Ohio Personal Return MFS vs. MFJ
Joan Mc
tax return then file an Ohio state income tax return for the
same year using "married filing separate" filing status?
Doesn't married filing separate render lower tax on an Ohio
personal income tax return than a married filing joint Ohio
return, in most cases?
PLEASE DO NOT RESPOND BY EMAIL
Frank S. Duke, Jr.
My wife and I have filed MFS for many years because the
lower Ohio tax offsets the slightly higher Federal Tax, even
when you give up the state joint filing credit. Ohio law
requires that your state return be the same as the federal.
You can't do one without the other, like you can in KY.
The only way to know which is better is to compute 6
returns, one federal and one state joint and one each for
each spouse as separate. There is a lot of latitude in how
you spread the deductions, exemptions, and joint income
(like dividends and interest) around so it would be a good
idea to contact someone familiar with this.
In general, you try to equalize the federal AGIs for each
spouse as much as possible by moving joint dividends,
interest and capital gains to the lowest income spouse. The
will minimize the state tax. Since the brackets are at
$5000, $10,000, $15,000, $20,000, $40,000, $80,000,
$100,000, and over $200,000 if you can move income out of
one bracket and into a lower one for the other spouse, it
helps. Then you do the same thing on the federal by moving
the exemptions for the children and the joint deductions to
move income from higher brackets to lower brackets on the
federal. The last step is to tune with small things like
charitable deductions to try to lower each tax payer just
below one of the $50 tax table breaks.
I have clients who save as much as $1500 a year by doing
this.
--
All freely provided tax opinions and financial advice
guaranteed accurate or your money back.
Frank S. Duke, Jr. Cincinnati, Ohio USA
gindie
government.
You are correct, you can really get screwed filing jointly
in Ohio because the tax brackets are so tight that adding
two incomes together can actually bump you several brackets
higher than the separate incomes. The joint filing credit
is a joke.
Stewart Rowe
> Can an Ohio taxpayer and spouse file a joint federal income
> tax return then file an Ohio state income tax return for the
> same year using "married filing separate" filing status?
>
> Doesn't married filing separate render lower tax on an Ohio
> personal income tax return than a married filing joint Ohio
> return, in most cases?
If the earnings by each spouse are reasonably close to
equal, you should go through the calculations both ways. The
savings from Ohio taxes by filing separately may be greater
than the losses from filing federal taxes MFS.
Stewart Rowe
Frank S. Duke, Jr.
> Joan Mc wrote:
>> Can an Ohio taxpayer and spouse file a joint federal income
>> tax return then file an Ohio state income tax return for the
>> same year using "married filing separate" filing status?
> If the earnings by each spouse are reasonably close to
> equal, you should go through the calculations both ways.
I have often found situations where it works well and they
are not close. For example, if one spouse has Ohio taxable
income in the upper end of the $40,000 to $80,000 range
(5.012%) and the other has income in the lower end of the
$20,000 to $40,000 range (4.295%) shifting income from the
higher taxpayer to the lower is often beneficial
Rich Carreiro
> In general, you try to equalize the federal AGIs for each
> spouse as much as possible by moving joint dividends,
> interest and capital gains to the lowest income spouse.
And how do you do this? From many, many answers about such
things in this very group (as well as reading I've done
elsewhere), the rule appears to be that the income goes to
the person who earned it. And for income that comes from
joint accounts, the income is split in proportion to account
ownership. So if the account is owned 50/50 between the
spouses, the income must be split 50/50, for example. It
can't all be shown as income only for one spouse just
because that gives a better tax result.
--
Rich Carreiro rlc...@animato.arlington.ma.us
Saul Izeman
> Can an Ohio taxpayer and spouse file a joint federal income
> tax return then file an Ohio state income tax return for the
> same year using "married filing separate" filing status?
>
> Doesn't married filing separate render lower tax on an Ohio
> personal income tax return than a married filing joint Ohio
> return, in most cases?
NO, Ohio requires matching federal filing status. In some
cases where one or the other spouse had disproportionate
earnings, it is better to file jointly, but if incomes are
similar it is usually better to file separately, at least
that has been the case in my over 30 years of practice.
Lois Nicholson
Virginia allows married couples filing jointly on their
federal return to file separately on the state return. The
rules clearly say that itemized deductions paid from joint
funds can be assigned to either spouse, so of course they're
given to the spouse with higher income. But the rules are
fuzzy for splitting income from joint accounts. Our TCE
instructor said that he had gone over this issue thoroughly
and repeatedly with people in the state dept of taxation,
and the understanding that came out of the discussions was
that joint income could be assigned to either spouse as
desired. So at least in our part of Virginia's TCE program,
we are assigning joint income to the spouse with lower
income. Does anyone know otherwise?
Lois Nicholson
Frank S. Duke, Jr.
> "Frank S. Duke, Jr." <fsdu...@one.net> writes:
>> In general, you try to equalize the federal AGIs for each
>> spouse as much as possible by moving joint dividends,
>> interest and capital gains to the lowest income spouse.
> And how do you do this? From many, many answers about such
> things in this very group (as well as reading I've done
> elsewhere), the rule appears to be that the income goes to
> the person who earned it. And for income that comes from
> joint accounts, the income is split in proportion to account
> ownership. So if the account is owned 50/50 between the
> spouses, the income must be split 50/50, for example. It
> can't all be shown as income only for one spouse just
> because that gives a better tax result.
I know it sounds crazy but it really can be given to one
taxpayer to get a better tax result. When I first started
doing this, I allocated everything according to the
proportion of the W-2 income earned by each person. I had
my accounting hat on and said that was the fairest way to
"allocate." My wife and I each took one of the children's
exemptions.
In the fall of 1994, I took HRBs tax prep course and they
said none of that was required. They had a special program
for Ohio and even taught you how to claim interest and
dividends that were reported under another SSN but which
were joint. You made 2 entries on the schedule B, one to
report the income and another (-) to transfer it to the
other taxpayer. On the spouse's schedule B, you say,
"Transferred from taxpayer SSN#". TurboTax does not think
much of negative entries on you schedule B but they were
teaching a paper method. They were careful to stress that
things like state taxes withheld and United Appeal
contributions paid through payroll deduction could only be
claimed by one individual but everything else in joint names
was fair game.
As a result, I amended 3 years worth of my own returns both
Ohio and Federal. The explanation was that, "I had been
insufficiently aggressive in allocating joint deductions and
income to take full advantage of the benefits of MFS." One
or the other of us was entitled to a big refund and the
other owed a large amount. I explained away the penalties by
saying that as a family, we were fully paid but that do to
the reallocation, the accounts became unbalanced. In the
end, I came out almost $1500 to the good for those three
returns and they had already been filed MFS! Of course, if
I had filed previously as MFJ, I could not have amended
them.
None of these returns were ever questioned nor have the many
I have done for other clients over the last 5 years. To the
best of my knowledge, HRB is still teaching this method for
Ohio MFS. I can't believe that the IRS would let a big
preparer like that run roughshod over them if they had any
basis to challenge it.
Ed Zollars
> None of these returns were ever questioned nor have the many
> I have done for other clients over the last 5 years. To the
> best of my knowledge, HRB is still teaching this method for
> Ohio MFS. I can't believe that the IRS would let a big
> preparer like that run roughshod over them if they had any
> basis to challenge it.
The problem is that what you are trying to do is difficult,
but if you look at the law on community property issues and
federal taxes you'll find that two things are clear:
1. State law determines who "owns" each item of income and
deduction AND
2. You aren't given carte blanche to assign items based on
what you want.
That said, it would be extraordinarily messy for the IRS to
come up with a "proper" allocation in a state that doesn't
follow the community property rules, absent extreme
circumstances. What it would really involve would be
tracing each item of expense to the funds used to pay it,
and then determine the ownership of those funds (which
likely requires yet another inquiry).
In a community property state, if things get sufficiently
messy, the presumption of community ownership steps in to
solve the issue (the problem of comingling). So there the
IRS (and anyone else for that matter <grin>) can start from
the presumption it's 50/50 and you have to *prove* it's not.
Because it would be almost impossible to prepare a correct
separate return in a non-community property state, you can
argue that your "balanced" return is likely just as good as
any other you could put together. While I wouldn't want to
go to court *solely* based on an allocation to minimize the
tax, I wouldn't mind having an accounting rationale that
managed to work out to support such a division. I think
virtually *any* reasonable rationale would likely hold in
those states.
---
Ed Zollars, CPA (AZ)
ezo...@primenet.com
http://www.hmtzcpas.com
kam...@infinet.com
> Joan Mc wrote:
>> Can an Ohio taxpayer and spouse file a joint federal income
>> tax return then file an Ohio state income tax return for the
>> same year using "married filing separate" filing status?
>>
>> Doesn't married filing separate render lower tax on an Ohio
>> personal income tax return than a married filing joint Ohio
>> return, in most cases?
> If the earnings by each spouse are reasonably close to
> equal, you should go through the calculations both ways. The
> savings from Ohio taxes by filing separately may be greater
> than the losses from filing federal taxes MFS.
And in many cases the federal might be better by MFS
than MFJ.
This is especially true if there are large medical
deductions, and even if large Misc deductions, and
occasionally if there are casualty losses. There, not
only is Ohio much better but federal is even a lot
better.
--
Art Kamlet Columbus, Ohio kam...@infinet.com
kam...@infinet.com
> "Frank S. Duke, Jr." <fsdu...@one.net> writes:
>> In general, you try to equalize the federal AGIs for each
>> spouse as much as possible by moving joint dividends,
>> interest and capital gains to the lowest income spouse.
> And how do you do this? From many, many answers about such
> things in this very group (as well as reading I've done
> elsewhere), the rule appears to be that the income goes to
> the person who earned it. And for income that comes from
> joint accounts, the income is split in proportion to account
> ownership. So if the account is owned 50/50 between the
> spouses, the income must be split 50/50, for example. It
> can't all be shown as income only for one spouse just
> because that gives a better tax result.
Rich,
Ohio is not a community property state. Splitting
income in joint accounts in any manner agreeable to the
couple is OK. Even splitting taxable refunds of state
tax refunds (assume last year this was filed joint) is
also the norm.
Rich Carreiro
> Ohio is not a community property state. Splitting
> income in joint accounts in any manner agreeable to the
> couple is OK.
^^^^^^
I know that the original poster was referring to spouses.
Just out of curiousity, do you mean spouses when you say
"couple" or do youmean any joint account holders?
--
Rich Carreiro rlc...@animato.arlington.ma.us