Marriage is a big step in life. As such, getting married ought to rank high among the happiest events of your life. Though everything else, including the weather, might work perfectly like clockwork on your special day, the IRS may just spoil the party or deliver an unwanted wedding gift. This is because marriage leads to big changes on your tax status. For instance, deciding whether to file jointly or separately is a decision that has a resounding impact on the tax rates you’ll pay as well as any entitled deductions or credits.
The IRS considers your marital status on the final day of the year. Regardless of the time of marriage, be it on New Year’s Eve, or January 1st, you will be required to file as married.
Before gathering tax forms and deciding to combine your finances, here’s some food for your thought:
- The unpopular marriage penalty hits many couples. If both spouses work and earn similar pay, the marriage penalty will most likely be applied. Couples with a single earner, on the other hand, view the tax benefit from marriage.
- Married couples ought to change the way they have taxes directly withheld from their paychecks. This may be done by filling out a Form W-4 with your employer to adjust withholding tax, and ensure not too little, or too much tax is withheld.
- Usually, filing jointly makes the most sense, as filing separately makes you ineligible for certain valuable tax credits, including those for child care and education as well as the Earned Income Tax Credit. But occasionally — such as when one spouse has major medical expenses — filing separately can save you money.
- Filing joint returns definitely makes more sense. This is because filing separately renders you ineligible for certain tax credits, including credits for child care and education, in addition to the Earned Income Tax Credit. Occasionally, however, filing separately may save you some money: for instance when one spouse has major medical expenses.
- You should ensure that the IRS is supplied with the most current information about you. If you have relocated to a new abode, then Form 8822 informs the IRS of the change of address. With regard to any name changes, ensure you fill out Form SS-5 to keep the Social Security Administration and the IRS updated on your new name.
In conclusion, marriage may spring extra savings opportunities. For instance, a non-working spouse can open a spousal IRA, which is a non-exploitable opportunity for the single and unemployed to prepare for long term retirement goals.
To the recently married, these tips should put you in line for IRS blessings.