Tax Tips for Newlyweds

August 17, 2016

Looking for a gift to give after all those June weddings? How about some solid tax advice for the newlyweds?

Taxes may not be the first thing newlyweds are thinking about, but this life changing event has financial and tax consequences all newlyweds should be aware of.   Check out the following set of tips.

Name Change

Names and Social Security numbers on their tax return must match their Social Security Administration records – so if any names are changed, they’ll need to report it to the SSA with Form SS-5, Application for a Social Security Card.  Remember, the Social Security Administration and the IRS are big bureaucracies, if you change your name late in the year, it’s likely the change hasn’t cycled through the system yet.  So don’t be alarmed if your return is rejected by the IRS, your accountant can easily walk you through the correction.

The form to start the name change process is available on www.ssa.gov, or by calling (800) 772-1213.

Congratulations – you’re in a new bracket!

Now that you’re married, your income for tax purposes will be combined to determine your new tax bracket.  If both spouses have good paying jobs, they may very well discover the “Marriage Penalty” can apply to them.  In some specific circumstances, couples making the exact same money they made as single people, are suddenly in a higher tax bracket.

Newlyweds should report to their employers on a new Form W-4, Employee's Withholding Allowance Certificate.  However, calculate your withholding closely, you don’t want an unhappy surprise next April 15th.

Crossing the threshold

If either of the newlyweds are moving, they’ll want to let the IRS know, with Form 8822, Change of Address.  This form is unnecessary if your tax return is filed before the form is.  All addresses are updated using the latest tax return filed.  However, don’t make the IRS come looking for you.  Not receiving an IRS notice because you moved isn’t considered an adequate excuse for not responding in a timely manner.

Filing Status

If the couple is married as of December 31, that’s their marital status for the whole year for tax purposes – and that means they need to decide whether to file jointly or separately. Which one is better depends on the couple’s individual circumstances, so they’ll want to check out both possibilities.  With some forward planning, the happy couple may decide to wait one more day and get married on Jan. 1st if the “Marriage Penalty” applies to them.

New forms

Combined financial lives may mean a higher tax bracket, but they can also mean more benefits from itemizing – which would mean claiming those deductions on a Form 1040, as opposed to a 1040A or 1040EZ.

This would be a good area for a friendly tax advisor to offer some advice …

Healthcare

Yes, the Affordable Care Act (also known as Obamacare) may apply.  If either spouse bought a Health Insurance Marketplace plan, or got an Advanced Premium Tax Credit this year, they need to report any changes in circumstance, like income or family size. They should also alert their Marketplace if they moved out of area.  If one spouse qualified Healthcare through the exchange and another spouse didn’t, they’re likely to have a significant impact on their final return in the year they got married.  This would be a great time to meet with an accountant.

More IRS resources

The IRS offers a host of resources for new couples, including videos on YouTube and more.

No need to send them a thank-you card.

   

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