Married Filing Jointly
A married person has two choices when filing his or her income tax return: married filing jointly and married filing separately. Let us try and understand what it means and its implications.
When you file your taxes, you have the option of married filing jointly and separately. When filing jointly, the couple is taxed based on the tax bracket which they fall in for their combined income. You can file your tax return under the option of ‘married filing jointly’ only in two cases: either you have been married for a while, you were married during the year, or if you have been married for a while or during the year but your spouse is deceased. Married couples that have been divorced at any point of time during the year cannot attain joint filing. So basically, if you are married, or your spouse is deceased, you have the option of joint filing.
Pros of Joint Filing
Two words that everyone loves to hear: tax savings. The way the tax brackets are designed, if you and your spouse choose to file your taxes jointly, you may end up saving quite a lot of money. If fact, the more the disparity between your individual incomes, the higher will be the savings. Secondly, both of you will be able to share the tax credits and tax deductions, which you would otherwise forfeit, should you sign separately. Several tax deductions are available to married filing jointly couples if they choose to file jointly.
Cons of Joint Filing
The first disadvantage is the fact that since you and your spouse together sign the tax filings, you both are responsible for any tax-related problems that your spouse may incur. As such, if your spouse falls into any tax-related problems, you too may be held liable to pay any money that is owed by your spouse. Secondly, the other disadvantage is you will have to let your spouse in on the details of your income. If you would rather have your spouse out of the matters regarding your income, you ought to avoid this option.
Clearly the calling card on the debate on married account filing is the tax liability that falls on one spouse when the other is involved in tax evasion. If your partner is a risk taker with matters related to taxation, perhaps it is a better idea to file your taxes separately. Otherwise, there is no reason for not taking the tax savings arising out of the option of filing jointly.