Ah, newlywed bliss! A time spent reliving the special moments of your magical wedding, remembering the fun and romance of the honeymoon, and thinking about the tax implications of your new marital status. What? You weren’t doing that last one? Well, you probably should be! Marriage can bring many pleasant surprises, but a big tax bill shouldn’t be one of them. With some smart planning, it’s easy to avoid some common pitfalls of the first year of filing together.
Your New ‘Married’ Tax Filing Statuses
The first thing to know is that the minute you say “I do,” whether it’s January 1st or December 31st, as far as the IRS is concerned you are married for the whole year. In previous years this could lead to trouble for many newlywed couples because of something known as the “marriage penalty,” a quirk of the tax brackets that could cause a substantial increase in tax liability for couples filing jointly. The recent tax reform (you may have heard of it) made some big changes to the tax brackets, essentially eliminating the marriage penalty, which is great news whether you’re still unpacking your wedding gifts or planning for your diamond anniversary!
How Many Exemptions on that W-4?
Despite the new tax brackets, there are still some things to consider when gearing up for your first tax return together. The way you choose to file (Married Filing Jointly or Married Filing Separately) can make a big impact on your bottom line so it’s good to know that going in. Once you make that decision you’ll want to take a look at your W-4 (you know, that funky form you fill out every time you get a new job). The W-4 lets your employer know how much tax to withhold from your paychecks. If your withholding doesn’t match up with your actual tax liability, then you could be in for a big surprise when you file your tax return, so it’s important to spend some quality time getting familiar with it!
The W-4 asks you for two main pieces of information: (1) are you single or married and (2) how many allowances will you claim? You can claim anywhere from zero to 99 allowances with each additional allowance resulting in less tax taken out of your paycheck. If you prefer to get large refunds at tax time, then claiming fewer allowances, resulting in a higher withholding, is one technique to maximize your likely refund (though it certainly doesn’t guarantee it). Taxpayers who prefer not to have the government hold onto their money for them can increase their allowances to decrease withholding. There can be an art to balancing the number of allowances claimed, but it’s not for the faint of heart!
Is your head spinning yet? Luckily you don’t have to go it alone on this one. The IRS has a very helpful resource available called the withholding calculator. You provide some basic information and the calculator tells you your estimated tax liability and suggests changes you can make to your W-4 to get you on track.
Of course, if you’re having any difficulties with it, Visor’s tax team can guide you through the W-4 as well to help ensure you’re on pace to get the refund that you expected.
Filing taxes, much like planning a wedding, can seem like an overwhelming task. But like planning a wedding, the more prepared you are the more you can relax and enjoy the day!
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