I am going to be doing a 1040X for my 2020 taxes. Switching from MFJ to MFS. After I submit when does my spouse submit their new 1040? Right away?

[beckerbee982]

I know that MFJ is usually more beneficial but this year due to stimulus money it makes way more sense for us to file separate. I just don't know when my spouse can submit their 1040 without causing confusion after I submit my 1040X.

[KathrynG3]

After the amended return was accepted and approved, the second Married Filing Separate return could be e-filed. However, the stimulus money would not be increased by filing separated when claiming the Recovery Rebate Credit.

While one spouse may be able to receive the whole amount, the other spouse's income would be reduced by $5 for each $100 above $75,000 for married, separate filers, not $150,000 for married, joint filers.

To calculate it yourself, see page 58 of 2020 Form 1040 Instructions for the Recovery Rebate Credit Worksheet.

For more information, see: Should You and Your Spouse File Taxes Jointly or Separately? - TurboTax Tax Tips & Videos

[fanfare · Accepted solution]

turbotax will open in late March  e-Filing of 1040-X for already e-Filed 2020 tax return.

This will probably give you faster processing overall and there is no chance of losing it.

Then at that time the other MFS return can also be filed. It will probably have to be mailed in.

[beckerbee982]

Thank you for the response. Why do you think my spouses regular 1040 would have to be mailed in?

[beckerbee982]

Hi,

Thanks for the response. I did the calculation and the credit does go up.My salary is just above 75k and my spouse is just above 100k. So when I do MFS I am entitled to almost the entire amount. Plus we had a baby in 2020. When we do MFJ at 175k we are not eligible for anything. Am I misunderstanding your response?

[VolvoGirl]

I seriously doubt MFS works out better.  And since you already filed Joint both ssn are in the system so your spouse will have to mail their original 1040 MFS return.  You might be able the efile the amended 1040X to change the joint to your MFS.  

Many people think they come out better when filing Married Filing Separate but they are probably doing it wrong.  If one person itemizes deductions then the other one must itemize too, even if it's less than the standard deduction, even if it is ZERO!  

And there are several credits you can't take when filing separately, like the

EITC Earned Income Tax Credit

Child Care Credit

Educational Deductions and Credits

And contributions to IRA and ROTH IRA are limited when you file MFS.

Also if you file Married Filing Separately up to 85`% of your Social Security becomes taxable right away even with zero other income.

See …….

https://ttlc.intuit.com/community/married/help/is-it-better-for-a-married-couple-to-file-jointly-or-...

[beckerbee982]

Hi, I have ran it both ways multiple times and MFS comes out better. We do not qualify for any of the credits you mentioned, the child tax credit remains $2,000 since the tax reform in 2018 and I qualify for the full stimulus amounts that were paid in 2019 as well as $1100 more in stimulus money since we had a baby in 2020. With MFJ we make 175k so we qualify for no stimulus money since the 2019 payments are adjusted based on 2020 income. MFS I will also qualify for the increased 2021 child tax credit of $3600. Under MFJ  we would only get the $2,000. So, will you please explain to me why MFS would not be better? Am I missing something? I make just over 75k and my husband makes over 100k

[macuser_22]

If you file MFS (Married Filing Separately) keep in mind that there are several limitations to MFS.  Married filing Jointly is usually the better way to file.
 
A few of those limitations are: (see IRS Pub 17 for the full list

https://www.irs.gov/pub/irs-pdf/p17.pdf page 21

1. Your tax rate generally is higher than on a joint return.
2. Your exemption amount for figuring the alternative minimum tax is half that allowed on a joint return.
3. You cannot take the credit for child and dependent care expenses in most cases, and the amount you can exclude from income under an employer's dependent care assistance you are legally separated or living apart from your spouse, you may be able to file a separate return and still take the credit. For more information about these expenses, the credit, and the exclusion, see chapter 32.
4. You cannot take the earned income credit.
5. You cannot take the exclusion or credit for adoption expenses in most cases.
6. You cannot take the education credits (the American opportunity credit and lifetime learning credit) or the deduction for student loan interest.
7. You cannot exclude any interest income from qualified U.S. savings bonds you used for higher education expenses.
8. If you lived with your spouse at any time during the tax year:
a. You cannot claim the credit for the elderly or the disabled, and
b. You must include in income a greater percentage (up to 85%) of any social security or equivalent railroad retirement benefits you received.
9. The following credits and deductions are reduced at income levels half those for a joint return:
a. The child tax credit,
b. The retirement savings contributions credit,
10. Your capital loss deduction limit is $1,500 (instead of $3,000 on a joint return).
11. If your spouse itemizes deductions, you cannot claim the standard deduction. If you can claim the standard deduction, your basic standard deduction is half the amount allowed on a joint return.

- If you live in a community property state you must allocate community income between both spouses..
-
- Community property states.   If you live in Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, or Wisconsin and file separately, your income may be considered separate income or community income for income tax purposes. See Publication 555. http://www.irs.gov/publications/p555/index.html

 
See this TurboTax article for help with this.
https://ttlc.intuit.com/questions/1894449-married-filing-jointly-vs-married-filing-separately

https://ttlc.intuit.com/questions/1901162-married-filing-separately-in-community-property-states

[DoninGA]

Along with the list of limitations shown in the message from @macuser_22 did you also take into account that your Standard Deduction is cut in half when filing separately from jointly.  It is $12,400 on a separate tax return.

[MaryM428 · Accepted solution]

You will need two online TurboTax account for MFS.  Since you have already filed, I suggest that your spouse use the desktop version where you can run a What If comparison for married filing separate vs.married filing joint.  You are in a situation where MFS is very possibly your best option, especially with the stimulus income limits.

Here is an article on how to run that comparison.

[fanfare]

@beckerbee982 

if you used the software to prepare MFS return

and you use two different accounts, or the cd/download program, then  your result is incontrovertible.

If you are doing hand calculations, that can be tricky.

If you are using one Online account to experiment that can result in a mess.

[gregandrews]

As a retired CPA, I agree that it can work out better to file separately, which you can still do if you file before 5/17/21.

The long list of down-sides is often not applicable, although the dependent care credit is often lost (and any pretax dependent care would be added to income).  Getting your full stimulus payment could more than cover that, especially if the lower income spouse includes the children (increasing the stimulus payment).

If the lower income spouse also received unemployment, there's a new exemption for up to $10,200 - with an income limit they may qualify for on a separate return.

The point about community property states is a good one, though. MFS generally doesn't work in those states.