Tax Tip of the Week | No. 392 | How Are You Going to File?

Tax Tip of the Week | February 1, 2017 | No. 392 | How Are You Going to File?

Some tips are worth repeating----a reminder we offer every year:If you were legally married on 12/31/16, the IRS considers you married for the entire year of 2016.You now must decide if you are going to file as Married Filing Jointly (MFJ) or Married Filing Separately (MFS).  Note, however, if you file MFJ it is an irrevocable election---you cannot go back and amend a MFJ return to a MFS return.The primary reason to file MFS is to pay less tax.  This is particularly beneficial to save on the amount of Ohio taxes paid. Another reason to file separately is to avoid joint liability.  Each spouse who signs a joint return is responsible for the accuracy and tax liability on the return.Many times, for example, in a second marriage situation we see couples who have a desire to maintain separate financial responsibilities.  While this is understandable, it could lead to paying several thousand dollars in additional taxes.  If you file MFS, you should consider the following:-   Child care credits, education credits, adoption credits and the earned income credit are not allowed on MFS returns-    Deductions for student loan interest, tuition and fees, and savings bond interest are not allowed for MFS returns-    If one spouse itemizes, or takes the standard deduction, the other spouse must do the same.  (That is, one cannot itemize and the other take the standard deduction.)-    A greater percentage of your Social Security benefits may be taxable-    Your ability to contribute to traditional or Roth IRA will be greatly limited-    Capital losses could be limited to a maximum of $1,500-    Passive losses could be limitedRemember:  If one spouse itemizes their deduction BOTH spouses must itemize.  You cannot let one spouse use Schedule A for itemized deductions and allow the other spouse to take the Standard Deduction when MFS.Before filing your return you need to look at both MFJ and MFS to see which lowers your tax burden the greatest.You can contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504.  Or visit our website.Rick Prewitt – the guy behind TTW...until next week.