By the way, those are often people who are getting divorced, but it could be married people often in a second or third marriage that don't want responsibility for each other's finances. And for some people, that's so important they don't care if it costs them money or not. So married filing separately severs that liability. So if your spouse is cheating or doing something illegal, you could be liable for taxes on that. Now, if you file jointly with your spouse, each person is completely liable for all that information. Laura Sanders: Well, the most important reason may be one that doesn't necessarily save you on your tax bill, and it is that, and it's an old longstanding reason, married filing separately, it severs joint liability for what's on the tax return. What is it about people's finances that would make checking the married filing separately button makes sense? So let's talk about some of the pros and cons of doing this. So you need to always pay attention to state tax implications as well as Federal. And there's a lot there, especially if you live in community property states and things like that. Laura Sanders: No, it's very available with many states and you need to pay attention to the state tax implications because in some states you cannot file separately for the state unless you filed separately for the Feds. JR Whalen: Okay, I want to go into all the pros and cons of doing this in just a moment, but is this option of filing married but separately, is this available only on the Federal return? And that's because married couples may not choose to file separately, but they want to know what it means.

Laura Sanders: Well, I think a lot of people don't know it's there, but other people see it on the return and they say, 'What is this?' And in fact, some CPAs say this is the most asked question. JR Whalen: When you look at the tax return, you see single and married, they probably don't even know this married filing separately option is there. And they're different reasons for doing it, but you remain married in the eyes of the law. It's a complicated status to choose and it may cost you or it may bring you a benefit. And so how does the tax law view married filing separately taxpayers? Are they like two single people? The answer is no. Laura Sanders: Yes, exactly, that Congress makes the tax law, the IRS enforces it. JR Whalen: Oh, you always school me on this. Laura Sanders: Well, let's stop right there for a minute. JR Whalen: So how does the IRS view people who file separately? Are they considered individual filers? However, it had been going up before that. Now, some of that in 2019 and 20 had to do with people filing separately to qualify for pandemic benefits. So it's not many people, but it's the only one that's been growing and has gone up about 50% in the last decade. That's 2 million couples who file separate tax returns that is used the married filing separately category. There are about 160 million tax returns and there are about 4 million people. Laura Sanders: Well, it's not very common.

JR Whalen: So Laura, how common is this, married couples filing separately? Laura Sanders: Thanks so much for having me. So what are the benefits and what are the pitfalls to watch for when choosing that option? Let's bring in Wall Street Journal tax reporter Laura Saunders for some answers. More and more married couples are checking the married filing separately box on their tax return. JR Whalen: So what are the pros and cons of choosing married filing separately on your tax return? We'll talk to Wall Street Journal tax reporter Laura Saunders after the break. Laura Sanders: Well, it's not very common, married filing separately category. But some married couples are choosing to file their returns separately. I'm JR Whalen for the Wall Street Journal.īefore plugging numbers into their tax return, most people indicate if they're a single filer or a married couple will check married. JR Whalen: Here's your Money Briefing for Tuesday, March 7th. This version may not be in its final form and may be updated. This transcript was prepared by a transcription service.

Married but separate finances