by Jay Freeborne , Enrolled Agent
January 19, 2010

Another common error that people make is to file Married Filing Separate when that designation does NOT benefit them. Filing separately is particularly foolish if you live in a Community Property State, for reasons which we will explain below.

First, here are the Community Property States:

1. Arizona
2. Washington
3. California
4. Idaho
5. Wisconsin
6. New Mexico
7. Louisiana
8. Texas
9. Nevada

Here's the wikipedia definition of community property state: http://en.wikipedia.org/wiki/Community property.

1. No Separation of Liability. The bottom line is that if you live in one of these states there really is no separation of liability. If you owe taxes, your spouse automatically will owe. Therefore, filing separate offers just the "illusion" of separate liability. But in truth, you both really owe it.

2. Filing Separately is a Higher Tax Rate. Furthermore, filing separate is paying a higher tax rate. So this adds to the stupidity of filing separate in one of these states.

There is one caveat -- and that is if your spouse is supposed to get a tax refund and you will owe In this situation, you might have her/him file an "injured spouse" claim with the return so your non-liable wife/husband can get their refund ("injured spouse" is distinct from "innocent spouse" which is a whole other ball of wax).

What inspired us to write this blog entry was the circumstances of a client in Idaho. She is in the middle of a divorce. Her soon-to-be-ex's attorney thought it would be a smart idea for them to file Separately. WRONG! Why pay a higher tax rate when there is no separation of liability???

For 30 years, WATAX has been solving every kind of tax problem. Call us at 1-888-282-4697 or email us a description of your tax issue and we'll contact you.

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