21 Aug 5 Important Tax Considerations for Engaged Couples
With so much that goes into planning a wedding, it’s not often that engaged couples take a moment to think about how their impending nuptials will impact their taxes. And while it’s far from the most important thing on your list, it is a good idea to properly plan and prepare for the changes to your tax filing status, and other tax considerations. Here are 5 things that you should be aware of, so that you’re not caught off guard when you file for the first time as a married couple.
The most obvious change to your taxes will be that you will no longer be filing as an individual. However, it’s important to note that your filing status is based on your marriage status at the end of the year. So even if you’re married on December 31st, and went the entire tax year as an unmarried individual, your filing status for that tax year will be “married.”
Now, you can file as “Married Filing Separate,” but that will be between you and your accountant when you file your tax return in Provo. Just know that, regardless of when you are married during the year, you will be filing as a married couple for that year.
Tax Brackets and Withholdings
If you’ve been filing as an individual for a while, you may be accustomed to your tax return yielding a consistent return or amount owed each year. You should be prepared for this to change after you’re married. Depending on your current tax bracket, you may see either a marriage penalty or a marriage bonus on your taxes, as well as having your current tax bracket change, depending on your new spouse’s income.
If you’re planning to marry before the end of the year, it’s a good idea to meet with a tax planner in Provo to help you get an idea of what you can expect on next year’s tax return. Your accountant can also help you to make decisions regarding your withholdings, so that there are no surprises.
If you or your new spouse is bringing a child from another relationship into your marriage, then there are further tax considerations for your family. You’ll want to speak to an accountant and determine whether it is more beneficial for your to file jointly or separately, depending on how many children each of you have, and how much of the year they spend in your home.
Additionally, if you or your new spouse share custody with an ex, it’s important to have an honest discussion with them regarding who will be claiming the child as a dependent. This can help you to avoid some large and potentially expensive miscommunications.
Change of Name and Address
Many newlyweds experience a change of address and a change in their last name after marriage. While you don’t need to report name changes directly to the IRS, you should be sure to notify the Social Security Administration before you file your next return. This also applies to any children you have who will be changing their last names after the marriage.
If you’re changing your address, we can submit your updated information to the IRS to ensure that any refunds, notices, or other IRS communications are sent to the proper address.
If either you or your fiancé owe back taxes, it’s important that you sit down with your CPA and discuss how you want to handle that debt. We can help take steps to minimize the tax liability for the spouse who did not accrue the tax debt. This will allow you to still file jointly, if you wish, without placing one spouse’s accrued tax debt on both of your shoulders.
If you file jointly without filing these forms, your joint refund may be used to pay the back taxes. Also, bear in mind that, regardless of how you file, both of your incomes will be considered when determining available income for any payment plans with the IRS.
There are many important conversations to have before you get married. But amid all of the planning and other conversations you have, make sure that you both sit down and have a conversation with a tax planner in Provo. Doing this will help you to make smarter financial decisions from the first day of your marriage, and ensure that there are no surprises when you file your first tax return as a couple.