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Posted by on Feb 19, 2014 in Miscellaneous | 0 comments

Filing Taxes as a Newly Married Couple

I’ve been a bit MIA lately since my wife and I were in Miami Beach for a weekend, but also because I’ve been busy filing our taxes for 2013. Filing taxes as a newly married couple is particularly challenging, because you’ll encounter new rules, and a lot of numbers change. That’s why I recommend changing your name properly as quickly as possible to minimize headaches come tax season.

 

Form 1040 - everyone's "favorite" form

Form 1040 – everyone’s “favorite” form, photo by 401(K) 2012

 

I’m old-fashioned and do my taxes manually via the IRS recommended Free File Fillable Forms, but that’s only because I like to understand every single number on the tax return. For most newly married couples, I recommend using a tax software or a good accountant, because they will most likely do your tax return as if you were married filing jointly and as if you were married filing separately to arrive at the lowest tax for a couple. Nevertheless, I’ll offer my own thoughts on filing taxes as a newly married couple. Please just keep in mind I am not a financial adviser or an accountant so any information provided is not guaranteed to be accurate and should not be¬†construed as legal, tax or accounting advice. You should seek a professional adviser if you have questions in those areas.

 

Filing Taxes as a Newly Married Couple

The first step in filing taxes as a newly married couple is deciding whether you want to be married filing jointly or married filing separately. It’s not always true but more often than not, married filing jointly will save a couple time and money. That’s because married couples filing jointly only need to file one tax return together. In addition, they are potentially eligible for more tax credits and may be in a lower tax bracket than if they were married filing separately.

Some negatives of married filing jointly include both people being fully responsible for a tax return. Even if the tax bill is largely due to one person, both people will be held equally accountable. If one person lies on the tax return, both people will also be held liable. Another possible negative may be a higher combined income resulting in ineligibility for certain deductions, such as high medical expenses.

That is why I mentioned earlier it’s best to use a tax software or a good accountant if you are filing taxes as a newly married couple. They will likely do your taxes both ways to see which is a better deal for you. Having said that, I still think for most people, married filing jointly is the way to go. It’s good practice, however, to be aware of advantages as well as disadvantages.

 

Retirement Accounts (IRA, Roth IRA, Backdoor Roth IRA)

It may sound obvious but even after getting married, you and your spouse can potentially each have an IRA, a Roth IRA, or a backdoor Roth IRA account assuming you meet the income eligibility requirements. For those that are not familiar with all the different types of retirement accounts, Wikipedia has a pretty good comparison chart between the following: 401(k), Roth 401(k), IRA, Roth IRA. Vanguard also has an easy to understand video explaining backdoor Roth IRAs. The main point is retirement accounts can be powerful methods of saving money and reducing the tax bill so just remember that married couples can still open individual accounts.

 

New York City and Yonkers Tax

This section will only apply to New Yorkers, specifically those living in New York City or Yonkers. I know, however, a large percent of my readers are New York City based so I thought I’d quickly discuss how the New York City and Yonkers tax might affect newly married couples if one or both of them were just a part-time New York City or Yonkers resident.

Basically, a lot of newly married couples move shortly after getting married, and some of you may have moved to New York City or Yonkers. Those two cities levy a city tax on residents in addition to the standard NY state tax. If you moved mid-year from a place that does not levy a city tax, such as Long Island, you are generally not responsible for paying city tax for the whole year. You will be responsible, however, for paying city tax for the part of the year that you did live in New York City or Yonkers. What you have to do is fill out Form IT-360.1 in addition to the standard Form IT-201, which is the main tax return form for NY state residents.

Form IT-360.1 is for those who have experienced a change of residence related to New York City or Yonkers, and it basically prorates how much city tax you owe based on how many months of the year you lived in New York City or Yonkers. You will have to fill out one Form IT-360.1 for each person who changed residence. I was already living in NYC so I didn’t need to fill one out, but my wife was living in Long Island before we were married. As a result, we filled out one Form IT-360.1 for my wife.

 

The Main Point

Filing taxes as a newly married couple can be daunting and confusing. As if filing taxes wasn’t annoying enough, being newly married makes the process even more complicated. But hopefully, detailing my thoughts on our own experience filing taxes as a newly married couple will be of help to some of you.

 

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