Can you elaborate what the tax difference is between the two options are for a couple where one earns$150k while the other earns $60k?
FTR, I understand the “math” with the marginal tax bracket type thing; but does it really work out that the filing separately produces a materially lower tax burden? Does this difference between the two still more beneficial after taking filing/accounting fees into account?
Also, I assume your comment about filing separately as the “safer option” refers to having that lower tax burden.
Ok, so there’s two ideas here and I want to be careful to not conflate them.
There’s what you say on your W4 to try & get a reasonable amount withheld and then there’s how you file your actual return. There is no need for them to match. The need is for the withholdings to approximately match the tax.
Certainly if you do always file separately then choosing Married Filing Separately on the W4 is reasonable.
But if you file jointly, or are at least willing to file jointly if it works out better, then the W4 becomes more complicated.
There’s a gazillion factors at play, but in general the more different the incomes are, the more beneficial it is to file jointly. And the more the tax return will resemble an MFJ return with only the higher earning spouse’s income.
In many cases if your incomes are close and not too high you come out exactly the same joint or separate and you can base your choice on other factors such as state oddities or student loan repayment plans.
In your case it is most likely beneficial to file jointly. If you have no other significant income besides the two jobs then you might come closest to a $0 bill / $0 refund by having the high earner say Married Filing Separately and the low earner say Married Filing Jointly on the W4s.
That comment was solely about the W4 option that is least likely to result in you getting slapped with penalties & interest for failure to pay estimated taxes.
It was NOT a comment about which filing status you should use when preparing your return!!!
Sounds like the most ideal political selling point for being re-elected.
AHHHH; that makes far more sense and what I wasn’t thinking about, but in rereading the sequence of posts, I should’ve realized this was the case; but . . . having just finished filing my taxes for 2022, I wasn’t thinking “what do I put on my W-4?”
Early on in my career, I would often use the “married but withhold at the single rate” option for the W-4 to prevent too little being withheld given my wife often had very little taxes withheld from her pay.
But after the “tax reforms” went into effect, I did do the W-4 worksheet and made a few changes to my withholdings elections.
Yeah, when I read your question I realized that, particularly given the time of year, I really ought to have been clearer in my statement. Hopefully my revised post is clearer.
Hindsight being 20/20 and all that . . . but I think the context was nearly good enough to place the context about W-4; but agree that the edit you made will help a lot in understanding your overall comments.
Which I’ll likely pass on to my kids who got married late last year; so their 2022 withholdings are likely to not be impacted, but not sure how they’re doing their W-4 elections. However, my son-in-law’s step-father is an accountant specializing in health companies; so they might get better advice in this space than my gleanings from a board of strangers.
I’m not sure that an erroneous calculation that saves self-employed people 0.08% on their taxes is a key plank in anyone’s re-election platform.
Also it could theoretically end up hurting the taxpayer in the long run. I assume their Social Security benefit is now calculated using $99,415 rather than $100,000.
So they save $80 now but perhaps have their benefit calculated on $585 too little. That will reduce their monthly Social Security benefit.
I saw a tax return a few days ago, prepared by a CPA, with a $5 home office deduction. On significant Schedule C income. (I don’t recall how much but way more than $5.)
Took me a few minutes to realize what had happened, but I think it went something like this.
Taxpayer starts a business in 2020 or earlier.
CPA attaches a Home Office to the business, as you can do. You are allowed to allocate a share of your mortgage, taxes, utilities, insurance and a few other things based on the proportion of the house that is a home office. That can be calculated by either square footage or by counting the rooms in the house. It is usually beneficial to count rooms: home offices tend to be smaller than other rooms, plus you’re essentially getting a share of the bathrooms & hallways if you go with the room count option. So the CPA goes by room count. 8 room house, 1 room is a home office, 1/8th of the expenses are deductible. Input size of house = 8, size of home office = 1
In 2021 taxpayer does not know what they spent on mortgage interest, insurance, property taxes & utilities. No problem… you’re also allowed to take the “Simplified Method” which is simply $5 per square foot.
Size of home office = 1… 1 * 5 = $5 home office expense!
Not really worth it to amend, but what a dumb mistake.
