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
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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.
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
Please see the link below for more information on how to report this to the IRS. Failing to report income is considered tax fraud.
I do not understand. The question was how to split dividends and prior year tax refund if a couple elects married filing separately. So for example, assume $700 dividend on a joint account. Do I report $350 each? This would not match the single 1099-Div which would show $700. Is that a problem? The previous responder indicated ... "You also need to alert the IRS that the person that received the 1099-INT isn’t reporting the full income on their return."
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)?
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.
And to answer your general MFS question, if one of them itemizes Schedule A deduction, they both must.
Thank You Thomas M. So assuming 1099-DIv contains:
1A: $800 ordinary dividend,
1B: $700 qualified dividend and
2A: $200 capital gain distribution,
Is that correct? I've never done a married filing separately before so thank you for your support and patience!
Brian
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