topic Which state do you live in? in Get your taxes done using TurboTax

Should my wife and I file separately or jointly?

Stever — Thu, 06 Jun 2019 16:01:15 GMT

My wife owes the IRS about $25,000 from an old business. Because she is not making much money, they aren't requiring a payback at this time. However, whenever she has a refund, they take it. Last year we filed jointly, I also filed an Injured Spouse Allocation Form but they didn't refund my portion. I'm considering filing separately, but because she can't itemize (I own the house in my name only) we would each have to take the standard deduction and I'm afraid we would end up paying more than if they just took all our refund. Should we file separately or just file jointly and try the Injured Spouse Allocation form again?

Which state do you live in?

SweetieJean — Thu, 06 Jun 2019 16:01:16 GMT

Which state do you live in?

Connecticut

Stever — Thu, 06 Jun 2019 16:01:18 GMT

Connecticut

You are not a community property state.

Coleen3 — Thu, 06 Jun 2019 16:01:19 GMT

You are not a community property state.

Which means that I should be able to file as an injured s...

Stever — Thu, 06 Jun 2019 16:01:21 GMT

Which means that I should be able to file as an injured spouse?

Yes, but not that you will necessarily have any better lu...

Coleen3 — Thu, 06 Jun 2019 16:01:24 GMT

Yes, but not that you will necessarily have any better luck. It is just that there are special rules for those few states.

The Injured Spouse is supposed to work. However, this is...

Coleen3 — Thu, 06 Jun 2019 16:01:26 GMT

The Injured Spouse is supposed to work. However, this is not the first time I have heard of this happening. You have to weigh heavily the two options and decide which works the best for you. The only way to know for sure is to make two MFS returns.

MFJ vs MFS

https://ttlc.intuit.com/questions/1894449-married-filing-jointly-vs-married-filing-separately

If you choose married filing separately as your filing status, the following special rules apply. Because of these special rules, you will usually pay more tax on a separate return than if you used another filing status that you qualify for.

1. Your tax rate generally will be higher than it would be on a joint return.

2. Your exemption amount for figuring the alternative minimum tax will be half that allowed to a joint return filer.

3. You cannot take the credit for child and dependent care expenses in most cases, and the amount that you can exclude from income under an employer's dependent care assistance program is limited to $2,500 (instead of $5,000 if you filed a joint return). For more information about these expenses, the credit, and the exclusion see Pub 17, 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 the lifetime learning credit), the deduction for student loan interest, or the tuition and fees deduction.

7. You cannot exclude any interest income from qualified U.S. savings bonds that 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,

b. You will have to include in income more (up to 85%) of any social security or equivalent railroad retirement benefits you received, and

c. You cannot convert amounts from a traditional IRA into a Roth IRA.

9. The following deductions and credits are reduced at income levels that are half those for a joint return:

a. The child tax credit,

b. The retirement savings contributions credit,

c. Itemized deductions, and

d. The deduction for personal exemptions.

10. Your capital loss deduction limit is $1,500 (instead of $3,000 if you filed 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.