Know someone getting married? Here are some quick tips for the newlyweds to start them off on a secure path to financial bliss.
Notify Social Security – Notify the Social Security Administration (SSA) with any name changes. The IRS has a name match program with the SSA and will potentially reject deductions and joint filing status if the name change is not made timely. You do this by filing Form SS-5.
Selling a home? – If selling one or two residences, review the impact of capital gain tax laws and how they apply to your situation. This is important if one of you has only been in a home for a short time or if the home has appreciated in value.
Update your address – Update your address with the IRS if either of you is moving. You do this with IRS form 8822. Also, change your address at the postal service and DMV.
Notify your employers – Change your name and addresses with your employer to ensure your W-2’s are correctly stated. Recalculate your payroll withholdings and file a new Form W-4.
Beware the marriage penalty – If both newlyweds work, your combined income could put you into a higher tax bracket. This phenomenon is referred to as “the marriage penalty”. On the other hand, marriage could also reduce your tax burden. Because of this, now is a good time to conduct a tax forecast.
Review legal documents – Ensure legal titles are as you wish them after you are married. This includes bank accounts, titles on property, credit cards, insurance, and wills.
Beneficiary statement update – Review any retirement savings plans like 401(k)’s and IRA’s. The beneficiaries on these accounts must also be updated.
Review employee benefits – Review your employee benefits and make the necessary changes in health care, insurance, employee retirement accounts, pensions, and tax-preferred spending accounts. Marriage is a qualified event for most employers to allow you to make mid-year changes.
Talk about it – If you have not already done so, spend some time talking about how you will be managing your financial affairs. Who will be paying the bills? Who will be managing retirement accounts and investments? How will spending be managed? What bills and debt exist? Developing a plan and understanding how this will be handled can help reduce misunderstandings and future disagreements.
Last week we gave you the first half of a list of items that are often overlooked that cause trouble in filing a timely tax return. Here’s the second half of the list!
Name mismatch – If you’ve recently married or divorced, make sure your last name on your tax return matches the one on file at the Social Security Administration.
Inconsistent information – Most tax preparation software will check a tax return for inconsistencies. The message “Diagnostic Error!” will make you cringe. When one occurs, they must be resolved prior to filing your tax return. An example might be you filing Married Filing Separate, while your soon-to-be ex-spouse files as Married Filing Joint or Single.
No information for a common deduction – If you claim a deduction, you will need to provide support to document the claim.
Missing cost information for transactions – Brokers send out their statements with the sales transactions. You will need to also provide the cost and purchase information (cost basis) or the tax return cannot be filed.
Missing K-1 – If you have ownership of a partnership, Sub Chapter S or LLC, you should receive a Form K-1 that reports your share of the profit or loss from the business activity. Without this K-1, you cannot file your tax return.
Forms with no explanation – If you receive a tax form, but have no explanation for the form, questions arise. For instance, if you receive a retirement account distribution form, it may be deemed income. If it is part of a qualified rollover, no tax is due. An explanation is required to file your information correctly.
Hopefully, by knowing these common missing pieces of information, you can prepare to have your tax filing process a smooth one!