How to Decide Whether to Select Married Filing Joint (MFJ) vs. Married Filing Separate (MFS) Filing Status

Typically, when a married couple goes to their CPA, accountant or hired tax preparer to do their tax returns, those returns will be prepared as Married Filing Joint. This is typically the case due to the fact that a married couple will get a more favorable tax treatment for filing a joint return. Unfortunately, if the married couple are not careful, filing a joint return can result in dire financial consequences.

There are many case by case situations where it does not make sense for a married couple to file jointly. Recently, a married couple came to us with tax returns that had already been prepared and filed as Married Filing Joint and the returns showed large tax balances owed. On review of the returns, Lothamer discovered that the husband’s activities had caused the large tax balances. However, because the returns were filed jointly they could not be amended. Additionally, both husband and the wife were jointly liable for the full amounts owed in taxes. Joint liability means that each party is liable for the full amount. Three months after the returns were filed the husband passed away leaving the wife solely responsible for the large tax balance.

Another married couple recently came to us also for tax return preparation. Again, in preparing the returns we discovered that the husband had caused large tax balances. We counseled the couple and recommended that they file separate returns, even though it would cause slightly higher balances, with all of the tax balances on the husband and none on the wife. The couple agreed and the returns were prepared and filed as Married Filing Separate. Shortly after the returns were filed, the husband unexpectedly passed away. In this scenario, because the wife filed separate returns from her husband, she was not jointly liable for her husband’s large tax debt and therefore was not responsible for the repayment of the tax debt.

At Lothamer, our CPAs, Tax Attorneys, and Enrolled Agents discuss with our clients to determine the best filing status for our clients in relationship to the resolution that is recommended. It is usually the resolution to be sought that determines the filing status. Generally speaking, if a husband and wife cannot fully pay the balances due at time of filing, then Married Filing Separate should be examined. A Married Filing Separate return can be amended to Married Filing Joint, within certain time limits, but a Married Filing Joint return can never be amended to a Married Filing Separate status.

If you need assistance deciding the best Filing Status or if you have additional questions regarding whether or not to file jointly vs. separatly for your situation, please contact us at (877) 829-2455 to schedule a initial consultation.