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Tag Archive for Married Filing Separately

IRS Publication Error: Were You Misled By The IRS Publication 54?

IRS Publication 54- Were You Misled?

The Federal tax return filing thresholds were updated for the 2018 tax year, with the most significant change being for individuals filing as “Married Filing Separately.” The income tax return filing threshold was reduced from $4,050 in 2017 to just $5 for 2018. However, Publication 54 – Tax Guide for U.S. Citizens and Resident Aliens Abroad, for the 2018 tax year, incorrectly stated that married taxpayers filing separately must file a return only if the individual filer’s gross income equals or exceeds $12,000.

Meanwhile, the IRS website and the 2018 instructions for Form 1040 correctly indicated that a married filing separately taxpayer must file a tax return if the individual’s gross income is at least $5. They failed to mention the change in the more detailed Publication 54 on which many US taxpayers living abroad rely.

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Sticker Shock From The Tax You Owe: Read This!

Manasa Nadig

Everywhere these days, commercials are vying to get you to spend your big tax refunds on their products and services—oh yeah, even that liposuction place! But you just finished preparing your taxes and you find out you OWE Uncle Sam big bucks. That is quite the sticker shock if you are short on cash or are unprepared.

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Choosing the Correct Filing Status – Married Filing Separately (MFS)

If you are married and decide not to file a joint return with your spouse, you must file Married Filing Separately.

There is, however, one exception to this rule: A married taxpayer can be considered unmarried by law, if he/she maintains a household for a child, and the spouse was not a member of the household for the last six months of the taxable year. Such a taxpayer would not be required to file MFS, but will be able to file as Head of Household.

Although filing a joint return generally produces lower taxes, the opposite is sometimes the case, and to maximize the tax advantage in such circumstances, married couples may decide to file separately for a particular year. Married taxpayers, therefore, have the Read more

Why Choosing Married Filing Jointly Might Not Be Your Best Option

Most married taxpayers automatically tend to choose the Married Filing Jointly filing status, because they enjoy being taxed at the lowest rate, and also because there are certain tax breaks they might not be entitled to if they were to file separate returns. This, however, might not always be a wise decision.

If you and your spouse each have income, it might be wise to figure your taxes both on a joint return and on separate returns, and then choose the filing status that gives you the lower combined tax. Generally, you will pay more combined tax on separate returns than you would on a joint return, because the tax rate is higher for the MFS filing status. However, if both you and your spouse are high earners; and both of you also have large deductions, there may be a possibility that filing MFS could result in a lower tax bill, as Read more

The Concept of Being Married, But Considered Unmarried For Tax Purposes

The general rule for married taxpayers filing their tax returns is that they can only file Married Filing Jointly (MFJ) or Married Filing Separately (MFS). There is, however, a very important exception to this rule. If you are married and separated from your spouse, under tax law you may be considered unmarried if certain conditions are met. This means that you could qualify to use the Head Of Household filing status instead of MFS, and will not be subject to the disadvantages associated with the MFS filing status.

Under tax law, you can be considered unmarried if you meet all the following tests:

• Obviously, you must intend to file a separate return from your spouse.
• You must have paid more than half the costs of keeping up a home for the tax year. Read more

Foreign Spouse – Married Filing Separately Or Head Of Household

growing taxSelecting the best tax filing status is an important factor in tax planning. Making the decision how to treat your foreign spouse for US income tax filing purposes can mean either the loss or savings of significant tax dollars. While we all love to save tax dollars, saving them should not be the only factor considered in making the tax filing status decision. For example, if your nonresident alien (NRA) spouse plans to apply for a green card, and eventually to apply for US citizenship, it may be best to make a special tax election to treat the spouse as a US person for tax filing purposes and to file joint tax returns. The special election (under Section 6013(g) of the US Internal Revenue Code) will be discussed in a later blog posting.

Tax Benefits of Filing Head Of Household

If you do not elect to file a joint income tax return with your NRA spouse, you might qualify to file as head of household (HoH). The qualification requirements are set out later. Filing HoH generally means the income of the NRA spouse is not included on the tax return (a big benefit) and also results in a lower tax rate than if you file as married filing separately (MFS). In addition to lower effective tax rates, you can claim a higher standard deduction when filing HoH. For 2013, the standard deduction for MFS is $6,100 whereas for HoH, it is $8,950.

If you do not elect to treat your spouse as a US person, and you do not qualify to file HoH, you would have to file using MFS status. Many clients come to me having made the mistake and filed using “Single” status when they have a NRA spouse. You may NOT file as “Single” if you are married, regardless if your spouse is a NRA. Read more