5 Things Newlyweds Should do to Prepare for Next Year’s Taxes
Congratulations on your nuptials – getting married is a very exciting time and while I don’t want to damper it with talk of taxes, what better time than when you have the fond memories of a wedding still fresh in your mind.
It’s time to get down to the nitty-gritty of your new financial situation. Many couples, while they figure out joint bank accounts and work on figuring out a new money system for their lives, neglect pressing tax issues because it’s not an immediate need.
Before you know it, April of next year will soon be here and it’s best to prepare now.
Don’t forget to make time for taxes as you put together your newlywed finances.
Here are 5 things you should do now, to get ahead of the curve for next year’s taxes:
1. Inform the Social Security Administration of Name Changes
When you, or your wife, change your name, you need to let the various offices know. If you change your name and don’t update every agency, you’ll have a headache come tax time because things will no longer match.
As soon as things settle down, the first step is to change your name with the Social Security Administration (SSA). The IRS uses the SSA records to match your name to a social security number.
If they don’t match, your e-filed return could be rejected or the IRS may send you a letter asking for you to explain the discrepancy if you paper file. If you’re waiting for a tax refund, this could be a huge pain.
2. Decide on Married Filing Jointly vs. Separately
Once you get married, you are legally moved into a new tax filing status. You have no choice in this; you must file your taxes as “married.”
The only question is whether you will file jointly or separately. Typically married couples receive more tax benefits when they file jointly since joint returns are taxed at a lower tax rate.
You also have to remember that there are some tax deductions and credits that are only available if you are filing as married filing jointly.
There are some situations where filing married filing separately is more beneficial. If you make similar amounts and you are high income earners — you might want to file separately, since you can run into the “marriage penalty.”
TurboTax will prepare your taxes using the filing status that is best for you.
3. Adjust Your Withholding
Now that you’re married, your tax situation is different and so it’s time to figure out if you need to adjust your withholding.
As you might remember, withholding is the amount that your employer takes out of your paycheck to cover taxes. You might need to withhold more or less, depending on the situation.
Consider your spouse’s work situation, and whether or not independent contractor income applies. All of these various factors will impact whether it needs to change.
TurboTax W-4 withholding calculator will help you figure out your exemptions.
4. Gather Receipts for Expenses That May be Tax Deductible
Now is a good time to plan ahead as a couple — gather your receipts for things like items you donated as a married couple, college courses you may have taken and settlement statements if you purchased a home.
You may find that expenses you have together as a married couple may amount to some big tax savings when you file your taxes.
5. Use Planning Tools
There are tools available like TurboTax TaxCaster that can help you estimate what your tax situation will be now that you’ve tied the knot. Don’t hesitate to use the tools available to help you plan for next year’s taxes.