Taxes are an unpleasant and potentially confusing part of life. If you’re like the majority of Americans, you want to fill out your tax forms, get things paid and then forget about them for another year.
Getting married can have both positive and negative impacts on your tax situation. Newlyweds may want to update their W-2 forms to help ensure they don’t get hit with a big tax bill the following year.
If you’re tying the knot, keep an eye on your paychecks and make sure you won’t owe an outrageous amount next year.
The sad fact of tax law is that it’s fairly outdated when it comes to modern couples. Tax law still benefits married couples that make disparate amounts. Couples making roughly the same amount are usually stuck paying a higher rate on their combined income in what many people call the marriage penalty.
In general, the rule is the fewer claims on your taxes, the higher the amount taken from each paycheck. Even if you normally claim dependents, you may be better off claiming zero to increase your withholdings and avoid owing at the end of the year.
You may have the option to withhold a certain amount from your paycheck rather than change your dependent claim. Setting your own withholding can be tricky, and you may be confused as to how much is the right amount. Take advantage of the IRS Withholding Calculator to guide you to the perfect amount.
Claiming zero or adding additional withholdings can feel like a pay cut, and in many ways it is. You will be taking home less every two weeks and may have to engage in a little extra budget planning. The positive is you won’t owe next April.
Budgeting with $100 less a month is a lot easier than struggling to come up with $1,000 to cover an unanticipated tax bill. Also keep in mind that if you budget and plan accordingly, you may get a hefty tax refund, which can serve as the start of a solid savings account.
Newlyweds aren’t the only ones who can benefit from a closer examination of their claims and withholdings. Individuals and families looking to avoid the last-minute scramble to pay off taxes should take advantage of the calculator and take the worry out of tax season.