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FOR IMMEDIATE RELEASE: June 19, 2006

TAX PLANNING FOR NEWLYWEDS

Marriage brings many joys and a few unexpected challenges, such as filing your taxes together. By starting now, well in advance of tax season, completing your first tax return as husband and wife will go more smoothly. Here are several items for your income tax to-do list, brought to you by the New York State Society of CPAs.

UPDATE RECORDS

A woman who takes her husband’s surname upon marriage should notify the Social Security Administration and her employer of the change. This helps to ensure that earnings are properly reported and credited. To get a Social Security card printed with your new name, complete Form SS-5, Application for a Social Security Card. The application is available on the SSA website at www.ssa.gov or by calling 1-800-772-1213.

When your marriage involves a move, you should complete IRS Form 8822, Change of Address. You can find this form on the IRS website at www.irs.gov or you can request a copy by calling 1-800-829-3676. Be sure to notify the U.S. Postal Service as well.

Newlyweds should also submit new W-4 forms with their employers to ensure that withholding from their paychecks reflects their new marital status.

FILING STATUS

Whether you got married on January 1, December 31, or anytime in between, as far as the IRS is concerned, you’ve been married all year and must file as a married taxpayer. You need to consider whether filing jointly or separately is better for your personal financial situation.

FILING OPTIONS

Choosing the best filing status is a major tax decision for newlyweds. When you file jointly, you combine your income, deductions, and credits, all on one income tax form. Generally – but not always – filing a joint return results in the lowest tax bill. Keep in mind that when you file a joint return, each spouse is personally liable for everything on the return.

Filing separately may be a better choice if one spouse has high medical expenses or miscellaneous itemized deductions. Since in both cases you can only deduct expenses in excess of a specific threshold (7.5% of adjusted gross income for medical expenses and 2% for miscellaneous deductions), your combined income on a joint return could make it more difficult to qualify.

On the other hand, keep in mind that some tax credits and deductions are reduced or eliminated for married couples filing separately. For example, separate filers can’t take advantage of education tax credits or deduct student loan interest. Figuring your taxes both ways is the best way to determine which filing status results in the lowest tax bill.

TAX BRACKETS

Be prepared. If you’re married and plan to file jointly, it’s possible that you will be in a higher tax bracket based on you and your spouse’s combined income. For a married couple filing jointly in 2006, the rate on taxable income between $61,300 and $123,700 is 25%.

IRA DEDUCTIONS

A newly married taxpayer who was able to deduct IRA contributions as a single filer may find that he/she no longer qualifies. If your new spouse is covered by a retirement plan at work, you may be entitled to only a partial deduction or no deduction at all. Your ability to claim a deduction is determined by your filing status, your combined adjusted gross income, and whether or not your spouse is covered by a qualified employer plan.

CPA ADVICE

Keep in mind that as you face new financial and tax challenges together as a married couple, a CPA can help you prepare for a lifetime of effective tax planning. Make an appointment now while you have time to implement tax-saving strategies for 2006.

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TAX PLANNING FOR NEWLYWEDS
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One of the unexpected challenges faced by many newlyweds is dealing with income taxes. The New York State Society of CPAs offers the following advice to help newlyweds address some of the taxing issues that will arise. For starters, if your marriage resulted in a move to a new residence, make sure the Internal Revenue Service knows where to find you. You can do this by completing IRS Form 8822, Change of Address, which can be found on the IRS website: www.irs.gov. Newlyweds should also adjust their withholding by filling out new Form W-4s with their employers to ensure that they are having sufficient taxes withheld from their paychecks. This will help you to avoid a big tax bill come tax season.
In addition, a woman who takes her husband’s surname upon marriage should notify the Social Security Administration and her employer of the change as soon as possible. This helps to ensure that earnings are properly reported and credited.

Finally, CPAs say one of the biggest decisions newlyweds will need to make about their taxes is whether to file their tax returns separately or jointly. While, generally, filing jointly is more favorable, there may be other reasons to consider filing separately. It’s wise to discuss your tax situation with your CPA before making your final decision.