Married Filing Jointly vs Married Filing Separately -- What-If Worksheet

Forum|Forum|2 years ago
April 6, 2023
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Hello again. I am trying to reduce a horrendous tax bite caused by a long term capital gain. The K-1 for the transaction reporting the gain is in my name only. My other income (W2 and Social Security) is considerably less than my wife's, approximately 1/6. We have no joint accounts, other than our mortgage and local property taxes (which exceed the standard deduction for married filing jointly). We have no carryover losses from previous years.

I have already completed a Married Filing Jointly return in Turbotax and just ran the What-If Worksheet. In the Married Filing Separately (MFS) columns, the Worksheet splits the capital gain evenly between my wife and I. Again, the K-1 (form 1065) for that gain is in my name only and results from an investment made prior to our marriage. The Worksheet does the same for interest income -- splits it 50/50 -- although most of it is from accounts in my name only. That doesn't seem right.

Also, line 72 of the Worksheet shows negative numbers. According to the TurboTax website, negative numbers indicate a refund. That is definitely not right in our case.

Bottom line: If the Worksheet calculations are off, do I need to start from scratch and create 2 new returns in Turbotax? Can I import data from last year's return (married filing jointly)?

I know it's a lot to ask, but help would be greatly appreciated.

Best answer by ThomasM125

You would need to create two separate returns. You could start with the current year version of last year's married-joint return, but it may be easier to just start from scratch as it may be difficult to adjust the married-filing joint return to a married-filing seperate one.

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wrdbrnAuthor

I took the time to create 2 new returns, one for my wife, one for me, each Married Filing Separately. After entering W2 and SS income and, on my return, the capital gain, the answer was clear. In our situation, which seemed like it might have been the rare exception to the rule, MFJ still beat MFS by quite a bit. Unless I'm missing something important, we'll just have to bite the bullet this year. Consider the question answered, and thank you for your help!

karinm1971

Hi! It sounds like you've figured out your question from last year, but I just wanted to say that in my experience, the What-If worksheet isn't completely accurate at times, for sometimes puzzling reasons. But, in case you weren't aware, you can move those numbers around. Where TT split your capital gain equally between you and your wife, you can change your portion to all of it and TT will automatically change your wife's portion to zero. FWIW. (I'm here looking for the reason why "current return" (which is MFJ) is different from "joint return" 🙂 )

Karin

vbmike

I am baffled by the fact that this worksheet is useless. Like others have said, the MFJ return has all the numbers, so it should have no problem telling me if we're better off filing MFJ or MFS. It would be awesome to save some time and be able to trust this What-If Worksheet, but instead we have to create 3 separate returns to do this. When comparing the tax payer's MFS return to the What-If Worksheet in MFJ return, it's literally showing me a difference of owing $4K vs owing $12K, respectively. Utterly ridiculous!

Am I correct in that this feature was just introduced for TT 2024? I don't see it in 2023.

tuckerlogan523

I'm pretty sure it existed a couple of years ago because I think I've seen other questions about it in this community forum from earlier years. But yes, it's baffling that they include it when it doesn't work. I took hours trying to figure it out because I thought the problem had to be me - how could this major, established software company have such a bad fail in their software? But as you can see from my earlier comment, not only does it not work, but their own people don't understand it.

What worked for me was to enter everything for a joint return, then save a duplicate of that and delete everything related to my wife so that a version was only me, but then I couldn't do the same for my wife because my name was listed first, so I had to re-enter her (luckily much simpler) data into a new return. Then we did a comparison and reconciliation.

Hopefully this will be fixed by next year.