Question(s) on Married Filing Separately

Forum|Forum|5 years ago
February 13, 2021
2 replies
22 views

Hi - I'm doing taxes for my daughter and son-in-law; both are high wage earners ($250-300k each). It appears that if each file "married filing separately" their combined tax liability for both federal & NY state is about $1K less than married filing jointly. Does that seem logical? I've never used married filing separately so I'm not certain its correct.

Also, when married filing separately, how do you handle income such as dividends or interest or prior year state refund? Do you split them or have the lower earner claim the full amount?

Thanks.

Brian

MaryK4

Level 15

Yes, there are times when filing separate is more beneficial, and two high income earners is one such case. See When Married Filing Separately Will Save You Taxes.

If you filed a joint state or local income tax return in an earlier year, any refund of a deduction claimed on that state or local income tax return must be allocated to the person that paid the expense. If both persons paid a portion of the expense, allocate the refund based on each individual portion.

For joint accounts, you have to divide the interest income between the two joint account holders based on your portion of ownership of the account throughout the year. You also need to alert the IRS that the person that received the 1099-INT isn’t reporting the full income on their return.

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brian-perriginoAuthor

Level 4

Thank you. Re:

>> You also need to alert the IRS that the person that received the 1099-INT isn’t reporting the full income on their return. <<

How do you do this? This is a joint account with both names on the account. It's only about $700 in dividends and interest so it won't matter much how it's split or if it goes to one individual or the other.

Brian

JotikaT2

Employee Tax Expert

Please see the link below for more information on how to report this to the IRS. Failing to report income is considered tax fraud.

Reporting suspected tax fraud

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brian-perriginoAuthor

Level 4

Hi -- I apologize for asking this question again as I was not clear on the answer that was previously provided. The situation is a married couple filing separately. There is one joint account involved -- it is listed as 'husband & wife JT Ten.' There is ~$700 interest and ~$200 capital gains distribution. The couple lives and works in NY. The question is what to do with 1099-DIV. Can I just add the full div amount to "husband" and be done? Or do I need to include the full 1099 div amount on each return and then adjust as a nominee (i.e. $450 each)?

ThomasM125

Level 15

The 1099-DIV must be listed under only one social security number. So, that person would enter the full amount and then adjust as a nominee. The other tax filer can just enter the reduced amount.

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