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Mid-year marriage and taxes

Anchorage, AK |

My husband and I married mid-year 2011. His taxable income is 4 times what mine is. Only a last half year of our combined incomes is joint income and the first half went to each of us individually. How should we split the very large income tax bill? Should we use the effective tax rate or the marginal tax rate to determine the tax liability on the latter half of the year, when we were married? It makes a huge difference. Thanks.

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Attorney answers 3

Posted

Sorry, but this is a marital issue not a tax issue. The IRS considers the entire amount to be a joint debt. I hope this helps.

Drew
www.wymanlegal.com

Bryant Keith Martin

Bryant Keith Martin

Posted

This is nonresponsive to the Q. The poster is not concerned about the filing and liability to the IRS. That is a given. Her concern is how much of that amount should she pay and how much should her husband pay, given the disparity in their income and the correlated responsibility for their respective share of the taxes owed?

Andrew J Wyman

Andrew J Wyman

Posted

Bryant, you and I will have to disagree. My comment is responsive to the question, as the IRS views them as one taxpayer unless and until they get divorced, which does not seem to be the case here since they are newly married. Again, while they are married, they can make their own decisions on who pays what portion of this tax liability.

Andrew J Wyman

Andrew J Wyman

Posted

Another choice they can make is to claim "married filing separate," which will divide the tax liability that way, keeping their accounts with the IRS separate, but doing so will likely result in a greater overall tax between the two. I advise they do what they think is fair, keeping things amicable as possible. I wish them the best.

Andrew J Wyman

Andrew J Wyman

Posted

There is nothing in the question that indicates that they knows what the IRS legally requires. This is a board for legal questions. You did not provide a legal answer. Please do not comment on my questions again.

Posted

The marginal tax rate has nothing to do with the total taxes paid. That’s only the rate on the last dollar earned. I would suggest that you allocate the taxes owed pro rata to the adjusted gross income of each. For example, if he earned $200,000 and you earned $50,000, then he should pay 4/5ths of the taxes and you would pay 1/5. Adjustments may be in order if one of you has proportionately more deductions. Also one could argue for allocating based on taxable income, but that includes all of the deductions, which complicates matters.
Or you could calculate the first half as single filing and the second half as married filing jointly to get a pro forma figure for the total taxes that each of you would have paid under that scenario. Then apply that ratio of taxes to the actual amount of taxes that you owe this year.

My guess is that the allocated amount would be less than either of you would pay if you filed as single persons (which you can’t, of course.) You should ask the accountant to run the numbers on single filing. It might make you both feel better about the allocated amounts (unless the “marriage penalty” bites).

DISCLAIMER—This answer is for informational purposes only under the AVVO system, its terms and conditions. It is not intended as specific legal advice regarding your question. The answer could be different if all the facts were known. This answer does not establish an attorney client relationship. I am admitted only in California. (Bryant) Keith Martin sbbizlaw.com

Andrew J Wyman

Andrew J Wyman

Posted

Bryant, these are great suggestions on how they can divide the taxes, but there is no requirement that they do so. The IRS views them as one taxpayer when they file a joint tax return, and a married couple can divide such however they seem fit. It is their decision.

Bryant Keith Martin

Bryant Keith Martin

Posted

You really don't understand the Q, do you? They asked how to divide the tax liability, they want to divide the taxes. That's the whole issue: How do they make the decision as to division of the liability?

Andrew J Wyman

Andrew J Wyman

Posted

You do not understand the reason people ask questions on this board: to get answers to legal questions. For IRS questions, they are asking what the IRS requires, which is what I provided. You did not. You provided suggestions that the asker has no legal requirement to follow, and they should only follow such if they want to. Of course, if they want to ignore your suggestions, they can do that too. They have no legal requirement to follow such.

Bryant Keith Martin

Bryant Keith Martin

Posted

They are not asking what IRS requires. They know that. They are asking for guidance on how they should share the liability. I give up. Plz don't respond.

Andrew J Wyman

Andrew J Wyman

Posted

You don't understand why people come to this board: to get legal answers to their questions, which is what I have done. You have not. You have merely provided suggestions that the asker has no legal obligation to follow. If they want, they can ignore your suggestions without any repercussions whatsoever.

Posted

First, your status at the end of the year determines your filing status for purposes of the IRS income tax. So if you were married at the end of the year, your filing options are to file as maried filing jointly, or married filing separately.

Now in making the decision on which calculation to use in preparing your taxes, you should choose the option that creates the lowest tax obligation or results in the maximum refund. In most instances, the effective tax rate would result in a lower tax obligation. However, the determination of which method to use requires more information than you provided. You should consult a CPA to determine which method is most beneficial to your situation.

The information provided is for informational purposes only and no attorney-client relationship has been formed. Attorney Kerriann Sheppard is the Managing Attorney of the Law Offices of Sheppard & Associates, a Taxation Law Firm specializing in helping taxpayers nationwide resolve their IRS back taxes and restoring peace of mind. Call (800)935-9609 for a Free Initial Consultation Today!

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