What someone claims as the number of exemptions for payroll tax withholding has nothing to do with how you file your tax returns. Because you were married on December 31, 2016 you have to file as married.
You can choose married filing separately as your filing status if you are married. This filing status may benefit you if you
want to be responsible only for your own tax or if it results in less tax than filing a joint return.
If you and your spouse don't agree to file a joint return, you must use this filing status unless you qualify for head of
household status, discussed later.
You will generally pay more combined tax on separate returns than you would on a joint return for the reasons listed under
Special Rules,
As for whether or not you can claim the children, it depends. Since you lived together in 2016, the following IRS rule will apply:
If the parents don't file a joint return together but both parents claim
the child as a qualifying child, the IRS will treat
the child as the qualifying child
of the parent with whom the child lived for the longer period of time
during the year. If
the child lived with each parent
for the same amount of time, the IRS will treat the child as the
qualifying child of the
parent who had the higher
adjusted gross income (AGI) for the year.
