Any CPA'S or tax people out there..

[lil mermaid]

I have a few questions about filing taxes married seperately or married jointly. I will be consulting someone when it is time to do our taxes but I am wondering...

DH and I moved from California to Texas in December of 2004. I quit my job when we moved and have been a SAHM since. When I quit my job, my employer was offering a separation incentive (i.e. "buyout") which I took, since I planned to quit anyway!

I received the payment for the buyout in January of 2005. It was about 20% of what my husbands income for this year will be.

Here are my questions:
1. In these kind of cases, does it generally work out better to file married filing seperately? What are the guidelines for when filing this way works out better? I think I have been told that it works sometimes when one income is much higher than the other (as in our case.)

2. California took out taxes from my payment. Do they really have the legal right to do this, i.e, do I have tax liability to CA for this money? I am guessing they do because the job was located in California, however if there is some (LEGAL) loophole that you know of....

3. If the answer to question #2 is yes, I will have to file a CA state income tax return. Can I file this singly (DH had no CA income at all) or does it still need to be joint if we file our federal jointly?

thanks. Like I said, I will be consulting with a tax professional at tax time, but since we don't have a tax guy here yet and these questions are general, I am hoping someone could shed some light. Thanks!

 

[Bob Slydell]

In general, married filing separately rarely ends up being a beneficial way to file. There are a couple exceptions to the rule, but I can't think of them off-hand. I'm guessing that in your example, you'd be better off filing jointly, but your tax adviser can quickly run a "what-if" analysis to show you the differences.