Marital status can impact your return

There are a number of misconceptions in the general public concerning marital filing status. Your marital status as of the last day of the year determines if you are considered married or unmarried.

If you are considered married at the end of the year then you can choose to file as married filing jointly or as married filing separately. There are a number of factors to consider in determining what is the ideal filing status, but here the focus will be upon the state of Ohio tax savings often generated from filing as married filing separately.

It is important to note that this separate or joint filing decision can be changed from one year to the next. This is not a permanent decision and is simply an election at the time of filing your tax returns for the year. However, it is also important to remember that whatever filing status you choose for the federal IRS return must also be used for the state of Ohio return as well. You can, however, choose to file in a different matter for your local tax return as this filing status does not need to be consistent with that of the federal and state returns.

In order to maintain consistency with the federal IRS filings, the state of Ohio has recently begun allowing same sex married couple returns to be filed as well.

Previously this was not acceptable under Ohio law as same sex marriages were not recognized in Ohio.

If both taxpayers have income then it often is better to file the returns as married filing separately since overall there can be tax savings in the hundreds or even thousands of dollars.

Although Ohio offers a joint filing credit of up to $650, this often is not sufficient to offset the fact that the state of Ohio has a progressive income tax schedule that does not distinguish between a married individual and a single individual. Since the tax rates in Ohio are progressive, two working individuals end up in a higher tax bracket or rate than each individual on their own.

Many of the tax software packages that are available will perform this analysis and most paid tax professionals will take the time to evaluate the best filing status for their clients. When performing this analysis, it is the overall taxes paid for both federal and state purposes for the couple in total that becomes the decision factor in most situations. Often this filing status choice will change from one year to the next as the tax laws change and the income of life circumstances of individuals can change from one year to the next.

In addition, through moving around exemptions and deductions between the two married filing separate returns the taxpayers may be able to reduce their tax burden even further. So, for instance, it may benefit the couple as a whole to a much greater degree if the children are all claimed on one of the married filing separate returns versus the other. This also may be the case with shared itemized deductions such as charitable contributions, mortgage interest, and real estate taxes as well.

There are many factors to consider when choosing the proper filing status, but many taxpayers in Ohio fail to evaluate the overall tax savings by filing as married filing separately when they prepare their own returns. A thorough analysis of the optimal filing situation is needed each year in order to minimize the tax liability and maximize your refunds.

There is often a difference between fulfilling the tax filing obligation and preparing your income tax returns in a manner that reduces the tax burden to the greatest extent.

Paul Pahoresky is a partner in the accounting firm of JLP CPAs. He can be reached at 440-9741040x14 or at paul@ jlpcpas.com. Consult your tax advisor for your specific situation for additional information and guidance on these topics.