Visit us at divorceandyourmoney.com for the #1 divorce resources in the USA and get personalized help. Learn about coaching services here. As anyone who listens to the show regularly knows, there's a lot of different moving parts to be thinking about as you go through the divorce process. Sometime
Updated Date: Feb 14, 2022
Publish Date: Aug 05, 2019
Top Snippets - 0206: Married Filing Jointly or Married Filing Separately?
Visit us at divorceandyourmoney.com for the #1 divorce resources in the USA and get personalized help. Learn about coaching services here. As anyone who listens to the show regularly knows, there's a lot of different moving parts to be thinking about as you go through the divorce process. Sometimes there are some things that are less obvious that you may want to consider as you are filing for divorce, living your life and just doing some of the normal financial things that you should be doing. One of the questions that comes up, only on occasion, but it's a very important question when it does arise is while you're going through the divorce process, is it better to file your taxes as married filing jointly or married filing separately? While you are still married, you have those two options as a status to elect when you file your taxes. It can be an important question. I'll get into the reasons some of you might consider filing separately in a moment. But historically, most couples file married filing jointly for as long as they can. What that means is that you file one tax return for the two of you and both of you are supposed to sign it independently. The reason you filed jointly as one tax return is for two main reasons. One is that you get the maximum amount of deductions as part of your tax return, meaning, in general, you pay less in taxes at the end of the year. The second reason is it's much simpler for couples usually just to have one single tax return. It means you're only paying one accountant to prepare one return instead of maybe two accountants to prepare two returns or whatever the case may be. You’re probably accustomed to using married filing jointly, but when the divorce process arises or if you're thinking about separation, there are times where it makes a lot of sense to file your taxes as married filing separately. I'm going to go through quickly some reasons to do this. At the end of the day, ultimately everyone's situation is different. The best way to figure out how you should file your taxes is to work with an accountant to figure out what exactly makes the most sense given your specific situations, but let's think about... And you should always be aware of your options in the divorce process even if you don't ultimately choose it. So why might someone choose married filing separately? Well, there's actually a scenario. The first thing is that you could actually save on taxes if you are filing married filing separately. If you're filing separately, I'll just say to simplify the phrase. If you're the person in the relationship who has a lower a set of income or no income at all, you might end up saving actually overall on your tax bill. And conversely, if you're the higher income earner and you file separately, then you're likely going to have a much higher tax bill than if you filed jointly. That's just the way the tax rules are written. That's the first thing to be aware of. The second is something that comes up very frequently, particularly when it comes to divorce. That is, you want to minimize your liability when it comes to what your spouse does on the tax return. Why might someone want to minimize their liability? Well, I speak to many scenarios where one spouse is, I'll just say, doing something suspicious or you suspect a spouse of doing something suspicious with their tax returns. It could mean... Scenarios include they could have a cash business and they're not reporting all of their income and you're worried that they may get audited and that would come back and affect you because you're under-reporting and underpaying your taxes. It could mean that you just don't trust them that they're doing the right thing in their tax bill or they're misstating something and you don't want to be connected to them. You might not know what it is, but you don't want to be connected to them for the future and risk the tax man coming back after you later down the line. There are other things to think about when it comes to liability, but the point is, is you don't want... You are just very uncomfortable keeping yourself attached to your spouse when it comes to filing taxes and what they may be doing on their tax return because you might not see their income. You might not be able to verify what exactly they're doing. And for you, it might be worth the extra cost or extra expense to separate your finances from them in that regard. Now, there's a third category of reasons you might want to file separately, which I'm just going to call the other category. Some of these are technical or very specific and I can't get into all the details in this episode without boring you, but there are things I want to bring up so that you know that there are other scenarios in which you might want to file sep