Tax Filing Question

[haha]

How do those of you who are married but attempt to keep separate finances handle federal income tax?

Especially if one's spouse is working, and much of the tax is due to his/her wages or business income?

Does the retired member suck it up and pay half, or do you figure other ways to divvy up the bill?

I have tended to avoid shoving sticks into hornet's nests so I just split the bill. But I wonder if there might be other ways that some of you have worked out.

Mikey

 

[Janie]

Mikey,

We both work and keep finances mostly separate, and hubby earns about 3 times what I make. If I filed alone, I would owe proportionally less tax than he would owe if he filed alone. So what I usually do is figure each of our tax bills for filing separately (even though we file jointly), and we divide the tax owed (or refund) accordingly.

It keeps both of us happy since we like having a little "control" over our own financial destinies despite being together for 7 years! He is happy with this arrangement because I show him how much more tax he would owe if he were still single, and what a great tax break I am for him!!

Janie

 

[John Galt]

Hi Janie. We file separately. I solved the problem by not figuring what it would be like filing jointly. I pay no
federal income tax at all, thus no "splitting" of the bill
is needed. I do figure all the taxes though, so I do contribute something

JG

 

[haha]

Thanks Janie and John. I was thinking of looking at the proportion method. I can also try MFS to see what total tax bill it would produce.

Mikey

 

[Martha]

I have tended to avoid shoving sticks into hornet's nests so I just split the bill.

I think your past practice might be wise.
:-/

 

[haha]

I think your past practice might be wise.
:-/

Thanks Martha. Yet another case where good enough is a lot better than some alternatives.  

As always your advice is good and given with a true desire to help. I appreciate it.

By the way, I finally managed to clean my floors, or at least much of the floor. Fine steel wool, sometimes dry, sometimes slightly moistened with mineral spirit. I think the gunk was mostly from airborne grease from my skillet work in the kitchen, mixed with old floor wax.

I think I should look into installing a range hood, and stay away from floor wax.

Mikey

 

[gindie]

Be careful before choosing to file separately while still working. Allowable contributions to IRA's (especially Roth's) are severly reduced, if not eliminated, by filing separately.

 

[wzd]

Be careful before choosing to file separately while still working.

Also the education credits - hope and lifetime - are out the window if status is married filing seperately. Important for any with children still in college.

 

[wzd]

I have tended to avoid shoving sticks into hornet's nests so I just split the bill. But I wonder if there might be other ways that some of you have worked out.

Mikey

The "bill" should be minimal if both parties have correct withholding. If the bill gets big, you are liable for penalties, so it would be wise for both of you to adjust exemptions down if needed, and split the remaining bill or refund. Of course with correct exemptions listed, the higher earner pays more via withholding.

Legal Disclaimer: The above is in no way to be construed as disagreement with Martha's sage advice

 

[Burch64]

I total our income, do the math and see what % of the income is mine and what % is hers.

Figure the total taxes and if I have 55% of the income I pay 55% of the taxes.

I use an Excel spreadsheet to run the numbers.

Jim

 

[retire@40]

I total our income, do the math and see what % of the income is mine and what % is hers.

Figure the total taxes and if I have 55% of the income I pay 55% of the taxes.

I use an Excel spreadsheet to run the numbers.

That's fine and dandy, but what if she has 99% of the deductions and you have 1% of the deductions? Your income formula may work well for you, but not for others.

 

[Burch64]

That's fine and dandy, but what if she has 99% of the deductions and you have 1% of the deductions?  Your income formula may work well for you, but not for others.

Well we have always been pretty even on the deductions, but you could just use taxable income instead of total income.

Give each person credit for his\her deductions and see what % of taxable income each person has and pay tax accordingly.

 

[retire@40]

Well we have always been pretty even on the deductions, but you could just use taxable income instead of total income.

Give each person credit for his\her deductions and see what % of taxable income each person has and pay tax accordingly.

At this point you might as well do 2 mock single tax returns or run married-separate returns if you use turbo-tax instead of doing all these calculations in Excel.

 

[charlie]

Lyn and I never worry about such things. What's
mine is hers anyway.

Cheers,

Charlie

 

[retire@40]

Lyn and I never worry about such things.  What's
mine is hers anyway.    

That's my attitude too. If it were not for my wife, I may be living in a gutter anyway.

 

[JOhn Galt]

Hi Charlie. "What's mine is hers" is a nice arrangement.
People who have been through a divorce or 2
unfortunately take a more measured approach. It's
not as romantic, I'll grant you that.

JG