Sam and Diane separated in June of this year although they continue to live in the same town. They have twin sons, Norm and Cliff, who remain in the family home with Diane. Sam's income this year was $45,000 while Diane worked only part-time and made $15,000. Sam also gambles heavily but told Diane that he had no winnings this year. What tax issues should they consider?
Answer: Sam and Diane have several choices for filing status. Since they are still married on December 31, the last day of the tax year, they could file jointly. That will probably result in the lowest overall tax liability. However, they should consider joint and several liabilities, especially if Diane fears that Sam may be hiding income. If Diane is maintaining the home in which at least one dependent child lives, she may be able to file as head of household. Of course, they could file separately which would result in the highest overall tax liability.