Married Filing Separate & Tax Software


D

DolphinVJ

I am using Taxact and we are trying to see how married
filing separate will come out as compared to filing jointly.

When I am prompted to enter the W-2 information, do I enter
half of each of our wages, Fed & State Tax Withheld for each
of us? It seems odd. But seems like if I enter full
amounts then that is what the tax will be based on which
will not be correct. It just seems like that the Taxact
should take the whole amounts and based on the filing status
of "Married Filing Separate" divy the wages, taxes withheld,
etc?

We live in California.

Thanks in advance for your input.
 
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B

Bill

(e-mail address removed) (DolphinVJ) posts:
I am using Taxact and we are trying to see
how married filing separate will come out as
compared to filing jointly.
When I am prompted to enter the W-2
information, do I enter half of each of our
wages, Fed & State Tax Withheld for each of
us? It seems odd. But seems like if I enter full
amounts then that is what the tax will be
based on which will not be correct. It just
seems like that the Taxact should take the
whole amounts and based on the filing status
of "Married Filing Separate" divy the wages,
taxes withheld, etc?
I'm not familiar with Taxact -- but TaxWise has an option to
quickly compare the effect of switching between MFJ and MFS.
You simply click on the MFJ/MFS, and a comparison of the
tax cost is shown.

But you seem to have a misunderstanding about how MFS works.
In fact, there is not a "sharing" of the total income
between the two partners; rather, each individual's income
becomes the basis of their taxes due (along with the loss of
certain tax benefits - but that's a different subject).

So, for example, if both husband and wife have similar
incomes, there is occasionally a savings derived from MFS
(less so, after recent tax law changes re "the marriage
penalty"). But usually, if one partner has a much larger
income, MFS would result in a higher tax cost.
We live in California.
That won't have any effect on Federal taxes -- except that
you're probably paying quite a bit in state taxes, which are
a deductible when you itemize, and the MFJ/MFS change
_might_ affect your state tax cost.

Many states (MD, to my certain knowledge in past years) have
offered the option to file MFS for state returns if it
benefits the TP -- regardless of the election taken on the
federal return. Although I paid CA state income taxes for
several years, it was decades ago, and only vaguely recalled
as "expensive." <g>

Bill
 
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S

San Diego CPA

DolphinVJ said:
I am using Taxact and we are trying to see how married
filing separate will come out as compared to filing jointly.

When I am prompted to enter the W-2 information, do I enter
half of each of our wages, Fed & State Tax Withheld for each
of us? It seems odd. But seems like if I enter full
amounts then that is what the tax will be based on which
will not be correct. It just seems like that the Taxact
should take the whole amounts and based on the filing status
of "Married Filing Separate" divy the wages, taxes withheld,
etc?

We live in California.
I don't use Taxact but all tax prep programs I've worked
with allow you to enter income and deductions assigned to
either Taxpayer, Spouse or Joint (T, S, J), default is
usually Joint. If you want to compute and compare results
of MFS & MFJ, then you need to assign each item of income
and deduction to the appropriate spouse using either the T,
S or J codes. You'll enter the full amount of each W-2 for
each spouse as well as assign other items of income and
deductions accordingly.
 
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V

Vic Dura

DolphinVJ said:
I am using Taxact and we are trying to see how married
filing separate will come out as compared to filing jointly.

When I am prompted to enter the W-2 information, do I enter
half of each of our wages, Fed & State Tax Withheld for each
of us? It seems odd. But seems like if I enter full
amounts then that is what the tax will be based on which
will not be correct. It just seems like that the Taxact
should take the whole amounts and based on the filing status
of "Married Filing Separate" divy the wages, taxes withheld,
etc?

We live in California.
Most of the "Documents Received" (1099s, etc) input forms
have check boxes to indicate if the income is for husband,
wife or both. Be sure you have them checked correctly. Then
go to Reports - Compare Joint vs Separate and you will get
the comparison you are looking for.
 
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A

A.G. Kalman

DolphinVJ said:
I am using Taxact and we are trying to see how married
filing separate will come out as compared to filing jointly.

When I am prompted to enter the W-2 information, do I enter
half of each of our wages, Fed & State Tax Withheld for each
of us? It seems odd. But seems like if I enter full
amounts then that is what the tax will be based on which
will not be correct. It just seems like that the Taxact
should take the whole amounts and based on the filing status
of "Married Filing Separate" divy the wages, taxes withheld,
etc?

We live in California.
Not a Taxact user, but the process for splitting income in
CP states usually takes the form of having to enter all the
income received by the couple and identifying whether the
item was in the filers name, spouse's name or joint name.
One then uses a worksheet that the software should make
available when you select the married separate filing
status. The worksheet would have 3 columns: Column 1 has the
all the amounts entered and Columns 2 and 3 are for the
filer and spouse. You have to make the allocation based on
that state's tax law for how community income is split.
 
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D

DolphinVJ

Thanks for all your responses.

And yes, I am still confused because to an average person it
would seem logical when filing separate to just report
his/her income but when I was reading Publication 555 (I
think) that discusses Separate and Community Property, I
understood that in Community Property States, such as
California you divide each of the spouse's income/earnings
50-50 for both Fed and State purposes.

Is this not true?

As far as doing tax with Taxact if you select "Married
Filing Separate" as one of the first questionnaire items,
then the software does not give you an option for filer's
name, spouse's name or joint name, just the filer's name.

Please repond and thanks.
 
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A

A.G. Kalman

DolphinVJ said:
Thanks for all your responses.

And yes, I am still confused because to an average person it
would seem logical when filing separate to just report
his/her income but when I was reading Publication 555 (I
think) that discusses Separate and Community Property, I
understood that in Community Property States, such as
California you divide each of the spouse's income/earnings
50-50 for both Fed and State purposes.

Is this not true?

As far as doing tax with Taxact if you select "Married
Filing Separate" as one of the first questionnaire items,
then the software does not give you an option for filer's
name, spouse's name or joint name, just the filer's name.

Please repond and thanks.
As previously mentioned, I can't speak for Tax Act directly,
but if you enter all the income from all parties and
identify it by filer, spouse or joint and you check married
separate and you enter the spouse's SS#, and you enter a
state residence that is a CP state, TAx ACt, if it is worth
its salt, should provide you a worksheet where you have to
do the allocation based on that state's law relating to
division of community income.
 
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