Thanks everyone for all the helpful responses! This is exactly the kind of insight I was hoping for. Based on what I'm reading here, it sounds like we definitely have the flexibility to file separately this year and switch back to joint filing next year if our situation improves. @James Martinez - your point about losing the student loan interest deduction is really important. My wife's loans are federal and she's currently on an older IBR plan, so this could be a double hit for us. @Emily Sanjay - this SAVE plan information is incredibly helpful! I had no idea about the 2023 changes. My wife should definitely look into switching from IBR to SAVE if that means her payments would be calculated on just her income even if we file jointly. That could solve our main concern about filing separately. @Jordan Walker - thanks for the Roth IRA warning! We both contribute to Roth IRAs so this is definitely something we need to factor in. I think our next step is to have my wife contact her loan servicer about switching to the SAVE plan, and maybe use one of those tax tools mentioned to run the numbers both ways. Really appreciate everyone sharing their experiences!

Great question! Yes, you can absolutely switch between filing statuses year to year - there's no rule that locks you into one approach. However, I'd encourage you to really crunch the numbers before deciding to file separately. From my experience working with taxes, married filing separately often results in paying more overall tax, even when it seems like it would help. You'd lose access to several valuable credits and deductions, and the standard deduction is exactly half of what you'd get filing jointly ($13,850 vs $27,700 for 2024). Given your specific situation - unemployment benefits, your wife's business loss, and student loans - I'd actually lean toward filing jointly being better. Business losses can offset other income when filing jointly, potentially reducing the impact of your unemployment benefits. And if your wife can switch to the SAVE plan as others mentioned, that could solve the student loan payment issue without losing tax benefits. My suggestion would be to prepare your return both ways (or use one of those comparison tools mentioned) and see the actual dollar difference. Sometimes what seems logical doesn't match the math when you factor in all the credits and deductions you might lose.

This is really helpful information everyone! I'm in a similar situation but have an additional complication - I also do some drop shipping through eBay where I never actually handle the inventory. The supplier ships directly to my customers. How should I handle this on Schedule C? Do I still report the full sale amount as gross receipts even though I never physically possessed the items? And for Cost of Goods Sold, would I use what I paid the supplier for each item, or is there a different way to account for drop shipped merchandise? I'm also wondering about the timing - sometimes there's a delay between when the customer pays me and when I pay the supplier. Should I match these up by transaction date or payment date for tax purposes?

As someone who's been through this exact situation, I want to emphasize something that might not be immediately obvious - make sure you're tracking your business mileage if you're driving to thrift stores, garage sales, or post offices for your eBay business. I was missing out on a significant deduction my first year because I didn't realize that trips to source inventory or ship items count as business miles. At 67 cents per mile for 2024, this can add up quickly if you're actively sourcing products. Also, don't forget about other business expenses that are easy to overlook: storage containers for inventory, a scale for shipping, printer paper and ink for labels, packing materials, and even a portion of your internet bill if you use it for business. These might seem small individually, but they can reduce your taxable income substantially when combined. One more tip - if you're using PayPal or other payment processors in addition to eBay's managed payments, make sure you're not double-counting any income that appears on multiple 1099s. This is becoming more common as payment processing becomes more fragmented.

As someone who just went through this exact situation with my own family's returns, I can confirm what others have said - you absolutely need to sign with your PTIN even for free family returns. I was initially confused about this too, but after researching IRC Section 7701(a)(36) and the regulations, it's clear that as a CPA, you're considered a "tax return preparer" regardless of compensation. The key factor is that you're using your professional credentials and expertise. Here's what I do for my family returns: - Sign the return with my PTIN and include all required preparer information - Check "No" on the compensation question since I wasn't paid for that specific return - Still maintain the same professional standards and documentation I would for any client The IRS wants accountability for professionally prepared returns, and your CPA status means you're held to those standards whether you charge or not. Better to err on the side of compliance than risk any issues down the road.

Thanks everyone for the detailed responses! This has been incredibly helpful. I was getting caught up in the compensation aspect, but you're all right that as a CPA, the professional responsibility requirements apply regardless of whether I'm paid for that specific return. I'll definitely be signing with my PTIN and completing all the preparer information going forward, while marking "No" for compensation. It makes perfect sense that using my professional credentials creates these obligations even when helping family. Really appreciate the IRC Section 7701(a)(36) reference too - having the actual code section helps me explain this to other CPAs in my firm who might have the same question. Better to maintain consistent professional standards across all returns we prepare, whether for clients or family.

Has anyone used a Backdoor Roth IRA in this situation? My income is too high for regular Roth contributions, but my financial advisor mentioned this strategy with my severance.

Another option to consider is opening a Solo 401(k) if you do any freelance or consulting work while receiving severance. Even small amounts of self-employment income can qualify you, and the contribution limits are much higher than IRAs - up to $70,000 for 2025 if you're under 50. I was in a similar situation and started doing some freelance work on the side. The Solo 401(k) allowed me to shelter a significant portion of both my freelance income AND make additional contributions beyond what I could with just an IRA. You can contribute both as the employee (up to $23,500) and as the employer (up to 25% of net self-employment income). Just make sure to set it up before December 31st if you want to make contributions for this tax year. The paperwork is pretty straightforward and many brokerages offer them with minimal fees.

Check your transcript for code 971 - thats usually what shows up right before approval on injured spouse claims

I'm at 14 weeks waiting on my injured spouse claim too. From what I've researched, the IRS is really backed up this year - some people are reporting 20+ weeks. Have you checked your transcript lately? Sometimes there are updates there before they send any official notices. The waiting is brutal but unfortunately seems pretty normal for 2025 😕