In addition to the seating chart, invitation designs, and cake tastings, there are tax repercussions to plan for once you say “I Do.”
If you are planning to get married, or know someone preparing to exchange vows this year, here are some important tax tips every couple should know before they walk down the aisle.
After the wedding (or honeymoon), notify the Social Security Administration (SSA) of any name changes by filling out Form SS-5. The IRS matches names with the SSA and may reject your joint tax return if the names don’t match what the SSA has on file.
You will need to bring your official marriage certificate with you to apply for a new Social Security card, which is the first step that must be completed before obtaining a new driver’s license and/or updating your bank account information to reflect your new name.
If either of you are moving, update your address with your employer as well as the U.S. Postal Service. You will also need to update the IRS with your new address using Form 8822.
Getting married allows you to make midyear changes to employer benefit plans. Take the time to review health, dental, auto, and home insurance plans and update your coverage. If both of you have employer health plans, you need to decide whether it makes sense for each of you to keep your plans or whether it’s better for one to join the other’s plan as a spouse.
You will need to recalculate your paycheck withholdings and file new Form W-4s reflecting your new status. If both of you work, your combined income could put you in a higher tax bracket. This can result in reduced and phased-out benefits. This phenomenon is known as the “marriage penalty.” Our affiliate, Abacus Payroll Inc., offers a free W-4 Assistant to walk you through the computations.
Review your legal documents to make sure the names and addresses reflect your new marital status. This includes bank accounts, credit cards, property titles, insurance policies, and living wills. Even more importantly, review and update beneficiaries on each of your retirement savings accounts and pensions, along with your life insurance policy.
If you are selling one or two residences, review how capital gains tax laws apply to your situation. This is especially important if one of you has been in your home for only a short time or if either home has appreciated in value. This should be done as soon as possible prior to getting married to maximize your tax benefits.
It is natural for newlyweds to focus their attention on the big day. Because of this, reviewing your tax situation often is an afterthought.
Associate Partner Michael Engleman, CPA highly recommends that couples set to marry “have a tax projection prepared well before year-end to avoid any nasty surprises when you file your joint tax return. We could recommend changes to your tax withholding so you don’t owe thousands of dollars.”
Do not make this mistake of waiting or assuming you will not be impacted. A simple tax and financial planning session prior to the big day can save on future headaches and avoid potentially expensive tax mistakes.
If you’d like a review of how marriage will affect your tax and financial situation, call at your earliest opportunity.
The information contained in this newsletter is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance. For more information or for assistance with any of your tax or business concerns, contact our office at 856.667.4100.
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