Married filing separate vs married filing joint

[BAlbert]

My wife and I have filed married filing separate vs married filing joint since starting using Turbotax some 20 years now.  The reason: I have always run the program both ways and found we always got money back on our returns when filing separate.  AND, we always found we would have had to pay the IRS additional tax when filing joint.  Why this is I don't understand?

This year is different.  Running the joint filing is getting a return of approx. $3000 more than filing separate. Very little has changed in our tax profile to warrant such an unusual difference in returns.  While I have input the data several times, the results are the same.  And I run the review and analysis and it all checks out, ready to file.  I am afraid to file the joint return to receive the higher amount, in fear of the IRS coming back at us in the future to repay overpayment on this return.

Answers, suggestions, help, chat?

[HelenC12]

If you have legitimate records and documents for all the information on your tax return(s), even if the IRS ever questioned your return, you would be able to show proof why you filed the way you did. 

Yes, the fact that it's been more beneficial to file Married Filing Separately (MFS) versus Married Filing Jointly (MFJ) is unusual. Generally, filing jointly (one tax return instead of two) will give you a bigger refund or less taxes due. 

Perhaps your refund is $3,000 more filing MFJ versus MFS because when you file MFS, your tax rate is higher and you won't be able to claim:

• Education benefits
• Earned Income Credit (EIC)
• Child and Dependent Care Credit (usually)
• Adoption Credit (usually)
• The standard deduction if your spouse is claiming itemized deductions
• The full benefit for itemized deductions, the Child Tax Credit, and capital losses (you'll get only half compared to married filing jointly)

If you file MFS and live in Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, or Wisconsin, you have to deal with community property allocations and adjustments, which adds extra work and complexity to your taxes.

The main reason you'd want to file MFS is to protect yourself from inaccurate tax information reported by your spouse, or in cases where your spouse refuses to file a joint return (or refuses to file, period) and you don't want to get in trouble.

When you file MFS, your refund can't be seized to pay off your spouse's debts. However, filing jointly as an innocent or injured spouse can head off refund seizures as well.

[BAlbert]

The discrepancies I see are with the taxable amount generated by Turbotax.   I should mention we are both retired and our income is from SS and 401 investments.  Between SS, 1099-R, 1099-INT, and 1099-DIV, our income total was around $73K.  Yet Turbotax reduced our taxable income to just over $6K.  This appears to be from a large portion of our combined SS income being nontaxable?  That coupled with our standard deduction of $28K, reduced our taxable income to a near insignificant amount.  Can that be?

If as you state, as long as we have the documents to support our filing, and Turbotax analysis and review checks supporting the joint filing to be true ... should we proceed with the better return?

[JohnB5677]

You absolutely should file the returns that is to your best advantage.  If MFS is better, you should absolutely go with it.

The scenario you stated above is entirely possible.  People on full retirement may have a limited tax burden.  However, that can change quickly with the addition of a small amount of income the Social Security could become taxable.

There are a few key issues some people do not understand.

• Be sure that you are filing as MFS, and not as Single.  This mistake is made by many younger couples.
• If one spouse itemizes their deductions the other spouse must do the same.  One cannot be Itemized and the other use the standard deduction.
• The standard deduction balances out. The MFJ is exactly double the MFS.