Newlyweds Need to Understand How Tying the Knot Affects Their Taxes
Tax Checklist for Newly Married Couples
- Name. When a name changes through marriage, it is important to report that change to the Social Security Administration. 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 as well as generating a notice from the IRS to verify your identity. To update information, taxpayers should file Form SS-5, Application for a Social Security Card. It is available on SSA.gov, by calling 800-772-1213 or by visiting a local SSA office.
- Address. If marriage means a change of address, the IRS and U.S. Postal Service need to know. To do that, people should send the IRS Form 8822, Change of Address. Taxpayers should also notify the postal service to forward their mail by going online at USPS.com or their local post office. Further information can be found at Topic 157, Change Your Address – How to Notify the IRS.
- 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. If both spouses work, they may move into a higher tax bracket or be affected by the additional Medicare tax. They can use the Tax Withholding Estimator on IRS.gov to help complete a new Form W-4 or contact their tax professional. Taxpayers should review Publication 505,Tax Withholding and Estimated Tax for more information.
- Filing Status. Married people can choose to file their federal income taxes jointly (MFJ) or separately (MFS) each year. While filing MFJ is usually more beneficial, it’s best to figure the tax both ways to find out which works best. Remember, if a couple is married as of December 31, the law says they’re married for the entire year for tax purposes. The same holds true for divorcees – if you are divorced on or before December 31, you are considered not married for the entire tax year.
- Joint and Several Tax Liability. When a couple files MFJ, remember that both spouses are jointly and severally liable for the tax owed on that return signed as being true and correct under penalties of perjury. This can develop into an IRS tax debt situation for both spouses if one spouse is self-employed and is failing to report all of their income or is exaggerating their expenses. In such situations, the IRS will assess both spouses the taxes owed and attempt to collect from both spouses. Make sure you are comfortable with the income and expenses being reported on your MFJ return before you sign it. If you have any doubts about the information being shown on a MFJ return, speak with a tax professional about filing MFS.
- IRS Tax Debts. Often when a delinquent taxpayer is considering marriage, they will get religion and wish to get into tax compliance so as not to burden their newly-wed with their tax problems. However, that is not always the case. Consult with an experienced tax professional as to how each spouses IRS tax compliance can be verified.
- 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. Those wondering if they owe money to the IRS can view their tax account information on IRS.gov to find out.
Tax Planning Tip #1
NEVER sign a tax return without first reviewing it. You are ultimately responsible for what is reported on your tax return, even if the preparer included fictitious business losses to increase your refund or decrease the taxes you owe.
Tax Planning Tip #2
Inflating business profits may sound counter intuitive as one may think that the taxpayer would be subject to additional income taxes, but some tax credits, such as the earned income tax credit, could result in additional refunds to the taxpayer by showing more business profits.
Tax Planning Tip #3
Due to taxpayers filing false returns claiming tax credits, and tax preparers preparing false returns claiming illegitimate child care and tuition credits, the IRS is now requiring tax preparers to perform due diligence by asking questions and documenting the taxpayer’s responses to the required questions in the IRS’s efforts to combat tax fraud.
Tax Planning Tip #4
When you engage an unscrupulous tax return preparer, you are increasing the odds that your return will be audited by the IRS. When the IRS identifies an unscrupulous tax preparer, it runs the returns prepared by that person through IRS computers looking for similarities. For example, if a preparer is claiming erroneous childcare or educational credits, the IRS computers will identify all taxpayers who have claimed those credits who used that tax preparer.
Return preparer fraud is one of the IRS’ Dirty Dozen Tax Scams and taxpayers seeking a return preparer should remain vigilant. The IRS has information on its website for choosing a tax preparer and has launched a free directory of federal tax preparers.
If you would like to discuss your business or personal tax planning, tax preparation and other financial concerns with an experienced tax professional, we invite you to call 610-594-2601 today to make an appointment at our Exton PA CPA office to discuss your situation. You can also schedule a consultation at Click Here.
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BE SURE TO READ THE DISCLAIMER PAGE: Tax laws, IRS rules and regulations change frequently. Although we hope you’ll find this information helpful, this blog is for educational purposes only and should not be considered as the rendering of tax, legal or investment advice. The publisher shall not assume liability for any losses, injuries, or damages from the display or use of this information.
About F. Bryan Haarlander, EA, CTRS:
Bryan Haarlander is an IRS licensed Enrolled Agent and who owns and operates a specialized tax services firm serving clients in the western suburbs of Philadelphia, PA, which includes the cities of Chester Springs, Coatesville, Collegeville, Devon, Downingtown, Exton, Frazer, King of Prussia, Paoli, Philadelphia, Phoenixville, Pottstown, Radnor, Reading, Wayne, West Chester in Berks, Chester, Delaware, Montgomery and Philadelphia Counties, as well as clients in Delaware, New Jersey, New York and throughout the continental USA.
A Certified Tax Resolution Specialist, Bryan is well-known for his IRS tax resolution expertise and his book How to Resolve Your IRS Tax Debt Problems.