The standard US tax forms (1040, 1040A or 1040EZ) routinely ask filers to declare their marital status. Single taxpayers can only report their own income and deductions, but married taxpayers have two different options. They may file separately, as if they were both single entities, or combine their incomes and file one form. The latter option is known as a joint tax return.
A joint tax return is generally preferred over filing separately because of the different tax liabilities. Married couples with at least two regular sources of income often benefit from the higher standard deduction of a joint tax return. If one spouse only works part-time, his or her total income may fall completely under this deduction, reducing the other spouse’s tax liability as well. Quite often, the official tax liability on a married couple’s taxable income is less than for singles or married couples filing separately.
Filing a joint tax return is not without some risks, however. Tax returns are legally binding documents which obligate both filers to be completely honest. If one spouse fails to report a source of income or claims too many deductions, both are held responsible for the errors. If the tax return shows a debt to the government, both filers can be held accountable for the payments. This can prove problematic if one spouse abandons the marriage or files for divorce before the tax obligation is paid.
Some married couples would not benefit from filing a joint tax return because of extenuating financial circumstances. If a spouse can still be considered a dependent of another taxpayer, he or she must file separately in order to qualify. This could happen with younger married couples temporarily separated by job obligations or educational pursuits. If one spouse stays with a parent for more than a few months, the parent may be able to claim a dependency. Others may decide against a joint return because of significant personal debt accrued before the marriage; filing separately in this case reduces the financial risk to the other spouse.
Because both spouses are equally responsible for the veracity and obligations of a joint tax return, serious legal problems may arise. Sometimes a domineering spouse will refuse to reveal sources of income or details of his or her occupation. The innocent spouse may be coerced into signing off on a fraudulent joint tax return. If the guilty spouse is found guilty of criminal activity, the innocent spouse may still be held liable for the tax debt. For this reason, trained tax attorneys can seek a legal judgment called innocent spouse relief. The difficulty lies in proving that the illegal activity was truly hidden and the innocent spouse didn’t benefit from the proceeds. This is truly a difficult claim to prove, so it pays to learn as much as you can about your spouse’s occupation and income before filing a joint tax return.