By: DENNIS-SWING GREEN
IRS 2007 procedures Part Five: Marital status: how should you report?
Dennis Swing Greene is Senior Partner and International Fiscal Consultant for euroFINESCO s.a
In this series of articles, we examine required procedures when declaring individual income tax (IRS) in Portugal:
1) Fiscal residency explained
2) Submitting your IRS declaration
3) Non-residents and filing requirements
4) Exemptions from filing
5) Marital status for IRS procedures
WHO SAID marriage was simple? Or being single, for that matter? But when it comes to tax time, it’s best to be informed so you make the best of your lot.
Overall, marital status works as follows: single, widowed and divorced taxpayers submit an individual return, while couples must file a joint declaration.
Separated couples who are not divorced may file separately. This is usually advisable since both spouses are responsible for meeting all fiscal obligations under a joint return. All unmarried couples living together for more than two years, whether of different or the same sex, may also file a joint return.
The following questions and answers should point you in the right direction.
Questions and answers
I got married in October. Should my wife and I file separate returns for the period of the year that we were still single?
No. You may only file a joint return because it is your status at the end of the tax year that counts.
Filing a joint return should actually work out in your favour since a couple normally pays less tax than two individuals.
My boyfriend and I have been living together for several years. Should we file separate returns or can we file jointly?
While either is possible, unmarried couples may file a joint return and both must sign the return.
To qualify for this status, you must have been living together for at least two years. This status applies to both heterosexual and homosexual couples.
It’s a good idea to run a simulation before finalising your return to be sure which status is most advantageous.
Attention: While unmarried couples are treated the same as married couples for IRS income tax purposes, there is no carryover of this equality to other forms of taxation.
This is especially important in planning for inheritance tax. Unmarried couples normally have no succession rights, with marital and/or blood relations taking precedence.
While estate planning is advisable for everyone, it is imperative in the case of unmarried couples.
My wife and I broke up last year but we are not yet divorced. Do we still have to file a joint return or can we now file separately?
Both ways are accepted, although your circumstances may make separate returns more practical. If filing individually, remember that both cannot claim the same dependents or deductions.
My spouse passed away last year in May. How should I declare?
The death of a spouse must be reported in the tax return.
The survivor submits a tax return, ticking the widow/widower box for marital status and reports the fiscal number of the deceased.
Both incomes, as well as deductions and credits, need to be reported on the appropriate annexes.
In some instances, the estate may generate income prior to final resolution and that will need to be reported as well.
If there are complications or delays in the settlement of the estate, it is strongly advisable to seek professional advice.
This is the final article in this series on IRS 2007 procedures.
Private consultations can be scheduled at our offices in Guia (Albufeira), Lisbon (Chiado) and, starting January 2008, in Funchal (Sé), Madeira. In the Algarve, call 289 561 333, Lisbon at 213 424 210, Madeira at 291 221 095. Email [email protected]