File separately if you cannot agree with your spouse

When in doubt, file separately

If you and your spouse are unable to agree on how you can deal with your taxes, file separately. Usually, you can amend two separate returns (yours and your spouse's) to file jointly if you change your minds. You cannot, however, amend a joint return after the due date for that return in order to file separately. If you initially file separately, you've only 3 years to amend your returns and file jointly. Although filing separately might actually cost more in dollars, it could save you an excellent deal of grief.

You'll, needless to say, want to file separately if it'll save on taxes-but you need to also file this way if your spouse misrepresents income or expenses. If you file jointly, you can be liable for back taxes, interest, and penalties on a joint return. By filing separately, you will lessen your risk and maintain your choices open.

Bear in mind that if you file separately you forfeit the correct to certain deductions. These include education credits, child or dependent care expenses in most instances, the earned income credit, and interest paid on student loans.

Except in community property states, if you file a separate return, you generally report only your own income, exemptions, credits, and deductions. If your spouse had no income, you can claim an exemption for your spouse. If your spouse refuses to offer the information necessary to file a joint return, you should file a separate return.

What to understand if you file jointly

Filing a joint return is frequently to your economic advantage. A married taxpayer can claim the child and dependent care credit and also the earned income credit (for low-income taxpayers) only on a joint return. In addition, certain deductions-such as the dependency exemption for a spouse and also the deduction for a spousal IRA contribution-can be taken only on a joint return.

In deciding whether to file a joint return, you will wish to calculate-or talk to your tax adviser about-how each of these elements will affect your tax bill:

your tax rate
any deductions or credits you may lose
tax losses from partnerships or business losses
tax benefits available by filing a joint return as compared to filing separately, and
your liability for your spouse's dishonesty in reporting income and taking deductions when you file a joint return.

Additional factors to think about include your responsibility when signing a joint return and liabilities you can incur if your spouse indicators your name to a return or refuses to sign the return.

Responsibility when signing a joint return

According towards the IRS, you may not ignore the information on any income tax return you sign. Legally, you have to examine the return and make certain that any transaction of which you are aware is properly reported.

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