Married Filing Jointly vs Married Filing Separately -- What-If Worksheet

[wrdbrn]

Hello again.  I am trying to reduce a horrendous tax bite caused by a long term capital gain.  The K-1 for the transaction reporting the gain is in my name only.  My other income (W2 and Social Security) is considerably less than my wife's, approximately 1/6.  We have no joint accounts, other than our mortgage and local property taxes (which exceed the standard deduction for married filing jointly).    We have no carryover losses from previous years.

I have already completed a Married Filing Jointly return in Turbotax and just ran the What-If Worksheet.  In the Married Filing Separately (MFS) columns, the Worksheet splits the capital gain evenly between my wife and I.  Again, the K-1 (form 1065) for that gain is in my name only and results from an investment made prior to our marriage.  The Worksheet does the same for interest income -- splits it 50/50 -- although most of it is from accounts in my name only.  That doesn't seem right.

Also, line 72 of the Worksheet shows negative numbers.  According to the TurboTax website, negative numbers indicate a refund.  That is definitely not right in our case.

Bottom line:  If the Worksheet calculations are off, do I need to start from scratch and create 2 new returns in Turbotax?  Can I import data from last year's return (married filing jointly)? 

I know it's a lot to ask, but help would be greatly appreciated.

[ThomasM125 · Accepted solution]

You would need to create two separate returns. You could start with the current year version of last year's married-joint return, but it may be easier to just start from scratch as it may be difficult to adjust the married-filing joint return to a married-filing seperate one. 

[wrdbrn]

I took the time to create 2 new returns, one for my wife, one for me, each Married Filing Separately.  After entering W2 and SS income and, on my return, the capital gain, the answer was clear.  In our situation, which seemed like it might have been the rare exception to the rule, MFJ still beat MFS by quite a bit.  Unless I'm missing something important, we'll just have to bite the bullet this year.  Consider the question answered, and thank you for your help!

[karinm1971]

Hi! It sounds like you've figured out your question from last year, but I just wanted to say that in my experience, the What-If worksheet isn't completely accurate at times, for sometimes puzzling reasons. But, in case you weren't aware, you can move those numbers around. Where TT split your capital gain equally between you and your wife, you can change your portion to all of it and TT will automatically change your wife's portion to zero. FWIW. (I'm here looking for the reason why "current return" (which is MFJ) is different from "joint return" 🙂 )

Karin

[tuckerlogan523]

Hi. I looked at this thread and it seems like the bottom line is that the What-If Worksheet DOESN'T WORK. Am I wrong? My situation: second marriage, complicated pre-existing financial lives that we have not merged, trying to figure out how to allocate taxes, even if we file jointly. This worksheet seems to be made specifically to address our situation, but  a) there are no instructions as to how to use it, and b) it fails to allocate data properly between the two of us. Sometimes that's because it doesn't ask who the data applies to (e.g., capital gain from sale of land), and sometimes even when it does ask, it overrides that and evenly splits the data between us (e.g., dividends, Medicare taxes paid, dependent child). I've spent maybe seven or eight hours on the phone with TT agents, most of whom didn't even know this worksheet existed, and none of them could solve my problem. The only solution seems to be to create three separate returns - one for me, one for my wife, and one joint - and compare. This is the very thing I hoped to be able to avoid, and the very thing this worksheet is ostensibly designed to help me avoid. Do you have any insight? 

[DawnC]

The experience you described (what-if worksheet not calculating correctly) has been reported and is currently being addressed by the development team.   In the meantime, you can prepare the mock returns as you described above.  @tuckerlogan523 

[karinm1]

I hear you on all of this -- it's beyond me how Turbotax can literally ask who is associated with what income and then get it wrong on its very own what-if form. One thing you can do, though, is modify the what-if form. If TT puts all of an amount in the taxpayer's column but it's actually split between you two, you can change the amount in the taxpayer column and it will put the rest in the spouse's column. (Or something similar -- I haven't worked with that form in a few months.) And you can add and change and delete amounts wherever -- doing that gets me close enough, so it may get you close enough and then you don't have to do two whole sets of tax returns and compare them.

Though I'm thinking that you could actually create the two returns in TT without too much trouble. If you first enter all your info and tell TT you're filing jointly, print out the final returns as PDFs but don't file them, and then go back and tell TT you want to file separately (just switch that option but have TT use all of the same data), and print out THOSE returns. Compare them, and then tell TT the way you have concluded is best and go ahead and file. Nice thing about robots is they don't get mad at you for being wishy-washy.

[tuckerlogan523]

Thanks. At least I know I'm not crazy!

[vbmike]

I am baffled by the fact that this worksheet is useless. Like others have said, the MFJ return has all the numbers, so it should have no problem telling me if we're better off filing MFJ or MFS. It would be awesome to save some time and be able to trust this What-If Worksheet, but instead we have to create 3 separate returns to do this. When comparing the tax payer's MFS return to the What-If Worksheet in MFJ return, it's literally showing me a difference of owing $4K vs owing $12K, respectively. Utterly ridiculous!

Am I correct in that this feature was just introduced for TT 2024? I don't see it in 2023.

[tuckerlogan523]

I'm pretty sure it existed a couple of years ago because I think I've seen other questions about it in this community forum from earlier years. But yes, it's baffling that they include it when it doesn't work. I took hours trying to figure it out because I thought the problem had to be me - how could this major, established software company have such a bad fail in their software? But as you can see from my earlier comment, not only does it not work, but their own people don't understand it. 

What worked for me was to enter everything for a joint return, then save a duplicate of that and delete everything related to my wife so that a version was only me, but then I couldn't do the same for my wife because my name was listed first, so I had to re-enter her (luckily much simpler) data into a new return. Then we did a comparison and reconciliation. 

Hopefully this will be fixed by next year.

[karinm1]

I hear your frustration and agree that it's bizarre that this software company can't prefill the What-If worksheet very accurately. It's unbelievable. It's been there for at least a few years because I used it first for my 2020 return, I think.

I just wanted to chime in again to say that it's given me a workable estimate of taxes we each owe if I go through it and correct it. You can edit it and move the numbers in each row to the correct columns, and it recalculates.

[tuckerlogan523]

Any update on this? Is this worksheet fixed? Or will it be by next year? 

[tuckerlogan523]

(That question was specifically for Dawn C, Employee Tax Expert)

[MarilynG1]

We don't have a date for reprogramming the What-If Worksheet.  Editing the numbers on this form a bit is still better than preparing three separate returns.  If you live in a community property state, some items need to be split 50/50. 

@tuckerlogan523 

[tuckerlogan523]

Thanks. I don't live in a community property state and yet the worksheet was splitting a number of items 50/50. I gave up on it and created three returns because I had zero confidence in anything the worksheet was telling me.