I do my nieces taxes and have for years. She got married this year. Her husband hasn't filed taxes for 10 years. Should she file married filing separately?

[davis_mc]

She owns a home and they have been living together for many years. I came to my attention after they got married that he hasn't filed taxes for over 10 years. He just this year actually got a bank account. He has done things over all the years but I guess was either paid "under the table" or bartered. He is very skilled at cars so maybe bartered with work on cars. I'm not sure. But my niece has been paying taxes and filing her taxes. To keep her legit, I was thinking of suggesting that she files as married filing separately. Is this a variable option and if not, what options might she have or they both have?

[pk]

@davis_mc , your statement  that  he has opened a bank account implies that he has a tax id  ( probably SSN ).  In such a case, I would not look back but  look at the future and how to bring him into compliance.  Thus I would suggest filing MFJ and with all its benefits.  This will have him contributing to SECA / FICA and this would be good  for when they retire.

There are also other reasons for brining the person into compliance.

That is my view

pk

[davis_mc]

Thanks. Yes, he does have an SSN but not a "job" per say. So, he doesn't have a W2. He gets paid like under the table or barter for services. That being said I don't think he even qualifies for any SSN when he gets older.

If I do a MFJ for my niece and him. Will that not get them potentially in trouble? Putting him into question/concern with the IRS? 

[VolvoGirl]

If he keeps track of his "income" he should be filing as self employed on schedule C in their 1040 return.  If he  has a net profit he will earn social security credit.  But he will owe Self Employment tax (FICA) on it.  

[xmasbaby0]

Yikes----Your new nephew -in -law may have some real trouble some day.   He has not been filing tax returns or reporting his income, so that means he is going to have a huge mess someday if he needs Social Security and Medicare.   Sounds like he has been self-employed and has not been paying the self-employment tax he was supposed to be paying all along to pay in to Social Security and Medicare, along with not paying ordinary income tax.   If he has been young and healthy, that may have seemed fine to him----but if he develops a serious health condition and suddenly needs help---it will be a mess.   (I speak from being familiar with a close family member who went through this----also a skilled mechanic btw)

You do not mention whether they have children.  The disadvantages to filing separate returns include losing out on some of the child-related credits like earned income credit and childcare credit or education credits if they have a college student.    But, your niece may not want to see her refund seized for his tax mess, so she could file married filing separately, at least for 2024.

They really should consult a tax attorney to help them sort out this mess and help devise a plan to get nephew-in-law current with the IRS and Social Security.

[xmasbaby0]

Some information that might help you with necessary conversations to have with the newlyweds:

If you have self-employment income you will pay self-employment tax for Social Security and Medicare; you will need to use online Premium software or any version of the desktop software download so that you can prepare a Schedule C for your business expenses.

https://ttlc.intuit.com/questions/2926899-how-does-my-side-job-affect-my-taxes

https://ttlc.intuit.com/turbotax-support/en-us/help-article/form-1099-nec/1099-nec/L5qTsBiSe_US_en_U...

https://ttlc.intuit.com/community/self-employed/help/how-do-i-report-income-from-self-employment/00/...

https://ttlc.intuit.com/community/self-employed/help/what-is-the-self-employment-tax/00/25922

https://ttlc.intuit.com/questions/2902389-why-am-i-paying-self-employment-tax

https://ttlc.intuit.com/questions/1901340-where-do-i-enter-schedule-c

https://ttlc.intuit.com/questions/3398950-what-self-employed-expenses-can-i-deduct

https://blog.turbotax.intuit.com/self-employed/self-employed-tax-deductions-

calculator-2021-2022-50907/

https://ttlc.intuit.com/questions/1901110-do-i-need-to-make-estimated-tax-payments-to-the-irs

If you live in a state with a state income tax, you might need to make estimated payments to your state.

https://turbotax.intuit.com/tax-tools/calculators/self-employed/

https://ttlc.intuit.com/community/business-taxes/discussion/self-employed-don-t-miss-these-tax-moves...

If you were legally married at the end of 2024 your filing choices are 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 (+ $1550 for each spouse 65 or older)  for 2024. 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

https://ttlc.intuit.com/questions/1894449-is-it-better-for-a-married-couple-to-file-jointly-or-separ...

Some married couples with a spouse who owes back taxes, child support,  etc. file a joint return, but one spouse can file as an "injured spouse" to protect the part of the refund that can be attributed to their own income.

INJURED SPOUSE

https://ttlc.intuit.com/questions/1910698-how-do-i-file-form-8379-injured-spouse-allocation

To use Form 8379 to report Injured Spouse:  Go to

Federal>Other Tax Situations>Other Tax Forms

On Miscellaneous tax forms, click start or update for Report an Innocent or Injured Spouse

https://ttlc.intuit.com/turbotax-support/en-us/help-article/taxation/innocent-spouse-differ-injured-...

[Mike9241]

They need to sit down with a tax attorney, The issue with a joint return is that your SIL probably hasn't kept records of his income and expenses so what is entered for his schedule C if he even agrees to enter anything may be way off and even if numbers are entered, if they're out of whack that could flag the return for audit. Another issue with MFS is that she would have to enter his name and SSN. if he doesn't file, the IRS would likely first send letters requesting a return and if he still doesn't, an audit is likely.    

[pk]

@davis_mc  as you have seen from post by my colleagues ( @VolvoGirl , @xmasbaby0  and @Mike9241 ) we  are all urging generally the same  treatment ---  " bring him in compliance" and sooner than  later.   Personally  I think with your help, they can get into compliance at least for the current year.  What to do about the last 10 years  is a different  question --  whether he chooses to  use a tax professional  or visit the IRS office an seek advice  or whatever is up to him.   Obviously depends on the amount of his earnings  for those years and  when  he comes clean , others may be implicated also  ( depending on provable  facts and circumstances).

If  we   have jointly satisfied your query please  accept and thereby close this thread.

pk

[fanfare]

The way to get into compliance is to file correctly now and going forward.

If married as of Dec 31 2024, then filing status is Married and both names go on the Form1040.

MFJ gives the bests results.

Put wife as taxpayer and huspand as spouse.

You don't need an attorney.

@davis_mc 

[davis_mc]

He doesn't keep track not has he filed a schedule-c. As mentioned, he hasn't filed at all 

[davis_mc]

I am completely with you he should have but hasn't. 

He is one of these people that feels the government is too intrusive and feels he doesn't owe them anything. He feels he hasn't asked anything from them so he doesn't feel he owes them anything.

[xmasbaby0]

@davis_mc One of the obvious questions, then, is ----   does he want to fix this, or is he just going to continue to avoid paying taxes?   

[davis_mc]

I am not sure how/why a tax attorney is not needed? 

Again, I really don't believe he has kept any records and I know he hasn't filed Fed or states taxes let alone tax filings.

So this year, if I were to do an MFJ he wouldn't have any any income to show.

Please explain why and attorney wouldn't be necessary and especially for the last 10 or so years he hasn't filed? Maybe there is something I am missing.

[davis_mc]

Agreed. This is why I wanted to ask. I viewed it at a "Yikes" as well. 

The good thing is they do not have any kids, not yet nor do I know if they will. 

[xmasbaby0 · Accepted solution]

@davis_mc 

"He is one of these people that feels the government is too intrusive and feels he doesn't owe them anything.  He feels he hasn't asked anything from them so he doesn't feel he owes them anything."

Good luck in dealing with that kind of thinking.   It seems you truly care about your niece and want to help her.  If she was unaware that her spouse had not filed tax returns for years, and this has come as a nasty surprise to her, then it is very disturbing---to you and surely to her.   If she already knew this and chose to become legally wed to him anyway, that is a different story --  in my view.   

But whatever she knew before the wedding--the reality is that she is now legally married to a person who has not filed a tax return in years, and he may continue to be very obstinate about doing so.  She should seek some legal advice so that she fully understands the risk she is taking --- she could be held responsible for his debts if the IRS catches up to him.   Clearly she is aware of the need to file tax returns, as evidenced by the fact that she has accepted your help in preparing returns for her in past years.   So she abides by the law.   She needs sound legal tax advice---way more than we can provide in this forum, and way more than you can provide to her.   This might sound harsh--and it is just my view--- but if I were you, I would tell her to consult an attorney, bow out of preparing any future tax returns for her and wish the newlyweds the best of luck.