Almost everything about being a newlywed is exciting—from celebrating holidays as a married couple for the first time to decorating your new home with all of the items from your registry. But filing taxes together for the first time? Not exactly exciting. "The first time a couple files together can be a rude awakening," says Abby Eisenkraft, EA, ATA, ATP, CRPC, CEO of Choice TaxSolutions Inc. in Melville, New York. "Many couples find that one spouse has a hidden tax problem—maybe something in the distant past—and when they file jointly for the first time and don’t get any money back, the honeymoon is definitely over."
Federal law states that couples who are married as of December 31st must use either "Married Filing Jointly" or "Married Filing Separately" as their filing status. "Some people falsely believe that filing status is based on their marital situation for the majority of the year, but it's actually as of December 31st," says Steven Fox, founder of Next Gen Financial Planning, LLC. To make the process flow smoothly for you and your hubby, we reached out to financial professionals for their step-by-step guidance.
Settle your name change.
Did you take your husband’s last name? If you officially changed it, make sure you reported it to the Social Security Administration before filing your taxes. "The SSA reports name changes to the IRS, and if a SS number on a tax return does not match IRS records then the return may be rejected," Fox explains.
Alert your employers.
The absolute first thing you should do once you’re married is file a new W-4 with your employer. "It’s not likely that your withholdings will stay the same and you might need more (or less) taken from each paycheck," says Mark Jaeger, Director of Tax Development at TaxAct. "We see a lot of people guess at this, and they often end up with a bit of a surprise when they file."
Gather up your tax documents.
You know that paperwork you received from your employer that said "Important Tax Information Enclosed"? Keep track of it, especially if you work for more than one employer, and make sure to bring that to your meeting with your certified public accountant (CPA). Also, pull up your previous year’s tax returns.
Decide how you want to file.
If neither you nor your spouse are financially savvy, it is probably a good idea to hire a tax professional your first year of marriage to make sure to cover all of the nitty gritty details. "Choose the right filing status," says David Rae, Los Angeles-based certified financial planner. "Not to overgeneralize, but almost all first-time married couples file jointly."
Discuss your deductions.
As a newly married couple, you may find that your combined deductible expenses (expenses you don’t have to pay taxes on) are high enough that it makes sense to itemize (list them all out). Go through your credit card statement to see what costs, in any, you can deduct from your expenses. Any tax-planning software or professional tax preparer will be able to determine whether it makes sense to itemize.
Look at making retirement plan contributions.
If you end up owing more taxes than expected, consider making IRA contributions to help ease the pain of the marriage penalty. "Married couples who both work often end up paying more in taxes than two single people," explains Rae. "Putting money in a 401k or IRA can help reduce that big tax hit." FYI: You have until the tax deadline to make IRA contributions.
Review your results.
Once your taxes are filed, take a look at your refund (or bill!)—which you can expect to get in about 21 days—and decide how to address this for next year. "If you and your spouse prefer a large refund, make sure to adjust your withholdings appropriately next year," suggests Jaeger. "Or, you can adjust so you have larger paychecks throughout the year." Definitely make sure to have a conversation with your spouse to make sure you’re on the same page about your refund before making any adjustments.