Message Font: Serif | Sans-Serif
No. of Recommendations: 4
Since they're not yet divorced (and likely won't be before Oct.) it only affects whether that 8K will have gone to the IRS or be part of the assets to be divided in the divorce.

Nope. That's separate property thinking.

In separate property states, his income is his and her income is hers. So if he is the sole earner, all of the income goes on his return and none on hers. So her standard deduction and personal exemption are wasted. In addition, the tax brackets are roughly 1/2 of those for married filing joint.

In a community property state, MFS returns typically split all of the income and deductions in half. (The exception would be income from any property that remains separate property. Notably, that does NOT include wages).

So there, her standard deduction and personal exemption are not wasted. And with 1/2 of the income on two returns taxed with brackets that are 1/2 of the size of joint filing brackets, you end up with taxes that are roughly the same total on the two separate returns as they would be on a single joint return.

And directly to your comment - with 1/2 of the tax and 1/2 of the withholding on each return, whatever balance is due would become 1/2 her problem. He could meet his tax obligation by filing a return and paying whatever he separately owed. The balance of the tax obligation would be hers and her problem.

With no income and no assets, that could become a significant problem for her. The IRS will generally not look to his income and assets to pay her taxes when they file separate returns.

Print the post  


In accordance with IRS Circular 230, you cannot use the contents of any post on The Motley Fool's message boards to avoid tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions.
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.