Married Filing Separately

Posted on October 8, 2008 
Filed Under Federal Income Tax, Filing Status

There are two major reasons for a married individual to file a separate return. One reason is to avoid joint liability by seeking innocent spouse relief. The other reason is to increase allowable itemized deductions for several categories of expenditures by lowering the floor or threshold amount that these expenditures must exceed in order to be deductible.

(Note: To enhance the readability of this article, the wife is depicted as the innocent spouse; of course, one can, with the same result, substitute husband for wife.)

Before I discuss the reasons for filing separately, the reader should be aware that if one spouse elects to file separately, then the other spouse must also file a separate return. In addition, if the spouse who files separately chooses to itemize deductions rather than take the standard deduction, the other spouse must also itemize deductions.

Innocent Spouse Relief
Each spouse who signs a joint return is individually responsible for any taxes due as well as the accuracy of the return. But a wife who files separately is not responsible for either the husband’s tax liability or the accuracy of his return.

However, the issue of joint liability for a married couple is more complicated. After filing a joint return, a wife may seek relief from the negative consequences of the husband’s actions, namely, relief from a deficiency assessment the proximate cause of which is the husband’s decision to file an erroneous return. To qualify for relief, the wife must file Form 8857 (Request for Innocent Spouse Relief) with the Internal Revenue Service and satisfy the following conditions:

  1. The couple’s tax liability is understated because the joint return is corrupted by omissions (income earned but not reported) and erroneous items (unjustified deductions and credits).
  2. When she signed the return she didn’t know, or have reason to believe, there was an understatement of tax.
  3. All the facts and circumstances show it would not be fair to hold her responsible for the understatement of tax.

An innocent spouse may also seek relief under separation of liability. A wife seeking separation of liability relief is required to pass the following tests:

  1. The wife filed a joint return.
  2. The wife is no longer legally married to, or separated from, her spouse. Alternatively, the wife will pass this subtest if she has been living apart from her spouse for at least twelve months when Form 8857 is filed with the IRS.

Notice that the burden of proof is on the spouse seeking separation of liability relief.

In addition, a spouse who fails to qualify for either innocent spouse relief or separation of liability relief may petition for equitable relief. The heuristic for equitable relief is a facts and circumstances test, and the burden of proof is on the spouse seeking relief.

Finally, injured spouse relief is available to a wife whose husband has not paid child support, spousal support, or student loans and other federal debts and a portion of the couple’s overpayment of tax on a joint return is appropriated by authorities to settle in part, or in full, these past-due obligations. In this set of circumstances, the wife can claim injured spouse relief and recoup her portion of the overpayment if she meets all of the following tests:

  1. She is not required to pay her husband’s delinquent obligations or past-due loans.
  2. She earned and reported income on the joint return.
  3. She made and reported income tax payments on the joint return.

Lowering the Floor for Itemized Deductions
A key intermediate figure on a joint return, adjusted gross income (AGI), combines the incomes of two individuals; this feature of a joint return makes it difficult for a couple to take advantage of available deductions by itemizing. Specifically, many are subject to a 2%, 7.5%, or 10% of AGI floor (viz., the threshold amount itemized deductions must exceed in order to produce a tax benefit); the higher the AGI, the more difficult it is for a joint filer to meet this threshold. But if husband and wife file separate returns, especially when, say, large medical expenses are attributable to and paid by the husband, then the applicable floor of AGI will be lower and the corresponding odds higher that the husband, as a separate filer, will realize a tax benefit by itemizing.

The flip side is that several credits and deductions are available only to joint filers. For example, a married individual who files separately is not eligible to claim the child and dependent care credit, the earned income credit, education credits (e.g., Hope and lifetime learning credits), or the credit for the elderly or permanently disabled. Moreover, a separate filer is barred from claiming an individual retirement arrangement (IRA) deduction for a nonworking spouse or converting from a traditional IRA to a Roth IRA, deducting student loan interest, or writing off up to $25,000 in losses from real estate rental activities. For more information on the advantages and disadvantages of filing separately, click on and .

Additional relevant articles on married-filing-separately status are listed below:

Many happy returns, Roger

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