The averaging method can help many farmers trim their tax bills by thousands of dollars. But don t assume that income-averaging is always the best option. Some farmers will pay less tax by using the regular tax calculation. Married couples have a choice when it comes to filing status. Couples will find they ll usually pay less tax by filing joint returns rather than separate returns.
Filing separately can pay off in some circumstances.
But it takes an unusual composite of income and deductions, said David Rhine, national director of family wealth planning at the accounting firm of BDO Seidman in New York. Probably the most common situation is when one spouse had unusually large medical or miscellaneous itemized expenses. If you think filing separately might help, calculate your tax both ways to see which filing status results in the lowest tax. Avoiding penalties There are even ways to duck some IRS penalties. If you suspect you ll be subject to a penalty for failing to pay enough tax last year through withholding or quarterly estimated tax payments, you may be able to minimize the bite by filling out Form 2210, Underpayment of Estimated Tax.