December 31 is an important day for separated couples. Even if they are not living together, the IRS considers couples to be married for the entire tax year when they have no separate maintenance agreement in place by December 31. When a couple is considered married by the IRS, they can choose to file as "married filing jointly" or "married filing separately". They cannot file as "single" or "head of household".
Filing status affects tax rates and determines which credits can be claimed. Filing jointly can result in a lower tax bill than filing separately but does pose risks since the responsibility for any taxes due is shared. If one spouse fails to pay, the other spouse can be held responsible for the entire bill. Additionally, if one spouses itemizes deductions the other spouse must also itemize, even if it is not to that spouse's advantage.
In community property states such as California, filing separately requires income and deductions to be allocated based on a number of complex factors that must be documented on a special form the IRS has developed.
Preparing your own tax return when you are separated is challenging and can create potential audit issues. The use of an experienced tax professional knowledgeable in this area of tax law is highly recommended. Please contact Turner's Tax Service for assistance.