Jul 01, 2021
By Paula Rogers, CPA President and Partner at Terry Lockridge & Dunn
Marriage changes many things and the farthest thing from the newlywed’s minds is how their saying “I do” can affect their tax situation. However, marriage can have some major tax impacts and here are a few items that newly married couples should address:
Name and address changes
Name – when your name changes through marriage, it is important to report that name change to the Social Security Administration. If you try to e-file a tax return with your new name due to marriage but have not reported the change to the Social Security Administration, your tax return will get rejected and delay any refunds. The name on a person’s tax return must match what is on file at the Social Security Administration. You can update your information with SSA by filing Form SS-5 (Application for a Social Security Card).You can get this form at www.SSA.gov, by calling 800-772-1213 or at a local SSA office.
Change of address – The IRS and U.S. Postal Service need to know if your marriage means a change of address. If your address changed before e-filing your tax return, enter your new address on your return when you file, and the IRS will update their records when your return is processed. Be sure to also notify your tax preparer! However, if your address changed after you filed your tax return, you should directly notify the IRS by completing Form 8822 (Change of Address at www.irs.gov) because not all post offices will forward government checks. Taxpayers also need to notify the postal service of any address changes so they will forward their mail. This can be done by going online at www.USPS.com or at your local post office.
Couples should consider changing their withholding after getting married. A change in marital status can mean a higher tax bracket – especially if both spouses work. It has often been my experience with clients that the tax tables do not adequately withhold enough federal taxes for married couples when they both work. This is the case especially if in the higher tax brackets. The best way to make sure you are okay tax wise is to have your tax preparer run some tax projections based on current paystubs and any other tax items. They then can advise you if you should have more taxes withheld from your paychecks. Newly married couples are required to give their employers a new Form W-4 (Employee’s Withholding Allowance) within 10 days of getting married. Your tax preparer can assist you with this form.
Married couples can choose to file their federal income taxes jointly or separately each year. In most cases, it is more beneficial to file jointly. However, it is best to figure the tax both ways to determine which is the best filing status to select for the year. There are some deductions and credits that are limited if a couple chooses to file married filing separately instead of jointly. It is important to note an amended return filed after the due date of the original return cannot be used to change filing status from married filing jointly to married filing separately. Returns can be amended to a married filing joint filing status return for up to three years after the original tax deadline. Remember, if a couple is married as of December 31, the law says they are married for the whole year for tax purposes.
If marriage is in the near future for yourself or any of your children as it is for my daughter, please reach out to Paula at firstname.lastname@example.org to consider any tax implications. You may also reach out to any of our accountants at Terry Lockridge & Dunn in Cedar Rapids at 319-364-2945 or in Iowa City at 319-339-4884.