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A variety of life events have a significant impact on your financial and subsequently your tax profile. For example: Going to school, getting married, having children, buying a home, etc. This edition is going to highlight some key factors to watch out for if you are getting married.
1) Know each other’s tax history
You don’t have to audit each other but its a good idea to have a conversation with your spouse about their past tax returns. If one spouse is accustomed to getting a $5,000 refund every year, he or she is not going to be pleasantly surprised to write a check to Uncle Sam because the joint income resulted in higher taxes.
2) Filing Status: Joint vs. Separate
In almost all cases filing a joint return is better than “Married Filing Separately” for tax purposes. Washington regulators have spent a lot of time to weed out any loopholes that made “Married Filing Separately", an attractive filing status.
However, there are some cases when “Married Filing Separately” may make sense. For example: if one spouse has high medical expenses and low income
Whatever you decide, its important to tag every number on the return as yours, your spouses or joint. It really helps streamline any future controversies.
3) Tax Credits
After marriage, both spouses have to qualify for the same type of credit to be eligible. For example: if you are eligible for the $8,000 first time home buyer credit and your spouse is not, together you are ineligible. If you close on the house before signing the marriage certificate, you might be safe.
4) Name Change
A change in name is not effective for tax purposes until you update it with the Social Security Administration (SSA). The return can take longer to process if the name on the return and the one with SSA do not match.
5) On the Family Way
Having a child can open up doors for child care credit, dependent exemptions, and child tax credits. Make sure you discuss this with your tax preparer.
6) Adjust Your Withholding
Use your 2009 tax return to make any adjustements to your withholding rate with your employer using form W4. Remember to complete a corresponding form for state withholding as well. This will ensure an appropriate amount of tax is withheld from your paycheck each pay period and there will be less surprises at the end of the year.
By
Mohit Gupta
Gupta Tax & Business Services
Phone: +1 (516) 731-2956 | Fax: +1 (718) 504-4498
www.guptatax.com
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