My husband and I recently moved to NYC and are starting new jobs. We have already decided to file married filing separately for the 2024 tax year. Given this, I expected to choose "Married, but withhold at higher single rate" on the IT-2104, but my employer auto-selected "Single or head of household" on my form.
What impact will this have when I file taxes next year? Do the "Single" and "Married, but withhold at higher single rate" options withhold at the same tax rate? If I leave it as "Single", can I still file married filing separately without penalties?
The W-4 you give your employer for federal tax withholding and the forms you give the employer for state tax withholding just tell the employer how much tax to withhold. They do not obligate or dictate how you must actually file your tax return.
Single and married but withhold at single rate should be the same withholding. What you enter on your W-4 has no bearing on what filing status you use on your return. Filing separately is almost always less advantageous than filing jointly so be sure you have thought through the ramifications of your decision to file separately.
You might need more information about MFJ vs MFS in order to decide what filing status you should use for next time:
If you were legally married at the end of 2024 your filing choices will be married filing jointly or married filing separately.
Married Filing Jointly is usually better, even if one spouse had little or no income. When you file a joint return, you and your spouse will get the married filing jointly standard deduction of $29,200 (+$1500 for each spouse 65 or older) You are eligible for more credits including education credits, earned income credit, child and dependent care credit, and a larger income limit to receive the child tax credit.
If you choose to file married filing separately, both spouses have to file the same way—either you both itemize or you both use standard deduction. Your tax rate will be higher than on a joint return.
Some of the special rules for filing separately include: you cannot get earned income credit, education credits, adoption credits, or deductions for student loan interest. A higher percent of your Social Security benefits may be taxable. Your limit for SALT (state and local taxes and sales tax) will be only $5000 per spouse. In many cases you will not be able to take the child and dependent care credit. The amount you can contribute to a retirement account will be affected. If you live in a community property state, you will be required to provide additional information regarding your spouse’s income. ( Community property states: AZ, CA, ID, LA, NV, NM, TX, WA, WI)
If you are using online TurboTax to prepare your returns, you will need to prepare two separate returns and pay twice since with online, you get one return per fee.
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