutual liability for taxes owed.
If you’ve filed jointly, the IRS holds both partners responsible and liable individually for the entire tax debt. The IRS doesn’t care if you’re divorced, about to be divorced, or if a state court rules that you’re not responsible. In the case of tax debt, The IRS uses federal jurisdiction and ignores state proceedings when assessing or collecting federal income tax.
But if you did file jointly and the IRS is expecting payment for taxes owed, Tax Defense partners can help – if you qualify for innocent spouse relief. Qualification depends on whether or not you knew that your spouse was not reporting or under reporting income, or taking improper deductions. It may also depend on whether you knew where unreported income originated. In short, receiving innocent spouse relief really depends on getting the facts right, structuring them into a solid case, and providing evidence that supports what you assert.
Filing for innocent spouse relief is a lot easier with professional help. And Tax Defense Partners can provide just that. Call Tax Defense Partners for your FREE consultation today.