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How to file taxes when separated

how to file taxes when separated

Need help with your taxes? will publish a reader's question and the answer from a member of the American Institute of Certified Public Accountants (AICPA) every weekday until April 15. Today's question:

Q: I have been legally separated from my husband since June 3, 2007. Should I file as married filing separately? I work for a corporation and my taxes are, of course, paid throughout the year. He is self employed and paid next to nothing in last year, so his tax bill will be enormous. Should I file separately?

Answer from AICPA member Patricia A. Thompson:   A husband and wife may file a joint return as long as they are not legally separated under a decree of divorce or separation maintenance on the last day of the tax year, they have the same tax years and neither is a non-resident alien at any time during the year. We will assume the non-resident alien and different tax year issues are not relevant to your situation.

A husband and wife who are separated under an interlocutory decree of divorce are still considered married until the decree becomes final. The time period when the divorce becomes final depends on state law.

A husband and wife may file as married filing separately.

Certain married individuals may file as head of household. This status is available for unmarried taxpayers who maintain a household which for more than one half the year is the principal place of abode for a qualifying child or any other person who is a dependent of the taxpayer. A married individual will be considered unmarried for this purpose if the taxpayer's spouse was not a member of the household for the last six months of the year and if the household is the principal place of abode of a child for whom the taxpayer is entitled to a dependency exemption. Head of household tax rates are lower than married filing separate tax rates.

Once the decree becomes final, married filing jointly and married filing separately are no longer available. The choice of filing status would be either head of household or single.

Selecting the filing status has an impact on the availability of certain tax deductions and credits, amount of taxes to be paid and also the amount of tax liability you may be responsible for.

The benefits of

filing jointly (assuming not qualified for head of household status) include:

• Ability to take advantage of lower income tax rates when husband and wife have significant differences in income.

• Higher alternative minimum tax exemption and higher phase-out of exemption amount.

• Ability to take education credits

• Higher adjusted gross income (AGI) limits for deducting Individual Retirement Account (IRA) contributions

• Higher AGI limit to be able to convert a traditional IRA to a Roth IRA

• Higher AGI limit for taking passive losses

Disadvantages of filing jointly include:

• Joint liability for the entire tax on a joint tax return. Relief is available for this joint liability in limited situations.

• Potential liability for your spouse's unreported income or over stated expenses. Relief is available for this potential liability in limited situations.

• Potential higher tax liability due to tax brackets

• Loss of medical expenses due to higher AGI. Medical expenses are deductible to the extent they exceed 7.5% of AGI.

• Loss of unreimbursed employee business expenses and other miscellaneous itemized deductions due to higher AGI. Miscellaneous itemized deductions are deductible to the extent they exceed 2% of AGI.

We don't have enough information to know if your legal separation was final in 2007 but using the guidelines above may help you make a decision. In some cases, divorce attorneys have indicated they would consider any additional tax paid due to filing married filing separately as a reduction of the marital estate to be divided. Divorce agreements may also include indemnification agreements where you would not be held responsible for any tax liability as a result of filing a joint return. However, IRS is not bound by the divorce agreement. If you are eligible for married filing jointly and do file as joint, you may reach an agreement with your spouse to reimburse you for the refund you would have received if you filed separately.

For more information:

Send us your question. One selected question and answer will be published each weekday at through April 15. E-mail us at Include your e-mail address and daytime phone number. Our accountants can provide general information and advice about tax issues. They will not know your entire tax situation, so go to your own tax preparer for detailed advice.

Category: Taxes

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