filing status

Is it Better if I File Separately from My Spouse and Other Common Tax Questions Answered

We receive a lot of questions pertaining to tax and financial matters. Here is a sample of commonly asked questions:

Q: Is it better if I file separately from my spouse?

A: Usually the answer is no, and the only way to know for certain is to perform an analysis when preparing the tax return to split income and deductions between spouses to see if there is a benefit. However, you may want to file separately from your spouse if there are tax or legal issues.

Q: Is social security taxable?

A: That depends. If you are only receiving social security and do not have other income, then the answer will probably be no. A quick way of checking is to add one half of your social security plus your other income to see if it is greater than your base amount, which varies based upon your filing status (currently it is $32,000 for married filers).

Q: Does my son or daughter need to file a tax return?

A: Generally, if your dependent child has more than $6,300 of earned income or $1,050 of unearned income, such as from dividends, then they need to file a return.

Q: If I file an extension, will it extend the amount of time that I have to pay my taxes.

A: No, the extension only grants you additional time to file your return and all payments must be made by the original due date, otherwise additional interest and penalties may be incurred.

Q: Can the IRS levy my IRA?

A: Yes, the IRS has the power to levy almost all of your income and assets, with few exceptions, such as workers’ compensation.

Q: Are legal fees for a divorce deductible?

A: Many of the legal fees for a divorce are not tax-deductible, except for the portion relating to taxable income.

Common Questions & Answers

Tax season is just about upon us, and here are some common questions our clients have:

Q: Does an extension also extend the amount of time I have to pay my taxes?

A: An extension only extends the amount of time to file your return, but if you owe taxes, then you will incur penalties and interest for late payment of taxes. In NJ, if you do not pay 80% of your tax liability on April 15th, (100% for NY) then your extension will be disallowed.

Q: Is it better to file a separate tax return from my spouse?

A: Also known as “Married Filing Separately,” usually results in a higher amount of taxes being paid, but can be advantageous in certain situations. We always do an analysis to see if this is better for our married clients.

Q: Do I have to make estimated tax payments, and if so, why?

A: Usually self-employed taxpayers, retirees, and anyone who has income from sources that do not have taxes withheld are required to make quarterly estimated tax payments. If you need to make estimated payments and do not, you may be subject to underpayment penalties.

Q: Can I claim my elderly mother or father as a dependent?

A: Possibly. Certain rules have to be met, such as the amount of support provided and their gross income (the definition of gross income would take up half of this article). Interestingly, your parents do not have to live with you.