MFS and itemized

[Kea]

I don't do many MFS returns since I live in a community property state.

My client separated last year and says he can't get his wife's info. (Yep, that's a problem here, but we'll go with what we can.) Not sure if the wife itemized or not, or if my client even knows. But IF the wife took the standard deduction, then can my client itemize?

I know the rules state if his wife itemized then he must also itemize. But just asking about the reverse. (So if I itemize for my client, then his wife would potentially have to amend to itemize, too?)

I will be showing him the tax difference between MFJ & MFS based on last year. I'm hoping that the several thousand $ difference will convince him to get his wife's tax documents.

[Lion EA]

He can always itemize. He can't take standard if spouse itemized. And, at this late date, you might also want to know that if you file MFS, you can amend to MFJ, but not the other way around after 15 April.

[Kea]

Thanks LIon. I did know about the changing between MFS & MFJ. I actually expect this one to go on extension. He'll probably owe -- especially if MFS (based on last year). Their joint return has typically been pretty basic, so I'm not expecting any surprises (but I could be wrong). I just hope that when he sees the big difference he'll find a way to get his wife's info. The extension will give him time to try.

So if he itemizes, then she has to itemize. But what happens if she's already filed and took the standard? Does she have to amend? What if they don't know what the other did? (I'm so glad I don't deal with many of these!)

[HV Ken]

So if he itemizes, then she has to itemize. But what happens if she's already filed and took the standard? Does she have to amend? What if they don't know what the other did?

I have wondered this too. We have a client who got married in 2011. She still files with us (MFS) and he files with his preparer. House is in her name and she itemizes. His preparer takes standard, even though he is not entitled to it. We even gave them printouts of the rules. He's opinion is let them come and get me (you can't make this stuff up). This would seem like something a simple computer program could pick up and generate an automated letter. What are people's experiences with this - have you seen anyone get a letter about this scenario?

[Janitor Bob]

This raises an interesting question......My client is always on the short end of this stick.....her and husband are married, but do not mix paths financially...in her words, he's a "bastard sonofabitch", he always files MFS and itemizes...claiming all of the deduction because everything is in his name (and gets a substantial refund). she has very few itemized deduction and always owes to IRS. Every year, I tell my client she must itemize because he did.....but what if she refused? what if she still claimed the standard deduction? I assume she would receive a friendly notice from IRS, but what if she filed before him and claimed standard deduction....would he then be forced to claim standard?

Who would the IRS side with when one spouse wants to itemize and the other wants standard?....would the choice go to whoever files first or is there some other order of priority?

[Lion EA]

If one MFS spouses itemizes, then the standard deduction is $0 so the other MFS spouse is better off itemizing if only for a bit of donations to a charity and her state income taxes. If she insists upon the standard deduction, then you as the preparer know it is $0. Don't know how efficient the IRS is at matching up the spouses deductions.

[Janitor Bob]

but what is the one claiming standard files first...claiming the full standard deduction....then later, the other spouse itemizes....will they go back and change the original spouse's return and send a notice?

I seem to recall that this is exactly what happened to one of my clients, but it was probably 10 years ago and I cannot recall if we amended her MFS return to to itemize because she received a notice or voluntarily because she found out the other spouse itemized.

[Lion EA]

If you know her husband is likely to itemize based on what your client told you, you have the obligation to file her return correctly. If she Turbotaxes it with the standard deduction, or if you didn't know her before and she tells you hubby takes standard, I have no idea if she'll hear from the IRS. I would think so, but don't know how efficient the IRS is at matching up MFS returns and then looking at itemized vs. standard deductions. But, this isn't your situation. Know or should have known. You can't unknow it now. You can only prepare her taxes. If she wants some type of solution, she'll have to go to a divorce lawyer or a counselor or....

[Janitor Bob]

Agreed. I do wish clients would understand the limits of my powers.....tax prep...not therapist.

[Kea]

I don't know yet (but will find out tonight), but I'm guessing my client will be the one with the mortgage interest & real estate tax. So I would estimate that the wife took standard deduction. If my client itemizes, then the wife potentially gets the IRS nastygram for taking the standard?

I really, Really, REALLY hope they can work it out enough to file MFJ this year!

[MsTabbyKats]

I have wondered this too. We have a client who got married in 2011. She still files with us (MFS) and he files with his preparer. House is in her name and she itemizes. His preparer takes standard, even though he is not entitled to it. We even gave them printouts of the rules. He's opinion is let them come and get me (you can't make this stuff up). This would seem like something a simple computer program could pick up and generate an automated letter. What are people's experiences with this - have you seen anyone get a letter about this scenario?

No.

I find that when I do a MFS (I generally show people that it's better to do joint) it's usually because the spouses don't talk and don't have a clue about what the other one did. I do whatever is beneficial for "my spouse" and tell them "the rule" and not be be surprised if they get a letter. So far, no one letter has been generated.

[jklcpa]

Yes, I had a couple that filed separate returns one year and the wife filed her return first through some free service claiming the standard deduction. Husband came to me with Sch A deductions. House is in only his name alone with the mortgage and r.e. taxes that are paid out of a checking account with his name only, and funded solely by him. Wife did not want to listen when I told her to file an amended return. She did get the letter from the IRS. I've been preparing a joint return ever since.

[kcjenkins]

It takes the IRS on average 2 years to get around to sending notices, but the always do on the MFS situation, since each of those returns has both SSNs on it.

[Kea]

My client still wanted to file MFS - doesn't want to have anything to do with her. He had all the mortgage & RE tax info & itemized. I told him that meant she would have to itemize as well & he said she only worked part time part of the year & wouldn't pay any tax anyway. Of course he also mentioned that she took money out of her 401k to buy a car.

I showed him the MFS / MFJ from 2011 & explained that it would have been $2K more to file MFS that year. He seemed to think it was worth it. His balance due this year was over $5K and he was happy because he thought it would be higher.

He gave me an earful about their separation & I just nodded. I hope the divorce is final by 12/31/13. (FWIW, this guy used to work with my husband and I would call him a friend. Not sure I really wanted to hear about all the problems. But he probably just needed to vent.)

It is amazing that no matter how much most people hate to pay IRS, they're willing to pay a lot more if it means not having to deal with a "soon-to-be" ex-spouse.