Why does Turbotax say my best status is "married filing jointly" but if I switch to "married filing separately", my return has a a huge increase?

[vincentmassaro]

I entered in all of my tax info to the end, and went back to change my filing status from "married filing jointly" to "married filing separately". My return jumps from $500 to nearly ~$8000. Why does Turbotax tell me my best status is to file jointly when filing separately would yield a much larger return?

It seems like Turbotax should be making recommendations along the way to change my status based upon the information that is being entered, or show both along the way. I would not have thought to go back and change it because I assumed married filing jointly was the best option given the recommendation early on in the process. Thank you.

[xmasbaby0]

If you just went into My Info and changed your filing status and did not change anything else, you are not doing it correctly so your results are skewed in a big way.   

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...

[vincentmassaro]

Ok, are you saying that if I change to married filing separately and then run through all of the steps after that again, I would still need to do all of it again on a separate account for my wife? Or would Turbotax be able to submit both returns from the single account?

[xmasbaby0]

YOU have to prepare two separate returns---one for each spouse----following all of the rules regarding standard deduction or itemized deductions, etc.   TurboTax will not do that for you.   You will pay for each return if you are using online TT.  

The wildly different refund amounts you were seeing were because you did not prepare separate returns the right way.  

[vincentmassaro]

Thank you, this isn't really clear when using Turbotax online. I see that I can export my return to import into the desktop version. Can you confirm that the desktop version will allow me to more accurately see the difference between filing joint vs separately without having to enter the information 3 different times the way I would for the online version? I've never used desktop before. Thanks!

[xmasbaby0]

Desktop software has a "what if" feature that makes comparisons easier.

Or use the WHAT IF tool:

- Click Forms Icon (upper right of screen) or Ctrl 2 (forms view)

- Click on the Open Form Icon

- In the “Type a form name.” area type What-If (with the dash), click on the name of the worksheet - click on Open Form

- You will see the worksheet on the right side of the screen; enter the information right into the form

- To get back to interview mode - click on the Step-by-Step Icon (upper right of screen) or Ctrl 1

You can switch to desktop from online---you must have a PC or Mac that meets the system requirements--desktop software cannot be used on any sort of mobile device.

https://ttlc.intuit.com/community/choosing-a-product/help/how-do-i-switch-from-turbotax-online-to-th...