Should You File Married Jointly in 2023? Tax Expert Weighs In

are you married if so there are two filing statuses that you can use when you're doing your taxes married filing separate and married filing jointly now in this video I'm going to break down each of these filing statuses for married people and give you my recommendations for which one I think you should use be sure to stay until the end of this video because I'm going to be giving away one piece of information about these filing statuses that you're not going to want to miss without further Ado let's dive into this video all right guys what do these filing statuses even mean married filing separate married filing joint we got to talk about it married filing separate means that you and your partner will file separate tax returns even though you're married married filing jointly means that you and your partner will file a joint tax return now a joint tax return is a single tax return in which both Partners in a marriage report their income they report their credits and they're reporting their exemptions and deductions all together now let's talk about what the requirements are for filing married filing joint there are some basic requirements that you must meet if you would like to use the married filing joint status for example first you must have been legally married on the last day of the tax year for which you want to be filed for so if you want to file as married filing jointly for the year of 2022 then you must have been legally married by December 31st of 2022. also both Partners have to agree to use this filing status you cannot force your partner to do it if he or she just does not want to do it also another important thing is that you can not be legally separated under a divorce or separate maintenance decree so please do not try to do this guys it won't be approved and it could cause a headache down the road with the IRS another thing that you should be aware of regarding this filing status is that if your spouse dies during the year you're still considered married to him or her for that tax year as long as you don't remarry in that tax year so you can file married filing jointly if your spouse dies during the tax year finally the last thing you should know about the requirements for the married filing joint filing status is the income requirements for 22 22 if you plan on filing married filing joint then the minimum income requirements to file your taxes are 25 900 if both spouses are under the age of 65 or 27 300 if one spouse is under the age of 65 and one spouses over the age of 65 and then 28 700 if both spouses are over the age of 65. so if you meet all of these criteria then you will be able to file your taxes with the married filing joint status let's talk about understanding married filing joint if you're thinking about going with the married filing joint status then you should fully understand all the implementations of doing so for example you file a married filing joint tax return then both you and your spouse will both equally be responsible for filing a return and equally responsible for paying the taxes I have a lot of taxpayers where they get a little bit caught up in the penalties and previous tax return issues with one spouse if there happens to be any penalties that occur as the result of your tax return then both you and your spouse will be equally responsible for these penalties that is unspouse can prove that he or she was unaware of the mistakes and did not benefit from filing married so if you're thinking about fouling jointly just remember that you will most likely be held accountable for any mistakes omissions fraud that your partner makes or conducts on your joint return now in other words you definitely need to make sure that you're in full trust with your partner before you decide to file a tax return with them I have a lot of taxpayers that have this conversation with me because they want to make sure that it makes the best sense for each partner even though they love their partner that it makes sense financially to file jointly so let's talk about the differences here what's the difference between filing separate versus married filing joint generally speaking most married couples are better off filing jointly but there are many reasons for this the first and foremost and probably most obvious is that it saves time only having to fill out one tax return is significantly less time consuming than having to fill out two tax forms and go through two processes of filing a return additionally by filing joint returns you and your spouse can get access to a wide variety of benefits that are not available for separate filers yes that's right the IRS has incentivized joint filing for married couples by offering a number of important credits deductions and other benefits here's some examples you will get access to the earned income credit the dependent Care Credit you'll get access to tuition credits you'll get access to the student loan interest deduction which is a big one for taxpayers you'll get access to the child care credits unless you lived apart from July to December you'll get access to the adoption credit unless you lived apart from July to December on that one as well the Hope in lifetime credit learning credits and uh credits for elderly and disabled as long as you live with your spouse at any time during the tax year you'll also get exclusion of interest on series EE and IUS savings bonds used for higher uh education expenses and you'll also get a special allowance of 25 000 for Real Estate passive activity losses which gives you that act of participation if you live together at any time during the tax year now I named a bunch in addition to these benefits if you filed jointly you might also pay less taxes on your social security or railroad retirement benefits if you have these as long as you live with your spouse at any time during the tax year now here are some states that have community property uh status what this means is that in these states spouses are considered to be joint owners of almost all property and debts they acquire during their marriage so if you file a joint tax return in a community property State then it can help you to avoid tax rules regarding property that apply to married couples filing jointly so filing a joint tax return can be a lot more convenient for people who live in joint property States in case you don't know whether or not your state is a community property State here's a list of all the community property states in the United States in order number one Arizona number two California number three Idaho number four Louisiana number five Nevada number six New Mexico number seven Texas number eight Washington and number nine Wisconsin one final advantage of filing jointly versus filing separate is that if you take the standard deduction it tends to be higher for joint filers though you can potentially just decrease your taxable income even more simply by filing married filing joint as opposed to filing separate I get asked this question though all the time does it ever make sense to file separately yes the answer is yes there are a number of situations in which we as tax professionals find that it makes more sense to file separately for example some Partners in a marriage simply prefer to keep all of their finances separate including their taxes so if you and your partner are a couple who thrive on keeping finances separately then filing your taxes separately could be a smart idea for the relationship additionally it can make sense to file separately if one spouse has incurred a large amount of medical expenses but has income that is significantly smaller than the other spouses this is because the IRS only allows unreimbursed medical expenses that are in excess of 7.5 percent of the filers adjusted gross income to count as uh itemized deduction imagine that one spouse in a marriage is a lawyer making two hundred thousand dollars per year and the other is a preschool teacher making about 30 000 per year now let's just imagine for this example that the spouse who is a preschool teacher racked up seventeen thousand dollars in unreimbursed medical expenses like she came out of pocket for that or he came out of pocket for that in the tax year due to having an expensive surgery okay in this particular case if the couples filed jointly they would have an adjusted gross income of 230 000 per year and this would not be able to deduct any of the 17 000 dollars worth of medical expenses this is because the seventeen thousand dollars is less than the 7.5 percent of their combined adjusted gross income however if the couple filed separately then the spouse who was a preschool teacher would be able to deduct the medical expenses that were above two thousand two hundred and fifty dollars this is because 2 250 is seven point five percent of thirty thousand which was The spouse's adjusted gross income if they were to file married filing separate the IRS allows for medical expenses above 7.5 percent of AGI to count as miscellaneous itemized deductions so what this means is that if you make significantly less money than your spouse let me repeat if you make significantly less money significantly less money than your spouse and if you have a lot of unreimbursed medical expenses during a tax year then it might might make sense for you to file your taxes separately from your spouse but how do you know for sure how do you know for sure which filing status is going to be the best for you many couples struggle to choose whether they should file separately or file jointly because they don't know which one will save them the most money generally speaking I recommend clients to go with joint filing due to the abundance of incentives and tax breaks that the IRS has created for filing this way however if you would like to know with absolute certainty which method will save you more money then there is a way that you can do this you can do this by having your tax preparer fill out your tax returns both ways what I mean by this is that you can have your account and prepare your taxes with the status of married filing separate and then prepare them with the status of married filing jointly then you can simply look at the completed returns to see which one saves you more money nine times out of ten The Joint tax returns will save you more money but it's the process that will help you find the confidence the issue of trust I just want to touch on this real quick the issue of trust briefly here guys because it's highly relevant from joint versus separate taxes for married couples anyone who has ever entered a marriage can probably tell you that trust is an extremely important factor for a successful marriage when it comes to 2. successful tax filing the same is true for for trust if you choose to file your taxes jointly is critical to make sure that you fully trust your partner the reason is because if your partner is lying to you about his or her income or tax details then this could end up costing you so much money there are many illegal sources of income and oftentimes one spouse is earning income from one of these sources without telling the other common sources of illegal income include selling illicit narcotics loan sharking prostitution certain types of gambling theft robbery insider trading selling counterfeit Goods or creating some type of Ponzi scheme like if you suspect that your spouse is earning income from any of these illegal ways or other illegal means or they're not reporting 100 of their income because they collect a lot of cash I strongly recommend that you do not file a joint tax return with him or her the same is true if you suspect that your spouse is dishonest on his or her tax returns for example if he or she lies about critical info information about income deductions exemptions a carried out report by Credit Karma of two thousand individuals revealed that roughly six percent of people cheat on their taxes do I pay my taxes no guys of the people who admitted to cheating on their taxes the most common ways that they did this was one not reporting income that they made such as cash income or income earned under the table number two patting their numbers of dependents itemized deductions or tax credits which means they're adding additional children or adding additional tax credits for children that they don't have or adding additional itemized deductions for things that they didn't take number three omitting tips or gifts that they receive this is a very popular One Number Four failing to report gambling winnings if you suspect that your spouse may have cheated on their taxes in any of these ways or in any way in the past and you should steer clear of using the tax status married filing joint instead in these situations it is better to use this the status of married filing separate in order to reduce your risk of facing fines penalties or even criminal prosecution for tax fraud so question do your chances of being audited increase if you file separately first you should know that the chances of being audited for most Americans are less than one percent if you are wealthy and are earning more than a million dollars annually then the audit rates will go up for you but for the majority of Americans you have less than a one percent chance of being audited some sources report that your chances of getting audited increase slightly if you file separately there are a number of reasons why this could be true for example if you file separately the IRS might think that one spouse believes that the other is hiding something or is lying or that there's a reason why the couple did not file jointly however even though filing separately might increase the odds of being audited slightly it usually does not appear on the list of the top audit triggers for the IRS so here are some of the top five things that usually do appear on the list of the biggest IRS audit triggers you should be aware of all of these things just to protect yourself number one making more than a million dollars per year roughly fifty percent of the audits that occur in the US per year are done on people making over a million per year just so you know those people represent only a fraction of the entire population number two running a cash heavy business example of cash heavy businesses include restaurants beauty salons stores and car washes the IRS is fully aware that many people who own these types of businesses forget to declare some of their cash earnings for this reason people who own these businesses have a much higher chance of being audited now here's number three following a Schedule C yes schedule C's are commonly used by sole Proprietors to report their income and single member LLC owners now running their own businesses can give people more opportunity to cheat on their taxes which is why the IRS is commonly targeting people who file schedule C's on their tax returns what about number four making math errors the IRS screens all income tax returns with several programs that check for errors and omissions and discrepancies one of these programs is the math error program so if you have math errors on your tax returns and you are significantly more likely to be audited and of course number five taking the home off seduction that one I really don't view as much of a trigger anymore but this used to be a very high audit trigger because a lot of taxpayers who didn't qualify to take the home office were taking the home office deduction now the bottom line is we're filing jointly versus separately is that for most married couples it's going to be better to file jointly filing jointly will save you time money stress and a wide variety of other tax benefits credits and deductions that you're going to want some spouses still prefer to keep their finances separate and if you fall into this category that's fine too some people think that once you choose a filing status during your first year of marriage that you're stuck in with that valuing status for as long as you're married this is not true guys you could switch from filing from one filing status to the next at any point during your marriage also keep in mind that this is an important decision and you shouldn't rush it after all I mean if you decide to file jointly you can potentially be held liable for any tax debts or wrongdoing by your other spouse on the tax return so if you suspect that your spouse is lying about some of his or her income or that he or she is cheating or plans to cheat on their taxes I'm just being transparent it might make more sense to file separately if you develop more trust with your partner down the road you can always switch to married filing jointly now as promised here is the Golden Nugget for this video a lot of people end up changing their name when they get married however some people do not report this name change to the Social Security Administration before they file their taxes in their first year of marriage if you're changing your name due to marriage then you need to report it to the Social Security Administration as soon as possible the reason why you need to do this quickly is because if the name on your tax return does not match the name that is on file with the Social Security Administration then it's going to delay your tax refund and this cause other issues that so many clients call my office thinking that we're holding up their refund when there was a name change that occurred and they didn't report that to the Social Security Department the last thing that you want when you are starting your new marriage is to have to deal with stressful tax problems so let's take care of this before it becomes a problem guys and that's my recommendation to you that's it for today's video I hope that you found it entertaining and that you were able to get all the information you needed about joint filing versus separate filing if you have any questions about this tax topic feel free to get in touch with my team by clicking on the link in the description below you can also find a link to my course tax Alchemy in the description in this course I teach incredible tax savings that are used by the wealthy class illegally reduce their tax bills so feel free to sign up if that is something that you would like to learn I'm here to give you the tools as always don't forget to like comment subscribe you know what it is I look forward to seeing you guys on the next video over and out [Music] foreign

Channel: Karlton Dennis

Views: 80,547

Keywords: taxes, tax help, tax expert, how to file taxes, karlton dennis, karla dennis, karla dennis inc, taxes made simple, taxes 101, cpa, certified public accountant, accountant, accounting, tax deduction, tax strategies, tax planning, how to pay less taxes with an llc, tax savings tips, tax savings 2022, how to save on taxes, tax tips, tax tips 2022, llc, rental property, youtubers, how to avoid taxes, cars, s-corp

Id: bRpUVoO9afE

Length: 16min 20sec (980 seconds)

Published: Mon Feb 06 2023