Should We File Taxes Jointly or Separately When My Spouse Has a Carpentry Business?

But what about the situation where one spouse has a risky business that might get audited? Wouldn't filing separately protect the other spouse from being dragged into potential audit issues?

The IRS can still examine all relevant financial information regardless of filing status. Filing separately doesn't create a legal barrier protecting one spouse from the other's audit. If there are legitimate concerns about potential business liabilities, those are better addressed through proper business formation (like an LLC or corporation) rather than tax filing status. That separates business liabilities from personal assets legally, while you still get the tax benefits of filing jointly.

How does this compare to just using TurboTax or H&R Block? I've been using those for years but they never really explain if I'm making the right choice between filing options.

I'm a bit skeptical about these online tools. Did it actually save you money compared to using an accountant? And how did it handle the business deductions that seem to be the main concern here?

The difference is that regular tax software just asks you questions and calculates based on what you input, but doesn't analyze your specific situation to find the best strategy. I tried both ways with TurboTax before finding taxr.ai and it was just "here's your refund" without explaining why one filing status was better than another. As for working with an accountant, we actually did that too the previous year and paid around $350. The taxr.ai analysis matched what our accountant recommended but gave us more detailed explanations about why certain deductions worked the way they did with the business. It handled all the Schedule C business expenses exactly the same way but made it easier to see how they interacted with our other tax benefits when combined on a joint return.

Wait, how does this actually work? Does it just keep calling the IRS for you until it gets through? I've been trying to reach them about an EIN issue for my side business for weeks.

Sorry but this sounds like BS. Nobody gets through to the IRS in 15 minutes. I worked in tax preparation for years and even with our professional lines it takes hours or days of trying.

It doesn't just keep calling - they use some kind of system that monitors the IRS phone lines and jumps in when there's an opening. When a spot opens up, you get a call telling you to get ready, then they connect you directly to the IRS. No waiting on hold at all. I was super skeptical too. I'd literally tried calling for three weeks straight before finding this. But it actually worked exactly as promised. I got the call that they found a spot, picked up, and was talking to an IRS agent about my specific situation almost immediately. They don't do the talking for you - they just get you past the impossible hold times and connect you directly to a real person at the IRS who can answer your specific questions.

Did filing jointly affect how your husband claimed his business expenses at all? That's one thing I'm worried about - if somehow his carpentry deductions would be limited if we file together.

Not at all! He claimed exactly the same business expenses either way. The Schedule C for his business worked exactly the same whether we filed jointly or separately. All his tools, materials, vehicle expenses, studio rent, insurance - everything was deductible exactly the same way. The only difference was that when we filed jointly, all those business deductions helped offset our combined income, plus we qualified for additional credits that saved us thousands. If we had filed separately, I would have gotten some credits for the kids, but not as much as when we combined everything, and we would have lost some credits entirely.

Self-employment tax is calculated the same way regardless of filing status. It's always 15.3% of net business profit (12.4% for Social Security up to the wage limit and 2.9% for Medicare on all profit). Filing jointly doesn't change this amount. What filing jointly DOES help with is the income tax portion, where you get better rates and more credits. So while the SE tax stays the same, your overall tax burden is usually lower when filing jointly because of how everything else is calculated more favorably.

Thanks for explaining that! I guess we were confusing the SE tax with regular income tax. Makes sense that the 15.3% stays the same regardless. Good to know the filing status mainly affects the income tax portion.