Don't Mess With Taxes

Image by rakinmorjaria from Pixabay

Congratulations to all the newlyweds who tied, or will, the knot this June. Or during any ceremony this summer, or spring or coming fall or winter.

Marriage can be challenging, but I wouldn’t trade the decades I’ve spent with the hubby for anything. That includes many joint tax returns we’ve filed.

But you shouldn’t wait until tax filing season to get ready for how marriage changes your taxes.

Here are six tax matters newly married couples should consider as soon as they get back from the honeymoon.

1. Make sure everyone knows your new name. Some spouses change their surnames after marriage. If either new spouse opts to legally change their name, they need to report it to the Social Security Administration (SSA) by filing Form SS-5, Application for a Social Security Card.

The Internal Revenue Service matches what's on your Form 1040 with the SSA data every filing season. If your new name on your return doesn't match the official SSA info, it could delay any refund from your first post-wedding tax filing.

2. Update your address. Marriage often means at least one spouse will have a new address. In these situations, the IRS needs to be on your address update list. It's easy to let Uncle Sam know where you'll be living. Just fill out Form 8822, Change of Address.

Even if you didn't invite your employers to the wedding, they also need to know about your address and/or name changes. That's the only way to ensure the Form W-2, Wage and Tax Statement, they'll issue you next January will have the correct information.

3. Deal with dual withholding. Speaking of work, a key post-vows tax move is adjusting your paycheck withholding to account for your new joint filing status. This is particularly true where both spouses get wages. If you don't coordinate your taxes, specifically how much is taken out of each of your paychecks, then you could end up owing the IRS a lot at tax filing time.

Even more distressing, especially as you're starting out a new life together, is that such withholding miscalculations could mean you owe Uncle Sam an underpayment penalty (and interest!), too.

It's generally better for the higher-earning spouse to claim all the couple's allowances on his or her Form W-4, with the lower wage earner claiming zero. Such calculations also are critical if you and your new spouse might end up in a higher tax bracket.

The IRS' online tax withholding estimator is a good way for all taxpayers to make sure they get their withholding right.

4. Reassess tax-favored workplace benefits. Staying on the job, stop by your workplace's benefits office to make any changes necessary now that you're a couple. Marriage is a life change that generally allows you to make these adjustments immediately instead of waiting for the next benefits open enrollment period.

Considerations include coordinating health care coverages and, if available, associated flexible spending account (FSA) contributions. Just like with your now-married withholding, you need to assess how these tax-preferred medical accounts fit into your new lifestyle and where changes need to be made.

The same consideration is true for all job benefits. If your spouse has a retirement plan, for example, that could affect the tax deductibility of the IRA contributions you’re been claiming on your previously single tax filings.

5. Evaluate your filing status. Your wedding date obviously is important to you and your spouse. Uncle Sam is interested, too, but not because he's going to send you an anniversary gift. Rather, when you say "I do" affects your filing status options.

If you are legally married on Dec. 31, the IRS considers you married for the full tax year. Now, as a married couple for the full tax year, you must file your tax return jointly or married filing separately.

Filing jointly generally is more advantageous. Sometimes, though, married spouses fare better (or at least one spouse does) when they opt to file two separate returns. A common situation where this applies is when one spouse had lots of medical expenses, but the couple's combined income is so much that they can’t meet the 7.5 percent of adjusted gross income medical expenses threshold to claim the costs. But the spouse with the health expenses can claim them by filing a separate return that uses only the one income.

Sending the IRS separate returns also is a good idea if your new likes to play it a bit too fast and loose with the tax code for your liking. Remember that when you file jointly, each spouse can be held responsible for any tax bill (and penalty and interest) that the IRS might determine is due. This situation, known as joint and several liability, applies even if only one spouse earned all the income.

It's best to figure your tax both ways to find out which provides the most tax saving. You also can use IRS.gov’s interactive tax assistant. The online tool uses your answers to several tax law questions specific to your individual circumstances to help determine whether you should file jointly or separately.

6. Don't forget about your state taxes. Most Americans face some sort of state tax in addition to what they annually owe the U.S. Treasury. Many of the actions you'll take with regard to your federal taxes (name change, residence, etc.) also apply to your state tax situation. Check with your state tax office or your tax adviser as to what to expect, at all tax levels, now that you're married.

Finally, here’s a bonus tip from this long-time married blogger. Discuss all money matters, not just taxes, before you say I do.

Finances are one of the major stresses on a marriage. Being upfront about how you deal, or don't, with dollars early in your marriage can help you find ways to work together financially. And such fiscal communication can make keeping that for better or worse vow much easier.

You also might find these items of interest:

• After "I do," say "I donate" my wedding dress
• 4 tax-smart ways to give back on your wedding day
• His? Hers? Does the name listed first on a joint tax return define your marriage?

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