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Should we file separately?


A recent email from a client asked this question. Here it is:



“Hi Bob - Because of our financial struggles, we believe that we will finally be qualified for some assistance in regards to MaineCare and health insurance. My wife is wondering about the implications of filing separately, as we have yet to prepare the profit and loss for my schedule C, which is a factor holding things up. 



Are there any repercussions, or negative implications, of her filing separately? She really has not made any income that she could declare over the past year, so it's not going to be a very involved process from that standpoint.



We are thinking that her filing separately will get things moving in some essential areas, need to be diligent about asking questions of you as to whether this is advisable or wise.”



In addition to the above information, the clients have one small child, no itemized deductions and some student loan interest. Here is my response:



Client,



It's good to hear from you. I would advise that you not file separately for the following reasons:



1) The biggest tax credit for low income earners is the Earned Income Credit. You are not eligible for this if you file separately. 



2) You would not be able to deduct your student loan interest.



3) The child tax credit would be claimed on your return since your wife doesn’t have any income and it could be reduced depending on your Schedule C income.



Hope this helps,



Bob Langworthy, MBA, EA



Every tax situation is different. If you’re considering filing separately, we should talk through all of the implications. Call today: 207-729-0041



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