Finally, the day is over. You’ve walked the aisle, tied the knot and are headed into a life together. Now, as tax season is dawning, how will this affect things when you file tax return this year?
Should you file a 1040EZ or a 1040? Should you file separately or jointly? Just when the wedding and honeymoon decisions or over, a new bucket full of choices are here!
Fortunately, Bill Bischoff with Smartmoney wrote a great article on November 17, 2010 entitled “How Getting Married Affects Your Taxes.” Bischoff gives a great overview of things to keep in mind in the New Year when you file tax return.
Marriage and Filing Your Taxes
First off, Bischoff gives a rule of thumb. Even if you are married the last day of 2010 – taxwise, you are considered to have been married the whole year. So, if you were married December 31st, 2010, when you file tax return for 2010, you will still be counting yourself as married.
Next Bishchoff explains some pros and cons. The good news is that most often marriage will help you to save money when you file. Tax return checks are bigger because of added deductions. However, sometimes marriage will give you a bigger tax bill.
Two Options for Filing: Joint and Married Filing Separately
When it comes to filing, couples have two options, they can file jointly by using only one document or they can file separately by using the ‘married though filing separately’ status.
Filing jointly, Bischoff explains, is the most popular since it is easier and usually will save more money. Filing separately when you file tax return causes you to be ineligible for important tax breaks; you no longer qualify for child-care credit or higher-education credits.
Shouldn’t Everyone File a Joint Tax Return?
However, Bischoff gives a warning. If you file jointly, you are financially responsible for your spouse’s tax penalties. This means that if your spouse owes money to the IRS and refuses to pay, the IRS will come after you – even if you are divorced by that time.
Though it’s possible to get an ‘innocent spouse’ exemption at that point, it’s a difficult and iffy process. This is the biggest plus usually to filing separately. You have a smaller refund, but, in the eyes of the IRS, you have no financial responsibility for your spouse.
What About the “Marriage Penalty”?
The big question often when getting married though is if you will get a ‘marriage penalty.’ There is not a specific ‘penalty’ on married couples when they file tax returns. The marriage penalty is simply referring to a couple being pushed up into a higher tax bracket.
Bischoff gives an example to consider when you file tax return. For a single, the 2010 28% tax bracket begins at $82,400; however, if you are married and file jointly, this bracket comes into play at $137,300. Therefore, if you and your beloved each make $80,000 a year, $22,800 will be under that 28% bracket explains Bischoff. The total penalty? $681.
It’s a good idea after you get married to estimate whether your current withholding will cover your new tax liability. Use our Free Tax Calculator to estimate your new tax liability and then adjust your withholding accordingly.
The Marriage Bonus (Tax Wise that Is)
That said, Bischoff points out that many new couples actually collect a marriage bonus when they file. Tax return checks can actually be larger because of added deductions. This is most often if one spouse makes a substantial amount more than the other.
Marriage has many new things to experience and consider. Decisions concerning when you file tax return paperwork is just one of them.Tags: marriage penalty, married filing jointly, married filing separately