95% of married couples file joint tax returns. Tax return preparers may assume that’s what you want, because most couples do. Joint filing can be more convenient, and can save money compared to separate filings.
However, that simple step makes each spouse liable for everything on the return–and anything that might not be on the return.
You may have heard that if you get into hot water over something your spouse did–perhaps you didn’t know your spouse was gambling or hiding income–you can petition for ‘innocent spouse relief’. Unfortunately, getting innocent spouse relief is often fraught with problems and risks and there are numerous hurdles and limitations. You can avoid these issues altogether by filing taxes ‘married filing separate.’
The issue is biggest for couples with sizable assets, especially where one or both face business or tax risks. If one spouse has current or past legal, tax or credit problems, separate filings can save you headaches. This is true for couples with separate property too. If one spouse comes into the marriage with many assets and with a prenuptial agreement, separate tax filings help keep things separate. Imminent divorce is another good reason to file separately.
There are five filing choices: Single, Married Filing Jointly, Married Filing Separately, Head of Household and Qualifying Widow(er) with Dependent Child. Head of Household status may be the one most often claimed in error. The IRS wants you to choose the right filing status, and some of the rules are strict. Couples should think about their filing status carefully. There is increasing evidence that filing jointly without careful thought can be shortsighted.
Your marital status on the last day of the year determines your marital status for the entire year. So to be eligible to file a married filing joint return, you must be married on December 31st. If you are legally separated or divorced under state law you can file single. But if you are still married on December 31st and not legally separated, you’ll need to file married (presumably filing separate), not single. If more than one filing status applies, you can pick the one giving you the lowest tax.
Most people do not devote any thought to their filing status which can be a mistake. Run the numbers both ways and consider if joint or separate returns are better for you. Even if you’ll pay less by filing jointly, always consider your options. It can be worthwhile to keep returns separate, especially if one spouse has past credit, tax or legal problems or if problems seem likely to arise in the future. The most important thing is to think through what is best for you, the taxpayer.