Hi all,
First time my wife and I are filing married. As a test, we both set things up as MFS just to compare and contrast refunds/what might be owed.
As I have some freelance gig-work that requires self-reported income, I naturally owe much more than my wife does (who is getting ~$1700 in refunds by contrast).
However, since my wife has a Roth IRA as her primary retirement option, it looks like she would be subject to the 6% over-contribution penalty since you need to make under $10k to contribute to a Roth when MFS (she makes far more than that).
Alternatively, when MFJ, the amount "we" collectively owe is obviously a little less due to filing benefits (with my wife forgoing her refund), but she would not be penalized for her Roth contributions.
Even though my wife is technically "missing out" on the refund she would normally get by MFS, feels like it would be shortsighted to prioritize a $1700 refund over getting a 6% penalty tax on retirement holdings?
First time filing married: MFS yielding hiring return than MFJ
byu/GomaN1717 intax
Posted by GomaN1717
4 Comments
It sounds like you are saying MFJ is better in your post. Your title says the opposite.
If MFJ has the overall lower tax liability, file joint. Don’t look at refunds, look at tax liability.
Ok your wife might get a bigger refund MFS (ignoring the Roth part), but what about you?
The accurate comparison is the two MFS liabilities vs the combined MFJ liability.
The MFS filing status is designed to be punitive and therefore will almost never yield a lower total tax liability. If you really want to do it, have her return her either undo her Roth contribution or recharacterize it as a nondeductible traditional contribution.
Not sure what the issue is, married filing jointly has lower tax liability overall and lets her do the Roth.
If you guys still do separate finances, you pay her the 1700. You still save money on your part if I understood right (maybe split the savings with her as well).