Congratulations, newlyweds! While it may not have been on your registry, we’re pretty sure you’ll appreciate the gift of these tips to help you avoid trouble at tax time:
Has it Been a Year Already? If you were married anytime in 2017, the IRS considers you to be married for the full year, so you both should adjust your tax withholding with your employers. A two-earner couple may end up in a higher tax bracket after the wedding (the so-called marriage penalty) because of the way the tax brackets for couples filing jointly are set. You and your spouse should use the worksheets in IRS Publication 505, Tax Withholding and Estimated Tax, to figure the number of allowances you can claim as a couple, which will determine how much money your employers will withhold in taxes from your paychecks.
After you come up with the total number of allowances as a couple, decide how to divide them between the two of you. Then each of you should submit a new Form W-4 to your employer.
What About Roth? Your married status may also affect whether you qualify to make Roth IRA contributions. The income limit to contribute to a Roth IRA is $132,000 for singles, but it’s $194,000 for married couples – so two people who were close to the income limit when single may earn too much for a Roth after they’re married. If you’ve already made a Roth IRA contribution for 2017 and discover that your joint income is now too high, ask your IRA administrator to switch your 2017 Roth IRA contributions – plus all the earnings on that money – into a traditional IRA.
If you made contributions to the Roth in earlier years, the administrator should calculate how much of the earnings in the account should be attributed to the 2017 contribution. You need to switch only the 2017 contribution and its earnings to a traditional IRA; you can keep any money you contributed to the Roth in previous years in the account.
The Name of the Game. If you change your name, be sure to report the change to the Social Security Administration and get a new Social Security card. Otherwise, any tax refund could be delayed because the IRS will have trouble when it tries to match the names and Social Security numbers on your tax return. File Form SS-5 at SSA.gov or call Social Security at 1-800-772-1213 for more information. If you move, file Form 8822 with the IRS to report your change of address.
Questions about anything we’ve shared with you here? Call us. We’ll be happy to help.