Odd # of Children; Married Filing Separate; Non-cooperative Spouse

[tortdog]

Situation is a married couple. One spouse insists on filing a separate return and makes the least amount of money (substantially less). The other spouse obviously provides most of the support for both the spouse and the three children.

The spouse insisting on married filing separate is not cooperative on how to split the children for the dependent deduction, and obviously 1.5 each way is not feasible. Given it is a community property state, the income will be split equally (50% of each spouse).

But any suggestions on how to handle the deductions for the three children? If the insistent spouse grabs 2 (or even 3) then they will have a lower tax bill and leave the spouse who makes most of the money with a far higher tax bill. 

If they fail to cooperate (each claims 3) then that sets up a problem with the IRS.

Thoughts on an uncooperative married couple please?

[xmasbaby0]

Well---sorry you have an uncooperative spouse who perhaps does not understand the child-related credits that are lost when you file married filing separately.  When you file that way, you cannot get earned income credit, childcare credit, education credits---and the amount used for the child tax credit is reduced.

Getting a stubborn person to cooperate is not a tax question.  That is  a marriage issue.  Maybe preparing the returns both ways so they can see it in black and white would work.

It is not easy to compare MFJ to MFS using online TT but you can do it.  Since you only get one return for each account and user ID, you have to use 3 accounts and user ID’s—one for MFJ and two for each of the MFS returns.  Compare, choose, and file—and pay—accordingly.

It is much easier to do this comparison using the desktop version of TT installed from a CD or downloaded to your own computer.  You pay once for the software and you can prepare multiple returns easily, and it has a “what if” feature that allows comparisons.

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.

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

https://ttlc.intuit.com/questions/1894449-is-it-better-for-a-married-couple-to-file-jointly-or-separ...

[xmasbaby0]

Another thing....are you and your spouse living together or have you lived apart for at least the last six months of 2020?  If that is the situation---then you have a whole different set of issues.  The "uncooperative" spouse could file as Head of Household if that spouse has the kids.   HOH can get all of the child-related credits----is that what is going on?  The rules are not the same for HOH.  One of you could file HOH and the other would have to file MFS.  

And... no matter how you file----you cannot both claim the same child(ren)  if you file separate returns.  The SSN of a child can only be used on ONE tax return.  

You might want to consider going to a paid tax pro in your area to get it all clarified.