Married Couple NY & NJ - filing options


A married couple live in different states. The husband lives and works
in NJ, while the wife lives and works in NY. They will be filing MFJ
Federal return. What options do they have for filing NJ & NY returns?
Reply to
Luka
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The options include:
1 - filing jointly for Federal, separate for the states; 2 - filing jointly for Federal, joint for the states and address nonresident income - you may be able to exclude from tax by either state the income earned in the other state; 3 - file separately for the IRS and both states.
You'll need to check the state rules - some states require that the state return use the same filing status as the Federal return and some states allow you to file a Joint Federal return and separate state returns.
You'll also need to run the calculations at least three or four different ways to tell which is best. And keep in mind that you need to factor in the cost of multiple returns in your assessment. For example, I recently did a return where the client owed $14,000 in Federal taxes. By filing separately we were able to reduce that balance due BY ALMOST $4,000.
BUT since I had to prepare two SEPARATE returns I charged two separate fees - neither one alone as much a single joint return, but the two together were about $600 more than a single joint return. If the tax reduction had been $600 or less it wouldn't have been worth doing - they would only have saved enough to pay the extra fee.
Good luck, Gene E. Utterback, EA, RFC, ABA
Reply to
Gene E. Utterback, EA, RFC, AB
First, how do you whether it is worth pursuing the second return? You only know the savings if you do it, but then you have to charge $600, and the savings could be tiny.
Don't most software tools have an option compare married jointly versus married filing separate?
Reply to
removeps-groups
SNIPPED.
The software I use has a MFS v. MFJ comparison worksheet that I can trigger IF I've been diligent about coding all the input as either T axpayer - S pouse - J oint. The worksheet gives an indication but it misses things like disallowed credits or reduced limitations for MFS - still it does give an idea about what might work.
As a professional I consider it my DUTY to review this for EVERY client. IF, and only IF, the MFS v. MFJ worksheet indicates that they MIGHT benefit from MFS then I'll actually split the returns and do the additional work to see how it works out.
Once I've done that I subtract my fee from the COMBINED tax liabilities to see if I've saved them MORE than I cost them. NOW IF I can save them more than it costs them, THEN and only then do I even tell them about it.
If it turns out that they don't save enough by filing MFS to more than cover the additional cost then I go back to MFJ and they usually don't even know about it. I believe it is MY responsibility as a professional to know the laws and how they apply to my clients. If I can't save them money by splitting the returns then I EAT the time - such is life.
Nobles Oblige, Gene E. Utterback, EA, RFC, ABA
Reply to
Gene E. Utterback, EA, RFC, AB

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