There is no special direct penalty. However, the Married Filing Separately filing status does not allow the taxpayer certain deductions and credits that might be available to other filing statuses. MFS is by far the WORST filing status in the tax laws under most circumstances.
It is uncommon that MFS is a better choice than MFJ. Many of
the people who believe they are better off MFS think that because they are not
preparing their returns properly.
The "Married Filing Separately" filing status carries higher tax
rates than the “Married Filing Jointly” filing status. Also, many deductions and credits that are
available to MFJ filers are not available to MFS filers. Three well-known such
items that are not available to MFS filers are the Earned Income Credit, the Child and Dependent Care Credit and any
of the education deduction/credits (American Opportunity, Lifetime Learning,
Tuition and Fees Deduction).
Additionally, if one spouse itemizes deductions, the other
spouse must also itemize deductions and is precluded from using the standard
deduction.
People usually use MFS when they can't agree to file jointly. Occasionally, the
right combination of situations will create a smaller total tax than on a joint
return, such as when one spouse has significant medical expenses, but it's
rare.
About the only advantage to filing separately is that one spouse is not responsible
for what's on the other's return (including the tax).
Regarding that last comment, you can still use the MFJ
filing status and include a Form 8379 Injured Spouse Claim with your
return. This protects any refund of one
spouse in a joint return from being used to satisfy the debts and/or
obligations of the other spouse. The
Form 8379 is included within TurboTax under Federal Taxes, Other.
I am told that married persons filing tax returns in Ohio
may be able to benefit from filing their Federal returns separately to
significantly reduce their state tax obligations. Ohio filers should take this into
consideration in evaluating the above comments.
