Getting Married and Related Tax Issues
Although tax issues are the furthest thing from a newlywed’s mind during this big life-changing event, couples should know how tying the knot can affect their tax situation. There are actions they need to take to avoid problems and unfortunate tax surprises. If you are newly married, here’s a checklist of “to do’s” to help you:
SSA Name Change - When a name changes through marriage, it is important to report that change to the Social Security Administration (SSA). The name on a person’s tax return must match what is on file at the SSA. If it doesn’t, it could delay any tax refund. To update information, you should file Form SS-5, Application for a Social Security Card. The instructions for completing and filing the form are included with the form.
You’ll also need to tell your employer your name change so that your name and Social Security number on the W-2 form your employer issues will match the SSA’s records. This is important so that your earnings during the year and the payroll taxes you’ve had withheld are properly credited to your SSA account.
IRS Address Change - If marriage means a change of address, the IRS and U.S. Postal Service need to know. It is very important that the IRS has your correct address in case you are sent a notice about an already filed tax return. Responding to an IRS notice is essential to avoid compounding the problem that created the IRS inquiry in the first place. You don’t want to miss making a timely response because you didn’t notify them of an address change. An address change cannot be an excuse for any consequences of not responding.
To change your address with the IRS file Form 8822, Change of Address. Instructions on how and where to file are included with the form. If your state also has an income tax, check the website of the state’s tax department for a change of address form. Because the IRS is so backed up due to COVID, it might even be appropriate to pay the post office a little extra for their proof of mailing service just in case you should need it.
Postal Service Address Change – It will take time for IRS to make the address change after the Form 8822 is filed, so make sure the U.S. Postal Service (USPS) is notified to forward mail to your new address by going online at USPS.com or go to their local post office.
Also, notify your employer(s), financial firms, retirement payers, etc., of your new address.
Tax Withholding – After getting married, couples should consider changing their withholding. Newly married couples must give their employers a new Form W-4, Employee’s Withholding Allowance within 10 days. If you and your spouses both work, you may move into a higher tax bracket or be affected by the additional Medicare tax. You can use the Tax Withholding Estimator to help complete a new Form W-4. Additional information related to completing W-4s and estimated tax payments are available in IRS Publication 505, Tax Withholding, and Estimated Tax.
Tax Filing Status - Married people can choose to file their federal income taxes jointly (on one tax form) or separately (each filing their own tax form) each year. While married filing jointly is generally the most beneficial way, it’s best to figure the tax both ways to find out which is better. Remember, if a couple is married as of December 31, the law says they’re married for the whole year for tax purposes.
If your new spouse is a non-resident alien, the law requires you to file a married separate return unless you and your alien spouse both elect to file a joint U.S. return reporting world-wide income. This decision can have a profound impact on your tax liability, and you should discuss the ramifications with this office before deciding.
Some of the more relevant negative issues related to filing separately are outlined in the following chart:
Joint and Several Liability – There is always the possibility that one party to the marriage may owe back taxes, child support, or alimony from a prior marriage. If the newlyweds subsequently file a joint return each of them is legally responsible for the entire liability. Thus, any joint tax refund can be seized to satisfy those liabilities and is something that should be considered when making the filing status decision.
Beware of Tax Scams - All taxpayers should be aware of and avoid tax scams. The IRS will never initiate contact using email, phone calls, social media, or text messages. First contact generally comes in the mail.
If you need assistance completing your new W-4s, adjusting estimated tax payments, determining which filing status is best for you, or other tax issues related to getting married, please give this office a call.