Today my Husband and I participated in a group date. The date was in celebration of a couple's 17th wedding anniversary. If you have a spouse or had a spouse you know that marriage is no easy feat. One of the most common reasons that marriage ends in divorce in America is money.
Managing money is hard, especially when you have to do it with someone else. Taxes add another layer of difficulty to that. So today in honor of celebrating marriage I'd like to share 3 tips to help you keep marital bliss in your marriage.
#1 - Adjust your tax withholding
There are benefits to filing taxes together when you get married. But without proper planning, you can cancel those benefits. Filling out new W-4s together is one of the steps to proper planning. The most common tax issue I see with married couples is that they don't have the proper amount of taxes withheld. This is an easy fix.
I walk you through how to fill out a new W-4 with your spouse in the video below or you can check out this blog post: How to Fill Out a W-4 Properly and Avoid owing the IRS.
Depending on the income that you make, your tax bracket may go down or it may go up once you get married. For my clients, it often goes up. Each W-4 you fill out only takes into account the income from that job.
Let's say Ike and Tina get married in 2022. Tina makes $75,000 at her job and Ike Makes $75,000 at his job. They both select married filing jointly on their W-4s. This means neither job withholds federal taxes until they reach $25,900 in income. At the end of the year, we have $150,000 before the standard deduction. But both couples have already taken into account the standard deduction in their withholding so now they don't have enough withheld.
When this happens the amount is usually under $20,000 but it still is inconvenient if you were not prepared for it. If this is you and your spouse and you've had a clean slate with the IRS you should check out my e-book. Guaranteed Payment Plan will walk you through how to set up a payment plan if you owe the IRS less than $20,000 and can't pay today.
#2 - Develop a tax plan
Believe it or not, almost every major life event has a tax implication. You want to be proactive instead of reactive when it comes to your taxes. This will help you pay the least amount of taxes legally possible.
When you have a child you want to think about the child tax credit, the dependent care credit. You may not even qualify for those things if your income is over a certain amount. If you do qualify you can adjust your withholding to even less than before.
These credits will reduce the amount you owe dollar for dollar.
If you purchase a home you may also be looking at new tax benefits. The mortgage interest deduction and property tax deduction can lower the amount of money you pay taxes on. It is not like a credit that reduces the amount owed, just the amount used to figure the tax.
Let's say Ike and Tina have a son named Ike Junior. Based on their income in the example above they qualify for the child tax credit. The credit takes care of $2,000 in taxes they would have had to pay. They also bought a home. They paid $8,000 in mortgage interest and $2,500 in property tax. So instead of paying tax on $124,100 they are now only paying tax on $113,600.
Credits and deductions are beneficial to your tax situation. A qualified tax professional teamed with a certified financial planner is important. They can help you find which deductions and credits you qualify for during the year. They are very critical to developing a good tax plan.
#3 - Don't file married filing jointly if your spouse has back tax debt
You are joint and severally liable for the tax debt of your spouse when you file together. Even if you don't have any income of your own to report on the return. You agree to these terms when you sign the tax return.
I recommend that taxpayers that aren't sure if they are in their marriage for the long haul not file jointly when a tax debt is involved. I have seen more marriages than I'd like to admit split, due to back taxes and the mismanagement of that debt. It does not have to be that way.
If you have not received a refund or are receiving threatening letters as a result of your spouse's tax debt you do have options. Injured spouse or innocent spouse relief may be a great option for you. This will protect you. Your spouse should get on an installment agreement with the IRS to protect themselves from tax liens or levies.
Best wishes to you and your spouse on your journey together! If you have any questions about taxes and marriage leave them in the comments or submit them on the contact page.
Timalyn S. Bowens EA is America's Favorite EA and Tax Expert that is on a personal mission to fill the tax literacy gap by educating taxpayers on how the tax law affects them. Timalyn is also the owner of Bowens Tax Solutions. They will work hard to find a legal solution that is customized for you! As an Enrolled Agent licensed through the Internal Revenue Service Timalyn is able to fight the IRS for taxpayers in all 50 states.
If you are facing questions regarding your personal or business taxes, working with the right professional makes all the difference. Timalyn is here to assist you with tax representation, tax planning, and more. Visit www.bowenstaxsolutions.com for more information.