MFS HOH

[NashJ]

Hi,

I worked in state A from Jan-midAug and state B from midAug-Dec in 2021 (same home address as that of my spouse on paystubs/W2) after switching jobs (so, 2 W2's showing different states/addresses respectively).

My spouse worked in state B for the entire year 2021.

We got married in Feb 2021.

We had our 1st child in Sep 2021.

Our tax consultant advised that we can file as MFS with my spouse as HOH to maximize return (the difference is significant ~3k versus MFS only; MFJ yields the least return as this offsets my spouse's stimulus) as our on-paper stay together in 2021 is less than 6 months (ie midAug-Dec) with my spouse claiming our child as the qualifying dependent. The only documents I can think of showing my presence in state A from Jan-midAug are my paystubs and my W2 from previous job in state A.

Given the datapoints above, please let me know do we even qualify for the MFS/HOH filing status;

is it ok attempting to file and then amend if required by IRS; are there ramifications that can affect us down the line?

The intent is to maximize the tax return at the same time by remaining completely compliant to the tax filing system.

Thank you for your response in advance.

[ErnieS0]

It depends. From your post it appears you do not qualify as head of household because you and your wife lived together at some point during the last six months of the year.

It's also unclear whether your wife paid more than half of the cost of keeping up the cost of a home.

The IRS requires all married taxpayers who file as head of household to be "considered unmarried" as of the last day of the tax year. To be considered unmarried means:

• You file a separate return
• You paid more than half of the cost of keeping up your home for the tax year
• Your spouse did not live in the home during the last 6 months of the tax year
• Your home was the main home for your child, step child, or foster child for at least 6 months of the tax year
• You must be able to claim the child as a dependent

See Guide to Filing Taxes as Head of Household

[NashJ]

Thanks ErnieS0 for your prompt reply. 

1. Yes, we officially started staying together from midAug 2021. Our consultant said that counts as it constitutes less than 6 months plus she has a dependent, which I doubt, as I think the clause is staying together "anytime" during the last 6 months.

2. My wife pays rent for the apartment she was already renting prior to my moving in.

3. She has her own medical insurance including our child's through the company she works for and I have my own from the company I work.

I just wanted to learn whether MFS/HOH is completely ruled out and incorrect to file ( based on #1 above as it seems so ), then we can proceed with MFS only and get it done with.

Thanks again!

[macuser_22]

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@NashJ wrote:

Thanks ErnieS0 for your prompt reply. 

1. Yes, we officially started staying together from midAug 2021. Our consultant said that counts as it constitutes less than 6 months plus she has a dependent, which I doubt, as I think the clause is staying together "anytime" during the last 6 months.

2. My wife pays rent for the apartment she was already renting prior to my moving in.

3. She has her own medical insurance including our child's through the company she works for and I have my own from the company I work.

I just wanted to learn whether MFS/HOH is completely ruled out and incorrect to file ( based on #1 above as it seems so ), then we can proceed with MFS only and get it done with.

Thanks again!

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As ErnieSO said, you do not qualify for  HOH since you lived together after July 2 2021 (half the year plus 1).

But why file separately at all.  You will probably pay more overall tax then if you file jointly.

If you file MFS (Married Filing Separately) keep in mind that there are several limitations to MFS.  Married filing Jointly is usually the better way to file.
 
A few of those limitations are: (see IRS Pub 17 for the full list

https://www.irs.gov/pub/irs-pdf/p17.pdf page 21

1. Your tax rate generally is higher than on a joint return.
2. Your exemption amount for figuring the alternative minimum tax is half that allowed on a joint return.
3. You cannot take the credit for child and dependent care expenses in most cases, and the amount you can exclude from income under an employer's dependent care assistance you are legally separated or living apart from your spouse, you may be able to file a separate return and still take the credit. For more information about these expenses, the credit, and the exclusion, see chapter 32.
4. You cannot take the earned income credit.
5. You cannot take the exclusion or credit for adoption expenses in most cases.
6. You cannot take the education credits (the American opportunity credit and lifetime learning credit) or the deduction for student loan interest.
7. You cannot exclude any interest income from qualified U.S. savings bonds you used for higher education expenses.
8. If you lived with your spouse at any time during the tax year:
a. You cannot claim the credit for the elderly or the disabled, and
b. You must include in income a greater percentage (up to 85%) of any social security or equivalent railroad retirement benefits you received.
9. The following credits and deductions are reduced at income levels half those for a joint return:
a. The child tax credit,
b. The retirement savings contributions credit,
10. Your capital loss deduction limit is $1,500 (instead of $3,000 on a joint return).
11. If your spouse itemizes deductions, you cannot claim the standard deduction. If you can claim the standard deduction, your basic standard deduction is half the amount allowed on a joint return.
12. You cannot contribute to an IRA if your MAGI if more then $10,000 and you lived with yiru spouse at anytime during the year.
13. If you live in a community property state you must allocate community income between both spouses..
-
- Community property states.   If you live in Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, or Wisconsin and file separately, your income may be considered separate income or community income for income tax purposes. See Publication 555. http://www.irs.gov/publications/p555/index.html

 
See this TurboTax article for help with this.
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

[NashJ]

Thanks macuser_22 for your insights; MFJ yields the least return as it completely obliterates my wife's stimulus.

[VolvoGirl]

What happens with your wife's stimulus?  If she files separately she has to enter her half of the stimulus.  You should each get letter 6475 reporting half to each spouse.