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Now that wedding season is in full bloom, it might be a good idea to discuss what happens after the “I do’s” and the parties… tax wise that is.
After getting married, many begin the process of consolidating accounts, changing names, and coming up with a new budget. Here is a guide to the most important things you need to remember tax wise.
1. Tax Filing Status
Tax season just ended, but come next April you’ll be able to file under a new tax status – married filing jointly or married filing separately. While there are some reasons why married filing separately would be more advantageous (see What Is My Tax Filing Status for more info), the majority of newlyweds file under married filing jointly. This combines your income and makes filing your taxes a lot easier.
Also, don’t believe what you hear about the marriage penalty – Congress created laws in 2003 to alleviate the burden that was being put on married couples. However, this law expires in 2011 so take advantage of it now. Just make sure that you are married by December 31 in order to be able to file as married filing jointly for that year.
2. Social Security Number
In order to help avoid an audit AND a potentially larger tax bill, make sure that you change your name with the Social Security Administration prior to filing your taxes. This enables the IRS to match your name on your tax return to your social security number.
This process can take a few weeks, so be sure to give yourself plenty of time. The process to change your social security name/number differs by state, but usually involves submitting a form along with a copy of your marriage license to your local Social Security Administration office.
3. Combining Accounts
While this does not relate directly to your income taxes, combining accounts can affect the amount of interest your earn on your money. All couples will have to face the decision of whether or not to combine bank accounts. While I support being open and honest with your spouse, combining your money also allows for a greater return because the interest is building on a greater base.
Next, let’s take a look at buying a home and its tax effect.
Very few people use the words fun and taxes together… and don’t worry, I’m not one of them. I hope to make taxes easier to understand and less of a hassle. I am a CPA with a Master’s in Accounting, and I’ll do my best to help explain many of the tax options available today.