Did You Get Married this Year? Tax Tips for Newlyweds
posted Dec 10, 2014 by Paul Nadeau Jr., CPA, MST in the Global Tax Blog
With all of the time spent planning for a wedding, tax planning is the last thing on the minds of many newlyweds. You can add your tax situation to the list of changes in your life when you tie the knot and tax planning should be an important part of the conversation with your spouse.
Changing Your Name
If you decide to change your name when you get married, you must notify the Social Security Administration (SSA) after you’re married. To change your name, you must apply for a new Social Security card by completing form SS-5. You must provide proof of your old name and new name with documents such as your driver’s license and marriage certificate. The SSA does not accept copies of these documents, so it is generally suggested to visit your local SSA office to file the application.
The SSA informs the IRS of name changes. If the name on your tax return does not match the name on your Social Security card, your tax return could be held for review and your refund could be delayed until the issue is resolved. If you are up against the tax deadline and don’t have the time to file the requisite forms with the SSA, you can file a joint return with your spouse using your maiden name.
If you are legally married by December 31st, you’re considered married for the full year. This means you are required to file as either married filing jointly or married filing separate. But look out for the dreaded marriage penalty. The marriage penalty can happen because of the income limits on the joint tax brackets are now twice that of the single tax bracket limits. Couples who are both considered high earners are more likely to see the marriage penalty, while couples who have a larger disparity in their incomes could get a marriage bonus. It depends on the tax bracket ultimately applied to your income. Projecting your combined income early in the year is the most helpful tactic as it can give you more time to minimize any potential penalty.
Update Your Withholdings
After the honeymoon is over it is important to check in with your HR representative to adjust your withholding from your paychecks. Use the form W-4 instructions and the IRS’s withholding calculator to determine the appropriate number of allowances you are entitled to. If you are married toward the end of the year it may be wise to claim a smaller number of allowances for your last few paychecks to true up your withholding for the entire year. But make sure to recalculate your withholdings for the start of the next year. The goal is to match your withholding with what you expect to owe at the end of the year. This way you get neither a large refund nor an amount due with your return.
Coordinate Fringe Benefits
While discussing your withholding with your HR representative, it is also a good time to see what fringe benefits your employer offers for families. Make a list of all of the benefits your employer offers and rank them by priority and tax savings. It might make sense to convert your health plan -to another benefit and use your spouse’s family health coverage.
Are you a newlywed that needs more information? Contact us.