Married couples need no reminder that they can benefit from joint filing when one mate earns all or considerably more of the income than the other. That tax break, though, can become a trap for spouses who decide to split, but don't obtain a divorce or a legal separation. They still have the option to file jointly, assuming both partners are willing to do so. Nevertheless, one or both might find it more advantageous to file separately. The financial implications are huge.
Among other drawbacks for joint filers: they're jointly and severely liable. That means married persons remain on the hook even if their marriage breaks up after they file a joint return. So if the IRS audits their return and demands extra taxes, it can dun either mate for the entire amount of any additional taxes, penalties and interest that becomes due.
Nevertheless, there're some drawbacks to filing separately. Whatever a couple's reasons for avoiding tax togetherness, the two of them may be in for an unpleasant and expensive surprise when filing time rolls around. The taxes they'll pay as married persons filing separately can be considerably more than the taxes they'd owe as joint filers or even as two unmarried persons.
There're other drawbacks for married persons who choose to file separately. One is that both of them must use Schedule A of Form 1040 to itemize their deductions for charitable donations and the like or that both must use the standard deduction.
Special rules for married persons living apart. Fortunately, there's a way out of these traps for many married persons. An often overlooked break entitles them to be treated as if they were unmarried for the year in question--provided they fulfill certain requirements. The result: Even though they aren't divorced or legally separated, they're excused from having to use the rates for a married individual filing separately and, instead, receive the benefit of the more favorable rates for a head of household.
To take advantage of head of household rates, you have to pass a four-step test.
•Step 1: You file a separate return from your spouse.
•Step 2: Your spouse didn't live with you at any time during the last six months of 2015. You and your spouse must live in separate residences, warns the IRS, and the courts agree.
•Step 3: You paid more than half of the cost of keeping up your home for 2015.
•Step 4: Your home was, for more than half of 2015, the principal residence of your child, stepchild or adopted child, whom you can claim as a dependent.
You aren't necessarily disqualified from filing as a head of household just because you're unable to claim the child. As the parent with custody--the mother, in most cases--you continue to be eligible, if you sign IRS Form 8332, which allows the 2015 exemption to be claimed by your spouse, the parent without custody.
When couples live apart by mutual agreement, they might be able to work out an arrangement whereby each spouse can claim a dependent child and each qualifies as a head of household. Congress enacted this special provision that treats married persons as unmarried individuals primarily for the benefit of abandoned wives (or husbands). But it worded the provision broadly enough to cover couples who have separated and who live apart by mutual agreement--without any actual abandonment.
Additional articles. For free advice on tactics that trim taxes for this year and even give a head start for next year, delve into the archive of my articles for AccountingWeb.com, https://www.accountingweb.com/profile/julian-block.
These plain-language articles (more than 100) show how to nimbly sidestep pitfalls, while capitalizing on opportunities to diminish, delay, or deep-six payments of sizable amounts that would otherwise swell IRS coffers.
Julian Block writes and practices law in Larchmont, N.Y. He is frequently quoted in the New York Times, the Wall Street Journal, and the Washington Post, and has been cited as: "a leading tax professional" (New York Times); "an accomplished writer on taxes" (Wall Street Journal); and "an authority on tax planning" (Financial Planning Magazine).
His tax guides include "Tax Deductible Travel and Moving Expenses," "Tax Tips for Marriage and Divorce," "Easy Tax Guide for Writers, Photographers, and Other Freelancers," and "Home Seller's Guide to Tax Savings." For information about his books, go to julianblocktaxexpert.com.