WHY are you not filing a joint return ???
Filing separately is usually NOT your best option ...
The Married Filing Separately filing status is very different than the Married Filing Joint or Single filing status. There are a number of severe restrictions on deductions and credits, and on the amount of IRA contributions that you can deduct, especially if you live together with your spouse.
>You can not take the EIC,
>You can not take the credit for Child and Dependent Care, in most cases,
>You can not take the Education credits/deductions, and there are many other restrictions.
If either of you receive Social Security benefits and you live with your spouse, more of the SS benefit will be taxable, and the person receiving it will have to include the SS benefit in their gross income when determining whether they have to file. If one of you itemizes deductions, the other must also itemize even if they have nothing to itemize.
Before you decide, you should carefully read the restrictions that go with MFS in IRS Pub. 501, at this link:
You should carefully read the limits on IRA deductions in IRS Pub. 590-A at this link:
In addition, if you live in a Community Property state, there are special rules you must follow for reporting income and expense. For further information on that, see IRS Pub. 555, at this link:
and/or the Turbotax FAQ at this link:
Have you been separated for at least the last six months of 2019? Are the children with you? If that is your situation you can file as Head of Household and still get child-related credits.
You have a legal issue that needs to be resolved probably thru an attorney.
However... how much you make is NOT the issue here. Who the children live with for MORE than 1/2 the year is the crux of the matter. So do you all live together all year ? If you are the custodial parent then file a return claiming the children ... and if the other parent also claims the children the IRS will sort things out which is usually bad for the loser in this battle.
Briefly, there are 5 tax benefits of having a child dependent: Dependent exemption, child tax credit, dependent care credit, head of household, and eligible for EIC.
The tax code assigns all 5 benefits to the parent who has custody more than half the time. Custody is defined as where the child sleeps at night. (If the child is on a sleep over of a camping trip etc, the day is counted toward the parent where the child would have slept if not for the event in question.)
So for the IRS there is no 50% custody, you have to count nights, and one parent will almost always have more than the other. If for some reason the # of days is exactly equal (like in a leap year, 366 days, exactly 183 nights for each parent) then the tax benefits are assigned to the parent with the higher income.
If the divorce decree says that the non-custodial parent (parent with less than 50% time) gets the dependents in a certain year, the custodial parent must fill out and sign a copy of form 8332 and give it to the other parent, this releases the tax benefits to the other parent. However, the form 8332 only transfers the dependent exemption and the child tax credit. Eligibility for Head of Household, Dependent Care Credit, and EIC always stays with the custodial parent and cannot be transferred.
The only way to transfer all 5 tax benefits from one parent to the other parent is to arrange the children's sleeping schedules so that the desired parent qualifies for the particular year.
If you are the custodial parent, then in the years when you give your ex the form 8332 allowing him or her to claim the dependent exemption and child tax credit, you can still qualify for EIC, Head of Household and the Dependent Care benefit. You do this by carefully answering the questions in the dependent interview in turbotax by saying yes you have a dependent, and yes you are signing a form 8332 to allow the ex to claim the exemption. Turbotax will assign a special status to your children of "Non-dependent, use for HOH and EIC".
Your situation is covered in IRS publications 501 and 504, which you should definitely read.
hello @ Critter
My spouse income is higher than me. Hence, we cant get more stimulus if filed jointly. However, we did get more in total if file married separately with me claiming the kids. Can i do that?
Thank you for your help.
@leomessi There are other pitfalls to filing married filing separately that you should be aware of before you do that in the belief that you will receive more stimulus money by filing that way. You lose some other child-related credits when you file MFS.
If you were legally married at the end of 2020 your filing choices are married filing jointly or married filing separately.
Married Filing Jointly is usually better, even if one spouse had little or no income. When you file a joint return, you and your spouse will get the married filing jointly standard deduction of $24,800 (+$1300 for each spouse 65 or older) You are eligible for more credits including education credits, earned income credit, child and dependent care credit, and a larger income limit to receive the child tax credit.
If you choose to file married filing separately, both spouses have to file the same way—either you both itemize or you both use standard deduction. Your tax rate will be higher than on a joint return. Some of the special rules for filing separately include: you cannot get earned income credit, education credits, adoption credits, or deductions for student loan interest. A higher percent of your Social Security benefits may be taxable. Your limit for SALT (state and local taxes and sales tax) will be only $5000 per spouse. In many cases you will not be able to take the child and dependent care credit. The amount you can contribute to a retirement account will be affected. If you live in a community property state, you will be required to provide additional information regarding your spouse’s income. ( Community property states: AZ, CA, ID, LA, NV, NM, TX, WA, WI)
If you are using online TurboTax to prepare your returns, you will need to prepare two separate returns and pay twice.
The criteria for getting the 1st and/or 2nd stimulus payments on your return per the IRSL
A1. Generally, if you are a U.S. citizen or U.S. resident alien, you will receive an Economic Impact Payment of $1,200 ($2,400 for a joint return) if you (and your spouse if filing a joint return) are not a dependent of another taxpayer and have a Social Security number valid for employment and your adjusted gross income (AGI) does not exceed:
- $150,000 if married and filing a joint return
- $112,500 if filing as head of household or
- $75,000 for eligible individuals using any other filing status
Your payment will be reduced by 5% of the amount by which your AGI exceeds the applicable threshold above.
You are not eligible for a payment if any of the following apply to you:
- You may be claimed as a dependent on another taxpayer’s return (for example, a child or student who may be claimed on a parent’s return or a dependent parent who may be claimed on an adult child’s return).
- You do not have a Social Security number that is valid for employment.
- You are a nonresident alien.
The following are also not eligible: a deceased individual or an estate or trust.
@xmasbaby0 Thanks for replying my question!
You are right. We do get more refund if couple file married jointly every year. However, this year seem different in my case, because of my spouse 's salary, if total combine AGI, we do not qualified much of the stimulus. However, my income alone is within the qualified AGI of the stimulus rule, and we get more of the refund if filed married separately. I did my tax both ways in TurboTax (file married jointly and file married separately). The result showed we get more if both of us file married separately and I claim the kids. All the calculation were done using turbotax software, so I assumed it was corrected.
However, it has been over 21 days since I e-filed, the status of my refund in IRS.gov website shown "processing". Then I was browsing on other tax support flat form, and google more about my situation. Someone from CreditKarma forum said if a couple filed married separetely, a person with higher income will need to claim that kids. This is kinda make me wonder and want to check with someone more experience with this in TurboTax. Do you or anyone know about this?
Thanks for your comment.
There is not a rule that says the spouse with the higher income "has" to claim the children. The higher income can be the "tie-breaker" if two parents cannot agree on which one will claim the children. I hope that you and your spouse followed all the other rules for filing separate returns-----you both had to file the same way----either you both itemize or you both use standard deduction.
@xmasbaby0 Thanks for replying!
Yes we both taken standard deduction, and only 1 of us claim the kids as dependent. We do not have any other credits beside child tax credit. I just want to make sure my file status and the way I filed was corrected.
Again, thank you for you comment!