I was wondering which one can save our tax. Also, what should my wife and I file the W4. The tax withholding is inaccurate. Both of us have one job with no dependent. Our income is about: 240K and 130K
Unless you have a specific reason to file separate returns,
It is usually better to file Joint. Joint has the lowest tax rates and the highest Standard Deduction. And if you are in a Community Property state MFS gets tricky to figure out. Here's some things to consider about filing separately……
In the first place you each have to file a separate return, so that's two returns. And if you are using the Online version that means using 2 accounts and paying the fees twice.
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.
VolvoGirl gives a good overview of the married filing jointly / married filing separately question.
To discover which filing status is better for your situation, prepare two married filing separate tax returns and compare them to a married filing joint calculation. The TurboTax Desktop product would be helpful for this calculation.
Unlike TurboTax Online, the TurboTax Desktop product allows you to prepare multiple tax returns and electronically file up to five tax returns. Desktop also allows you to save multiple versions of tax returns and compare the results of the tax returns.
Having sat across the desk from couples with tax debt issues, I focus on the advantage of filing separately to shield the "other" spouse from those tax debt issues. I have recommended married filing separately to protect one spouse from the issues of the other spouse.
This TurboTax Help also addresses the topic.
TurboTax provides a free W-4 utility here. It generates the numbers to enter on your employers W-4. See also this TurboTax Help.