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Author: OtherVoices Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121564  
Subject: Married Filing Separately Date: 4/26/2008 2:05 PM
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I'm an accountant (having passed the CPA exam, currently getting the required experience), and would like some input and verification on something.

A relative of mine is going through a divorce. As of Dec 31, 2007, they were still married.

I prepared an analysis of the difference between them filing jointly or separately. Filing jointly would have saved them roughly $8000. I showed my relative how much he would save, and how much his wife would save, if they filed jointly. He showed his wife and she agreed to file jointly.

On April 14th he learned that she went ahead and filed separately, that she didn't believe my analysis (because this is my relative) and that her accountant was able to "get her a refund".

We filed an extension for my relative, hoping that we could convince her that her accountant was wrong and that she should amend her return and file jointly with my relative. She's refusing. He will, most likely, bite the bullet and file separately.

Since I filed for them in 2006, I know their basic income and expenses. My relative's income was over $250k in 2007 and the wife makes roughly $40k a year. They have no house, so no interest deduction, no real estate taxes, etc. I have a feeling that her accountant is about as good as her lawyer. My guess is that when the wife decided to file separately, she took the standard deduction. I can't confirm this, maybe her accountant found some deductions that we had no idea she was entitled to, but the standard deduction probably would have kicked up a refund, so that's my best guess. However, my relative's state withholdings are rather high and he will be itemizing. This is not to "screw her over" but because it benefits him greatly.

My understanding is that once he files his return, with the itemized deduction, it should kick up a notice to the wife that her return was corrected and it should lower her to $0 for the deduction. At that point she may have already received her refund, so she would have to return that as well, probably amend her return to itemize (if she can figure that out) and then pay what she would've owed in the first place.

Am I correct? She basically cut off her nose to spite her face?

Is there a chance that the IRS will not force her to itemize? In other words, might her return go through and when he files, it never kicks up a notice on her?

I guess my concern is, since the divorce is not final, if she doesn't get a notice, she will try to suggest that he (and I) misled her into trying to file jointly.
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