Rules for Filing Taxes Jointly
When you find the person you want to spend the rest of your life with, probably the last thing on your mind is the tax implication of marriage. However, once the wedding is over, it's time to take advantage of the tax savings the IRS offers when you begin filing joint returns with your spouse. Although a legal marriage is essential for filing a joint return, there are other issues of which you must be aware.
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Joint Return Requirements
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Eligibility to file a joint return with your spouse simply requires that you be legally married by the last day of the tax year. However, filing a joint return is not automatic after marriage; the IRS requires both spouses to consent and sign the joint return. In the event your spouse chooses to file separately, you have no choice but to file a separate return as well. As of 2011, the joint filing requirements only apply to marriages between a man and a woman. Gay couples who enter into a civil union or marriage pursuant to state law cannot file joint returns.
Joint Tax Liability
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Before you sign the bottom of your joint 1040 form, you should be aware that you and your spouse will share liability for all tax, interest and penalties. This means that you can be personally liable for 100 percent of your joint tax bill and so can your spouse. For example, suppose your spouse takes responsibility for preparing and filing your joint returns each year. If he omits taxable income from the return and the IRS is aware of it, you are both liable for the interest and penalties that accrue in addition to the tax underpayment. And if the IRS is unable to recover the tax underpayment from your spouse, it can collect the entire balance from you. However, in the event the omission is the result of your spouse's fraud rather than your own neglect in checking the return for accuracy before signing it, the IRS does allow you to request innocent spouse relief to reduce or eliminate your responsibility.
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Favorable Tax Brackets
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There is an upside to filing a joint tax return that can outweigh the drawbacks of joint liability. When you file jointly, the IRS combines your income and applies the most favorable tax brackets to your joint income. The tax brackets for joint filers feature the widest ranges of income that are subject to the lower tax rates. However, as your joint income increases, the effect of the favorable tax brackets begin to diminish, and at higher income levels, filing a joint return may even be a disadvantage.
Tax Bracket Example
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If in 2011, for example, you report joint taxable income of $60,000 of which $20,000 relates to the earnings of your spouse, the initial $17,000 is subject to a 10 percent tax rate and the remaining $43,000 is subject to a 15 percent rate for a total tax bill of $8,150. In contrast, if you each file separate returns and calculate your respective taxes using the married filing separately tax brackets, the sum of your separate tax bills equals $8,700.
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