Wording of 2010 Tax Return filing in Sep Agreement

My signed and notarized sep agreement says: “The parties agree to file joint federal and state income tax returns for the year 2010, provided that such filing results in a lesser combined tax than would result from separate filing. Each party shall pay that proportionate share of the tax due as shall be attributable to his or her respective earnings or income and each shall indemnify and hold harmless the other against any liability for his or her own proportionate share of said tax. Any refund that is realized as a result of a joint return shall be divided between the parties with each party recovering that amount of the refund which equals such party’s overpayment of his or her proportionate share of the income tax liability.”

My questions is 2 parts. 1st part - "providing that such [joint] filing results in a lesser combined tax than would result from separate filing. This is definitely true. if we file separately than there is around $8,000 of additional tax owed. So I believe this entitles me to file jointly. So I think that answers the question.

My second question is to calculate what share of the tax owed or what share of the refund is for her and what is for me. When I was preparing the return, I did the entire return, except I did not enter her W-2. This resulted in about a $2,500 refund. When I typed in her W-2, this refund dropped and it turned into me owing $500. This is because for the job she worked they only witheld .05% (literally they witheld less than $10 in federal tax the entire year…). So I interpret that as she owes me $3,000 (her federal tax that was not withheld that I had to pay on her behalf). I can’t really find another way to look at it. She worked all last year, paid less than $10 in witholding (and less than $700 in social security witholding), and so she needs to pay her share of the tax.

Also a small rant… When she worked her little toy jobs they never took out enough tax and it always wiped out our refund every year… Sorry…

So my question, does anyone have any opinions on whether this $3,000 amount is correct? If not, any other ideas for ways to calculate it?



Specific tax advice is beyond the scope of this forum, I would suggest you consult with a CPA to ensure your calculations are correct, and that you have gone with the most advantageous route.