Sharing tax return with wife?
My wife and I have been separated for nearly 2 years, but are still legally married and filed our tax return jointly.
All my income was on a W2, and totaled 0k. I had taxes withheld as normal, so I was entitled to a refund.
All my wife's income was on a 1099, and totaled k. She did not pay any taxes. She did however write off enough expenses to offset her income, as she purchased some expensive camera equipment for her business last year.
The state and federal refunds combined were 00.
The question is: How much of this is my wife legally entitled to?
She feels she deserves a portion of the refund because she had expenses which may have increased the refund amount, and I do not feel she's entitled to any of it because she paid no taxes.
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I am not a tax expert nor a law expert. However, if you file as "married, filing jointly" then you share tax liability. From IRS Pub 504:
Both you and your spouse may be held responsible, jointly and
individually, for the tax and any interest or penalty due on your
joint return. This means that one spouse may be held liable for all
the tax due even if all the income was earned by the other spouse.
Logically, I take this to mean you are also "jointly and individually" entitled to any refund that may result from over payment of taxes. For couples that are married and have lives together, this doesn't matter. If you file jointly you each pay into one "pot" of money, pay taxes from the one "pot" and get refunds back into the same "pot".
If you live in a community property state, she is entitled to 50% of the refund amount.
At the end of the day, consult a tax expert or the IRS to confirm.
The obvious option to look at is to file married filing separately (MFS) instead of Married filing Jointly (MFJ). The obvious benefit is that many of the financial issues are disconnected on your tax forms. There still does need to be some communication to make sure that shared items such as the house and children are handled appropriately.
In some cases MFS may increase the overall taxes paid by the two people because some deductions and credits are eliminated or modified by the choice of MFS. One advantage is that the tax decisions of one spouse don't directly impact the tax situation of the other spouse.
Of course making this decision now could be viewed as unfair by the other spouse if it is sprung on them long after they have the ability to make withholding adjustments or make quarterly payments.
There can also me state tax implications of this choice, so that should also be looked at before the decision is made.
I think there is a pretty simple argument in your favor. You could have adjusted your withholding amount so that you owed some money instead of getting a refund. Had you done that, would she be offering to split the amount you owe with her? (Obviously, no.) In fact if you think this is going to come up again next year I would consider reducing your withholding now so that you can avoid this same conversation next year.
That being said, how is she living with [CO] income after expenses? If you are still supporting her, and if the amount you provide her each month is based on your income, then the reality is that you actually make almost 0 more per month than your current take home amount. For example, if you do adjust your withholding so that you owed taxes next year, your take home would suddenly increase by at least 0/month (even more right now since it's mid-year). Knowing that might change the support amount you offer her, if applicable.
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