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For most people, marriage is a significant event that can have a major impact on your income tax situation and your finances in general. This topic is broken down into four general categories:
Your filing status is the most fundamental way that being married will affect your income tax situation. If you are legally married on the last day of the year, you generally only have two options Married Filing Joint and Married Filing Separate. Under some special situations, you may also qualify as Head of Household. In determining your filing status, there is only one date that really matters, December 31. If you are considered married on that day, for tax purposes, you are considered married for the entire year. Likewise, if a divorce is official before December 31, you are considered unmarried for the entire year. The benefit to being considered married for the entire year, is that it is not necessary to file any additional returns or forms to report your "Single" income and expenses prior to getting married. You simply file a return as if you have been married for the entire year. The downside is that the retroactive affect of the Married tax rates, may impact your income tax liability for the entire year and could cause some unexpected hardship if you're not prepared. The "Marriage Penalty" can be fairly significant. If you want to avoid a big tax bill on April 15th, it is a good idea to adjust your withholding. You can change your withholding at any time. By adjusting your withholding earlier in the year that you are getting married, the impact of the additional tax will at least be less painful by spreading it out over a longer period. To adjust your withholding, it is necessary to file a new Form W-4 Employee's Withholding Allowance Certificate with your employer. A new Form W-4 can be obtained by selecting the Federal menu item and then selecting Update W-4 or you can obtain one from your employer, copied from IRS Forms books at public libraries, or downloaded from the IRS Website at www.irs.ustreas.gov. There following are additional informational topics relating to the Marriage Life Event.
As a married couple filing a joint return, you will report your combined income and deduct your combined allowable expenses. Generally, a filing status of married filing joint will be most advantageous since your standard deduction is higher. Also, you can qualify for some tax benefits that would not be available under the Married Filing Separate status. If you and your spouse decide to file separate returns, you can later amend your return and change the filing status to Joint. On the other hand, once you file a joint return, you cannot later amend your return to change the filing status. An aspect of filing a joint return that should not be overlooked is that a joint return also creates joint responsibility for all tax, interest, and potential penalty that may be due from a tax year where a joint return was filed. One spouse may be held responsible for all tax due even if the other spouse earned all of the income. Typically, this only becomes an issue after the marriage is dissolved and one spouse finds out that the other spouse did not pay all of the taxes that were due or did not report all of the income that was received. There are some special rules that will allow "Innocent Spouses" to avoid this burden under certain circumstances. However, the best protection is for both spouses to know and understand what is being reported for income and expenses on the joint return. The other filing option available is Married Filing Separately. This method may be the logical choice if you want to be responsible for your tax return only. In some circumstances, this method may also result in a lower tax liability (See the Joint Versus Separate topic). For most couples, separate returns will not be advantageous because of special rules that deny certain tax benefits to married couples that choose to file separately. Some of the benefits denied are:
In some situations, there can be a tax advantage for a married couple to file separate returns. For example, when both spouses have income and are not entitled to any of the credits listed on the previous topic. The benefit will come into effect if one spouse has large deductions for medical expenses, casualty losses, or miscellaneous itemized deductions. These deductions are subject to limitations based on adjusted gross income. By filing separately, more of the expenses become deductible by lowering the adjusted gross income on the applicable return. The cost of invitations or wedding receptions for yourself or for your child are not deductible. In addition, legal fees associated with marriage are not deductible expenses. The kinds of legal fees that are not deductible include marriage licenses, fees paid to ministers, or Justice of the Peace. If one spouse changes a name after the marriage, the records with the Social Security Administration must be updated. The names and social security numbers on your tax return should match the information on file with the Social Security Administration at the time that you file your tax return. There will be delays in processing your tax return until any differences are reconciled. To update your name with the Social Security Administration, you will need to complete Form SS-5. This form is available at your local Social Security office, by phone at 1-800-772-1213, or you can download the form and free printing software from the Social Security web site at www.ssa.gov. In addition to the completed Form SS-5, you will also need documentation that shows your old name and your new name. Some of the documents that are acceptable as proof of identity are:
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