Tax Desktop Version

[dimitri771]

Hello,

I am on W2 and my wife is self employed. She has minimum income though around 300-600. Which of the following do you recommend:

1. Which turbotax version?

2. Number of allowances: we chose M-2 total.

3. Filing status: we are leaning towards MFJ.

Thank you!

[xmasbaby0]

If you are legally married at the end of 2019 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 will get the 2019 married filing jointly standard deduction of $24,400(add $1300 for each spouse over the age of 65).  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. 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

Since your spouse has some self-employment income, if you use online TurboTax you need the Self-Employed version.  If you use desktop software, any of the desktop versions will have the forms and schedules for her Schedule C.

[VolvoGirl]

1.  All the Desktop programs have the same forms. You just get more help and guidance in the higher versions.  I would start with Desktop Deluxe.  You can upgrade later if you want.

3.  Joint MFJ is usually always the best way to file.  It has the highest Standard Deduction and lowest tax rates.

[rjs]

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@dimitri771 wrote:

2. Number of allowances: we chose M-2 total.

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Use the IRS Tax Withholding Estimator to figure out what to put on your W-4 form.

[dimitri771]

It shows that we need to take 3, but I heard that 2 is a good number. M-2. 

[VolvoGirl]

The more allowances you put down like 3 means your employer will take out Less withholding so you might end up owing on your tax return.  It might be better and safer to put down a lower number like 2 or Less.  

[rjs]

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@dimitri771 wrote:

It shows that we need to take 3, but I heard that 2 is a good number. M-2. 

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"I heard" is not usually a good source of tax advice. The estimator on the IRS web site is a much better source. Did "I heard" take into account your filing status, your income, your wife's income, how much you've already had withheld this year, and other things the estimator asks about that might affect your withholding for the year? Did "I heard" ask you how big a refund you want to get?

But pay attention to the "Special Note for 2020" on the first screen of the IRS Withholding Estimator. If you change your withholding now, be sure to check it again at the beginning of 2020. You might have to adjust it again for 2020.