What's new in taxes: Tips for those getting married
If you are planning to get married this summer, or know someone taking the matrimonial plunge, here are some important tax tips every couple should know before they walk down the aisle.
Notify Social Security. 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.
Address change notification. If either of you are moving, update your address with your employer as well as the Postal Service. You will also need to update the IRS with your new address using Form 8822.
Review your benefits. 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.
Update your withholdings. You will need to recalculate your payroll withholdings and file new 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."
Update beneficiaries and other legal documents. 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.
Understand the tax impact of your residence. 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.
Sit down with an expert. It is natural for newlyweds to focus their attention on the big day. Because of this, reviewing your tax situation often is an afterthought. Do not make this mistake. A simple tax and financial planning session prior to the big day can save on future headaches and avoid potentially expensive tax mistakes.