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By: Brian Barto, EA
Do you have back tax returns that you need to file? If you suspect you will owe a significant amount of tax, there are some important things to consider before filing a joint return (Married Filing Jointly or MFJ). If you are married and file a joint tax return, the resulting tax liability will be a joint liability – meaning both spouses are responsible for the debt.
In cases where only one spouse is responsible for the debt, it may make more sense to file separately (Married Filing Separate or MFS). When you file MFS, only one spouse is responsible for the debt. This is very important if you plan to work out a deal with the IRS such as an Installment Agreement or Offer-In-Compromise. The total amount of tax you owe may be the same, or possibly even a little more, but the calculations of reasonable collection potential are calculated separately vs. jointly. Reasonable collection potential is what the IRS thinks you should be able to pay. Click here for a further discussion of Reasonable Collection Potential. For example, you can exclude any assets owned by your spouse and split up the household expenses in the calculations of “ability to pay.”
The difference in the amount the IRS will expect you to pay could be significant. But, once you file married filing jointly, you cannot amend (change your mind later) and switch to married filing separately. You must think through the collection end game before knee-jerk filing. An experienced tax resolution professional can help you determine the option that is best for your unique circumstances.
At Tax Debt Resolution Services of Winchester VA, we help you eliminate your IRS issues and the stress the IRS has created in your life and help you get back to doing what you do best! We help our clients in Winchester, VA to resolve their tax debts! If you need assistance please feel free to contact me at 540-662-4432 or brianbarto@libertytax.com.