When you get married, everything about you changes and this includes your financial status, tax obligations, filing status, and so much more.
Here are tips that can immensely help with your taxes and finances.
Employ the Right Filing Status
All married couples living with their spouse have two options when it comes to filing taxes – going by the joint filing route with your spouse or filing as married couples filing separately.
Joint filing is recommended and a good idea as your tax obligation will reduce and be more accessible. The couples will prepare a single return, and there is no need worrying who takes the deduction.
The only condition when it is not advisable to file jointly is if any of the partners have a tax liability and you don’t want to be responsible. Also, this does not apply to spouses that prefer to have private finances.
Debt
For married couples or people about to get married, it is essential to try and get rid of all debts as soon as possible.
All non-taxable debts like student loans and other credit types should be the foremost priority for elimination for people in their 20s. It is even more important than trying to buy a house.
All debts with a high financial cost like credit card bills should be the focus. For people with huge credit cards, it is recommended that they consolidate the debt into a single one with lower interest. You can even request that the bank withdraws a specified amount from your paycheck and direct it towards the consolidated loan. This way, you will make do with the available disposable income.
Try not to have too much or too little withheld.
One of the most important things to do is file Form W 4 with your boss after getting married. There might be a need to withhold more tax or less compared to when you were single. There is a high probability that it will not be the same.
Guesswork when filing Form W 4 is always not recommended as there are many factors that come into play to determine the tax liability.
Withholding too much might leave you wanting more money when you eventually need it. Also, withholding too little might come with some shock when you finally file your tax in the coming year.
Contact the Social Security Administration and Change Your Name
People who will change their name after marriage should update it with the Social security Administration, and this should be done before tax filing.
Failure might lead to a delay in processing the tax return and delay in any tax refund one might be expecting.
Fortunately, there are various ways one can change the name with SSA.
You can enter the Social Security local office
Call them using 1-800-772-1213
Change it via their webpage at ssa.gov
Does Marriage come with a "Marriage Penalty"?
Taxpayers need not worry about the marriage penalty on their tax returns. However, the marriage penalty is a term used to explain that one will likely pay more in taxes when married than the tax the two parties will pay as single.
A perfect example is some tax breaks alongside other provisions that disappear when one gets to a higher income level. If the level for married couples is less than twice what single people have, there will be a penalty for being married.
Sadly, you cannot avoid the marriage penalty by filing separately. And separate filing can worsen it as you will not have access to a series of tax breaks available for joint filers.
Interestingly, if one, in the couple, makes a colossal amount of money compared to the other, they might pay much less tax if filing jointly than what they would have paid in total as single filers.
FOR MORE INFORMATION OR TO SEE HOW KAREN MUNOZ, EA. CAN BEST HELP YOU WITH YOUR TAX FILING NEEDS, PLEASE CLICK THE BLUE TAB ON THIS PAGE.
THANKS FOR VISITING.
Karen Munoz, EA