Tax and Financial Articles

Getting married? You might need to adjust your withholding

Many newlyweds are surprised with a big tax bill come tax time.  This can happen when both spouses are working, and no adjustment has been made to the amount of income tax being withheld from one or both spouses’ paychecks.

For example, one spouse has an income of $250K/year.  The other spouse has an income of $30K.  As a single filer, the $30K per year earner was barely in the 15% tax bracket.  Now married, that $30K is now added on top of the other spouse’s $250K, and is now taxed at a 33%.  If the tax withheld was only $3K, there will likely be a deficit.

The solution is to adjust your withholding using the “Two Earner Household” worksheet at the bottom of Form W-4.  Remember that if you are married for one day, you are considered to be married for the entire year. So this adjustment should be made before the wedding date, especially if the wedding date is toward the end of the year.  Also note that simply revising your W-4 to indicate that you are married will not fix this problem. In fact, it may make it worse. You must use the “Two Earner Household” worksheet.

Some ask if it’s beneficial to file Married Filing Separately, and most of the time, the answer is no.  Yes, one spouse may get a refund, but the total tax paid between the two spouses will usually be much higher.

 

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Schanel & Associates, PA, Certified Public Accountants, located in Jupiter, FL, provides tax, accounting, and consulting services to clients throughout Palm Beach County, including Palm Beach Gardens, West Palm Beach and Jupiter, as well as  South Florida and the United States.

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