Typically, tax professionals counsel married couples to file their taxes “Married Filing Jointly”, as opposed to “Married Filing Separately”. This is not surprising; married individuals filing jointly enjoy better tax deductions, are eligible for more favorable tax credits, and are even audited less frequently than married couples who elect to file separately.
At this point, you’re probably asking yourself, “Why on Earth would any married couple elect to file separately, as opposed to jointly?”
That’s a good question; we’re glad that you asked.
It’s important to remember that filing taxes jointly means co-signing for your spouse’s income tax liabilities. For instance, if you incurred $1,000.00 in income tax liability during the last year, but your spouse incurred $10,000.00 of income tax liability, you will be held jointly liable for a total of $11,000.00 in income tax liabilities – regardless of how much income taxes you individually owe (or income tax refund that you are individually entitled to receive).
Carefully consider both certainties in life.
As a real-life for-instance, I’ll relate the story of a married couple who came to us for advice regarding the preparation of their income tax returns. For the sake of maintaining our clients’ confidentiality, I’ll call them Mr. and Mrs. Taxpayer.
Initially, the Taxpayers’ wanted to file their income tax returns jointly. However, when we noticed that Mr. Taxpayer had incurred $100,000.00 in business-related tax liabilities, and that Mrs. Taxpayer had only $1,200.00 in income tax liability. We recommended that the couple elect to file separately. This way, Mrs. Taxpayer would not have to worry about being held liable for Mr. Taxpayer’s income tax liabilities.
Shortly after we filed the Taxpayers’ income tax returns, Mr. Taxpayer died unexpectedly. Thankfully, because the Taxpayers’ did not file their tax returns jointly, Mrs. Taxpayer was not held personally liable for paying off Mr. Taxpayers’ remaining income tax liabilities.
Ask your Tax Professional good questions to avoid bad situations.
A thorough tax professional should consider every aspect of your financial well-being, prior to recommending a filing status. Choosing the filing status that best suits your financial circumstances is among the most critical decisions that you will make during this tax season. You should never be afraid of asking your tax professional “too many” questions.
If you have any questions about which filing status is right for you and your family, don’t hesitate to contact us. We’re always here to help.
Have additional questions regarding your filing status?Call (518) 451-9388 today to schedule your free consultation!