Married filing separately equals NO standard deductions?

Married filing separately. Think about it.

Yes, you’re married, but you’re still an individual. You’re each unique. Sometimes that is exactly what brought you together. Should you, then, be filing jointly or do you feel that filing separately would help you maintain your individuality? If these questions have crossed your mind, that’s plenty of reason to get good, solid answers.

Tax law rulings can be “acquiesced” to by the IRS, thus substantially changing implications, as was exhibited in early August of this year. The IRS “acquiesced” in a Section 163 ruling involving interest deductions on jumbo mortgages. These changes may have convinced some couples to rethink marriage. When it comes to deciding how you choose to present yourself to the IRS, whether before or after marriage, look before you leap.

If you choose married filing separately as your filing status:

You’ll usually pay more tax than if you use another filing status you qualify for.
If your spouse itemizes deductions, you can’t even claim the standard deduction.
If you can claim the standard deduction (possibly because your spouse did NOT itemize), your basic standard deduction is half the amount allowed on a joint return.
You’ll probably be exempt from any Premium Tax Credit benefits.

Why do this?

It’s a tough call. Often decisions involve one spouse having serious tax problems such as liens resulting from unpaid child support, student loans, or taxes; or underestimation of withholdings, lack of transparency, etc. There are also some taxpayers who, for various reasons, are not comfortable with their spouse’s interpretation of tax compliance and do not want to be involved in any potential tax consequences.

There are, however, some very specific regulations which can lessen the severity of restrictions imposed on an individual choosing married filing separately. Some of these regulations deal with certain victims of domestic abuse and spousal abandonment and their ability to claim Premium Tax Credit benefits.

Was your previous filing status your best option?

If you’re not sure you made the best decision in the past, there are remedies. Generally, any time within 3 years from the due date of the separate return (or returns), you can amend your filing status from a separate return to a joint return. On the flip side, the IRS also, in some cases, offers relief from joint responsibility. One option is through the Request for Innocent Spouse Relief.

What’s the bottom line?

If you’re thinking about choosing the status of married filing separately or changing a previous filing status, let’s talk about it. The consequences can be far-reaching and difficult. Explore possible choices and weigh advantages versus disadvantages.

Contact me. There’s a lot to discuss.

The IRS says