I just attended a wedding this past weekend and I’m always happily amazed at the outpouring of emotion at one of the most joyous occasions in your life. As a personal finance writer, we’re always focused on the dollars and cents of life so it’s nice to be reminded of what we’re working towards. Sadly, once the cake and champagne has been consumed and the DJ shuts off the music, we have to be transported back from this magical place and back to reality. :)
With reality comes taxes and the challenges that a newly married couple must face. Once the honeymoon is over, it’s time to start getting serious about your finances as a couple. And that includes getting your tax situation in order. Remember that your marital status is determined by your status on December 31. So if you marry on December 31, you are considered married for the whole tax year.
As the year draws to a close, and as you consider your new married filing jointly status, here are five tips to keep in mind:
1. Change Your Name with the Social Security Administration
Changing your name on your Social Security Card is step one. You want the name the Social Security Administration has to match the name on your tax return. If you have changed your name as a result of the marriage, you need to make sure that is reflected with all of the proper agencies. You need to fill out and file a Form SS-5 with your local Social Security Administration office. You’ll receive a new card, but your Social Security number will remain the same.
If you didn’t change your name as a result of the marriage, there is no need to file with the Social Security Administration.
You’ll want to change your name at the SSA before you try to change it on your driver’s license or any other documents. It can save you a lot of time because the SSA document can be used as proof for the license, which is then used as proof for everything else (utility bills, banks, credit cards).
2. Double Check Your Tax Withholding
Now that you have a new tax status, it’s important to review your tax withholding. Does your combined income with your spouse put you in a higher tax bracket? If so, you might not be withholding enough. TurboTax has a great calculator that can help you figure out if one or both of you need to make changes to your tax withholding amount. You want to make sure that you begin withholding more from your paycheck, or you could be surprised by your higher tax bill come April.
3. Consider the Possibility of Filing Separately
In most cases, it makes sense to file jointly. However, depending on your individual tax situations this year, it might make sense to file as married filing separately – at least at first. Take the time to figure your taxes with both scenarios to see what your tax bill ends up being. You can re-evaluate your tax filing status next year to see if the best option has changed. You can use TurboTax TaxCaster for free to check both scenarios. TurboTax also makes it easy when figuring out both scenarios.
4. Look at ALL Your Possible Tax Breaks
If you file jointly, your spouse’s tax breaks are yours as well. Make sure that you review ALL of your tax breaks from the past year. If you just got married, you might be able to take advantage of your spouse’s generous charitable donations to help lower your bill. Consider investment losses, dependent care credits, education credits, mortgage interest, and other tax breaks. Go back through the finances for both of you and identify your joint tax breaks – and see if you have time to rack up a couple more tax breaks before the end of the year.
I’ve always found that the simplest way to do this is with software. Tax preparation packages make this dead simple because they walk you through everything – trying to figure it out by reading IRS publications is usually a time consuming and difficult process.
5. Understand that Same-Sex Couples Can’t File Federal Taxes Jointly
Same-sex newlyweds need to be aware that they can’t file their federal tax return jointly. The Defense of Marriage Act, passed in 1996, prohibits federal recognition of same-sex couples. So, even if same-sex marriage or civil unions are legal in your state of residence, as far as the federal government is concerned, they are not recognized. Same-sex couples have to file as single when filling out a federal tax return.
These are just a few of the tax tips I’d give my newly married friends.