can i file joinlty for me and separately for my wife

[mkanahosur]

Hello, I have my w2 and my wife has a daycare with her income. In this case Can i file the tax returns with MFJ for me and married filing separately for my wife.  

[Vanessa A]

No.  If you are filing as Married Filing Jointly, that means, BOTH of you are filing ONE return which will include ALL income from ALL sources on that one return.  If she operates a daycare, then you would include the Schedule C on your joint return and report her daycare income on the Schedule C.

 

[Opus 17]

Married filing jointly means you file one return with all your combined income, deductions and credits, including her self-employment income.  MFJ almost always results in lower overall tax, even if your incomes are from different kinds of work.  Many important credits and deductions are reduced or disallowed for married filing separately.

Married filing separately means you file two separate returns.  You list only your own income and deductions, and your spouse only lists their income and deductions.  If you have shared deductions, like mortgage interest, you divide them.

Your wife willl have a schedule C for her home business.  She lists her gross income and her expenses.  The net profit flows to the main form 1040 where it is combined with other income, deductions and credits.  She must file the Schedule C attached to your joint return, or attached to her separate return.  You can't file most things joint and only the business separately. 

[VolvoGirl]

Well you can’t do it both ways.  It’s either one.  You either file a Joint return which is 1 return combined for the both of you.  Or you each file separate returns as MFS.

Joint is almost always better.  Here's some things to consider about filing separately……

In the first place you each have to file a separate return, so that's two returns.  And if you are using the Online version that means using 2 accounts and paying the fees twice.  The Desktop CD/Download program would be better to use.

Many people think they come out better when filing Married Filing Separate but they are probably doing it wrong.  If one person itemizes deductions on Schedule A then the other one must itemize too, even if it's less than the standard deduction, even if it is ZERO!  And if you are in a Community Property state it can be complicated to figure out.

And there are several credits you can't take when filing separately, like the

EITC Earned Income Tax Credit

Child Care Credit

Educational Deductions and Credits

And contributions to IRA and ROTH IRA are limited when you file MFS.

Also if you file Married Filing Separately up to 85`% of your Social Security becomes taxable right away even with zero other income.

See …….

https://ttlc.intuit.com/community/married/help/is-it-better-for-a-married-couple-to-file-jointly-or-...

[mkanahosur]

Thanks for your reply,

So if my wife is earning an amount "X", I need to pay the tax for only that amount "X" is this correct?. If this "X" is added to my income as additional income and tax calculated for "my income+X", is this all? Or any additional tax for "X" as self employment tax is also applicable? (in 1040 Schedule II line 4). If this is the case is it not double taxation for the amount "X"? One at "additional income" and another at "self employment tax in 1040 Schedule II line 4)".

[VolvoGirl]

No not double tax.  They are 2 different kinds of tax.  Regular income tax and self employment tax.   The SE tax is to pay the Social Security and Medicare tax that is not taken out like on your W2.  

You will pay Self Employment tax (Scheduled SE) on a Net Profit of $400 or more on Schedule C in addition to regular income tax on it.   You pay 15.3% SE tax on 92.35% of your Net Profit (If it is greater than $400).  The 15.3% self employed SE Tax is to pay both the employer part and employee part of Social Security and Medicare.  So you get social security credit for it when you retire.  

[Vanessa A]

Whether you file a joint or separate return, her daycare income will be subject to the 15.3% SE Tax. 

Her income will also be subject to regular income tax, again, with or without your income.  The only difference is, she could be at a lower tax bracket if she files separately.  However, the tax brackets are further apart, so this may or may not be the case.

If you file separately, you may not be able to claim certain credits or deductions.  You can do a dummy return trying it each way to see which way works better for you both, however, nothing you do will change the SE tax.  If she is not making quarterly payments and you do not want to take on her tax liability, then that would be a reason some people would file separately.

How Should You and Your Spouse File Taxes? Married Filing Jointly vs Separately

[Opus 17]

All your combined wages from W-2s (if any) are put on form 1040, line 1a.  Form 1040 lines 1-7 have most common forms of income. 

Self employment income is calculated on Schedule C, and then the net profit (income) is put on Schedule 1 line 3 as Additional income.   All your forms of "additional income" on schedule 1 are totaled on line 10 and transferred to form 1040 line 8. 

The total of all your income is on line 9 of form 1040.  Your credits and deductions are subtracted to determine your taxable income on line 15.  Your income tax is on line 16. 

Separately, your wife will owe self-employment tax on the self-employment job, that is calculated on schedule SE and goes on form 1040 at line 23, form 1040 line 24 is the total of all taxes you owe.

https://www.irs.gov/pub/irs-pdf/f1040.pdf

https://www.irs.gov/pub/irs-pdf/f1040s1.pdf

Nothing is taxed twice.  If you were to file separately, your wife will still pay income tax and self-employment tax.  The SE tax will be the same either way, but the income tax portion is likely to be higher when filing separately due to several factors including the tax brackets, and limits on deductions and credits.