Author Topic: Just Got Married--Tax Question  (Read 3422 times)

midweststache

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Just Got Married--Tax Question
« on: May 02, 2015, 03:10:48 PM »
My partner and I just got married and we're thinking about the fiscal elements of this.

After putting me on his insurance, BF mentioned how he needed to update his W4s to account for me as a "dependent"--to which I scoffed, as I have a (modest) income and claim myself. He has since moderated his position to adding me as a tax exemption, but if he does that I have to knock my own exemptions down to 0, correct? (He also thinks if I claim an exemption, we can't file our taxes jointly--to do that, all our exemptions have to be on one W4...)

And ultimately, if we file jointly, it's a six one way, half dozen another proposition, right? I've included my basic understanding of why the scenarios are the same below.

What I'm proposing looks like this:
BF's Annual Income - $75,000
Tax Exemptions on W4 - 1

My Annual Income - $20,000
Tax Exemptions on W4 - 1

2015 Married Filing Jointly Taxes
Total Income - $95,000
Total Exemptions - 2

What he's proposing looks like this:
BF's Annual Income - $75,000
Tax Exemptions on W4 - 2

My Annual Income - $20,000
Tax Exemptions on W4 - 0

2015 Married Filing Jointly Taxes
Total Income - $95,000
Taxe Exemptions - 2

The income disparity may effect whether we have more take out of our monthly checks vs. how much we get back from the federal government at tax time, but it all evens out, right? Right?

I'm also keeping everything very basic, since we don't have complicated taxes.

MDM

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Re: Just Got Married--Tax Question
« Reply #1 on: May 02, 2015, 04:33:08 PM »
Next April (or whenever you do your 2015 taxes), the IRS won't (and you shouldn't) care how much was withheld from each of your paychecks.  What the IRS will (and you should) care about is the total amount withheld, compared to the total amount due.

Do you have a good estimate of your total 2015 tax bill, and do you have a good estimate of how much will be withheld using whatever strategy you choose?

You are correct that "an exemption" will cause a different amount of withholding for paychecks with different gross incomes.

midweststache

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Re: Just Got Married--Tax Question
« Reply #2 on: May 02, 2015, 05:25:48 PM »
Do you have a good estimate of your total 2015 tax bill, and do you have a good estimate of how much will be withheld using whatever strategy you choose?

The answer to the first half of that question is yes; the answer to the second half is no since, in my mind, it all equals out, but I will do the long math to figure it out. I think the question is going to come down to "Do we want more money in our bi-weekly/monthly paychecks" or "Do we want more money in a lump sum"? BF is the former, I'm the later, since we don't currently have investment vehicles (we're paying down lots of debt). I would rather dump the big refund toward our student loans than have the money accessible (and therefore spend-able, because "if it's only $50/month, that's not enough buffer to up our direct deposit loan payment," says the BF) in our monthly budget.

MDM

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Re: Just Got Married--Tax Question
« Reply #3 on: May 02, 2015, 05:38:47 PM »
I will do the long math to figure it out.
Good plan.

Quote
...that's not enough buffer...
It probably isn't if you don't know what your April 2016 payment due for 2015 taxes will be.  But if you do know, then your need for a buffer goes away.

See http://forum.mrmoneymustache.com/ask-a-mustachian/how-can-we-optimize-our-withholdings/ for a similar question.

You don't have to wait until April to know if you are doing this correctly.  Just wait a couple of months after filing the W-4s and check the actual withholding against what you thought it would be.  If it is close, you are all set.  If it is not close, talk with the payroll department (and/or repost here) for more info.

forummm

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Re: Just Got Married--Tax Question
« Reply #4 on: May 02, 2015, 06:33:43 PM »
Funny that you're still referring to your new husband as "BF" :)  I guess it takes awhile to get used to.

Now that you are married, neither of you are a dependent. You would instead decide whether to file as "Married filling jointly" or "married filing separately". And you will get an exemption for each of you. Given the significant difference in your incomes, you are most likely going to save a lot on your taxes compared with before you got married. For fun you can quickly fill out a 1040 with your info from last year and you'll likely see a pretty big savings.

For your W-4's, you can just tick the "married" box instead of "single" if you want your withholding reduced. At the end of the year you can see if you want to adjust your withholding further based on how your 1040 turns out.

Cpa Cat

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Re: Just Got Married--Tax Question
« Reply #5 on: May 02, 2015, 07:28:32 PM »
A couple of things here...

First - your W-4's are completely separate from your personal income tax return. What you put in your W-4 ONLY impacts your withholding. It definitely does not impact whether you can file Married-filing-jointly. I encourage you to go just go ahead and look at Form W-4 (Google it and read it). It will walk you through your exemptions on the personal allowance worksheet. Remember that "exemptions" on your W-4 may not be the same number as the "exemptions" you'll have on your income tax return.

Next - You can't make your spouse your dependent on your income tax return. It's not a thing.

Also - You do not have to change anything on your W-4 if your husband changes his. The risk you'll have is that you'll under-withhold if between you, you put too many exemptions on your W-4. So you'd owe taxes at the end of the year.

So for example - your husband could put 5 exemptions on his W-4, because he's decided that all of your cats count as dependents. That won't change how you get to file (married filing joint), it doesn't actually mean he's claiming your cats as dependents, and it doesn't change anything to do with your W-4 at your job. All it means is that now he'll have a lot less withheld from his paycheck.

midweststache

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Re: Just Got Married--Tax Question
« Reply #6 on: May 03, 2015, 11:36:53 AM »
Gracias everyone! Your suggestions are very helpful. I find tax lingo a bit confusing, so I will definitely look into all your advice, walk through the WF, etc.

I've been using BF for so long, changing to DH feels weird :)

rubybeth

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Re: Just Got Married--Tax Question
« Reply #7 on: May 03, 2015, 12:38:16 PM »
Use the IRS withholding calculator on your paychecks (find your two most recent checks) to figure out how many exemptions and if you are having enough withheld from each check. As others have explained, you can each put as many (or few) exemptions as you like on your W-4, it has nothing to do with your status at tax return time and you can file however you like (jointly, separately, whatever): http://www.irs.gov/Individuals/IRS-Withholding-Calculator

For example, DH and I file jointly, and one year I noticed that it seemed we would be over-paying, so I added some exemptions on my own W-4 since my office's Accounting dept. is just down the hall from my office, whereas my husband would have to drive to his HR dept. on the other end of town to change his. As long as we pay the right amount of total tax on our income, it doesn't matter if I have 6 exemptions and he has 0.

And, I prefer not getting a tax refund, if possible (I'd rather owe). You can change your W-4 anytime during the year.

Sibley

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Re: Just Got Married--Tax Question
« Reply #8 on: May 03, 2015, 05:31:08 PM »
A note on filing status. You can file married filing joint, or married filing separate. The cases where's it advantageous to file separately are very specific, in fact its usually a huge penalty to do so. So one of you would be the "taxpayer" and the other the "spouse". The IRS doesn't care which is which, though I think it may cause problems if you change it year to year (no evidence though). Any other people you claim would be "dependents", this is usually your children.

clarkm04

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Re: Just Got Married--Tax Question
« Reply #9 on: May 03, 2015, 05:46:07 PM »