Marriage and Taxes

For Better or Worse: How Marriage Affects Your Tax Status

For Better or Worse: Marriage Can Affect Your Tax Status in Positive (And Negative) Ways

Most people don’t have taxes on the brain when they decide to settle down permanently with their romantic partner, but that doesn’t mean your nuptials won’t affect your tax standing.

To mark Valentine’s Day, we’d like to share with you the many tax benefits (and a few potential drawbacks) of tying the knot as well as some helpful information about maximizing your refund or minimizing your tax liability. If your tax filing status has recently changed and you’ve got questions, please contact S.H. Block Tax Services for help.

Updating Your Tax Status After Matrimony

Once you’re officially married, you’ll need to make several changes to your tax status to file accurately with the IRS and the State of Maryland. If you changed your last name when you got married, you’ll need to report the name change with the Social Security Administration by completing and filing Form SS-5. And if you move in with your partner and change your address, you should complete and submit Form 8822 to notify the IRS of this change.

In addition to those routine changes, you’ll also want to update your tax withholdings and your filing status. To update your withholdings, you should complete a new Form W-4 and file it with your employer or human resources manager. If you and your new spouse are both employed, you should check to see if your combined income might place you in a higher tax bracket.

You should also consider updating your filing status once you’re married, as it could affect your tax liability, filing requirements, and even your potential eligibility for numerous deductions and credits when you file your annual income taxes. Keep in mind that if you got married at any point during the year for which you’re filing, the IRS considers you married for that entire year regardless of whether you were married for 12 months or 12 days.

While there are five different tax filing statuses, only two apply for married couples. (Note: nonresident aliens must file separately.)

  • Married Filing Jointly

Couples who file jointly must combine their income and their deductions. In most cases, couples who file jointly enjoy less tax liability because their standard deduction is higher and they’re eligible to receive additional tax benefits.

Three important things to keep in mind if you’re considering filing jointly with your spouse:

  1. You may file jointly even if your spouse has no income or deductions.
  2. Both spouses are responsible for the information on their joint return, which could potentially lead to significant legal or financial problems if the information isn’t accurate. (If you find yourself in a difficult situation based on your spouse’s reporting, you should hire a skilled tax resolution attorney and file for innocent spouse relief.)
  3. If your spouse has pre-existing tax issues, these problems should not affect your tax standing or your decision about whether to file jointly. Whichever spouse does not have pre-existing tax issues should inquire about injured spouse allocation.
  • Married Filing Separately

Sometimes couples are better off filing separately, especially if one spouse believes the other is filing inaccurate or fraudulent returns or if one spouse isn’t having enough taxes withheld from their paychecks. Also, if one spouse had significant medical expenses or other limited deductions, filing separately could result in less taxes overall.

In general, however, couples filing separately usually pay more in taxes. Separate filers often miss out on credits and deductions only afforded to joint filers. And when filing separately, only one spouse may claim the couple’s child as a dependent. Also, when filing separately, if one spouse itemizes their deductions, the other spouse can’t claim the standard deduction.

Unmarried domestic partners are not recognized as married on their federal taxes and should file as “single” or “head of household.” Same-sex couples who are married must file as one of the two “married” classifications.

The Tax Advantages of Marriage

Depending on your financial situation and how you to choose to file, there are several benefits to married filing status.

  • Tax write-offs: If one spouse has a failing business or is otherwise losing money, the more profitable spouse can use those losses as a tax write-off when the two file jointly.
  • Retirement accounts: An unemployed spouse can contribute to an individual retirement account, and retirement benefits phase out at a higher point for married couples.

 

  • Childcare benefits: If one or both spouses have minor dependents in need of childcare, the spouses may be able to claim special childcare deductions and credits.
  • Estate protection: If one spouse chooses to leave their income and assets to their surviving spouse if they die, this action won’t generate estate tax.

These are just a few of the many tax advantages of marriage, and there are also potential disadvantages depending on your unique circumstances. To learn more, you should contact a skilled and experienced tax resolution attorney for a free consultation.

Contact S.H. Block Tax Services for All Your Tax Needs

If you’ve recently gotten married or entered into a domestic partnership, S.H. Block Tax Services is here to help you navigate potential tax issues. Our attorneys and support staff have decades of tax resolution and filing experience, and we’ve earned an A+ rating with the Better Business Bureau for our years of service on behalf of Maryland taxpayers.

To schedule your free, no-obligations tax consultation, please contact us today by calling (410) 793-1231 or completing this brief contact form.

The content provided here is for informational purposes only and should not be construed as legal advice on any subject. Please readour full disclaimer here.

Sports Gambling

How Will Legalized Sports Gambling Affect Your Taxes?

Although Maryland House Bill No. 989 failed to pass and legalize in-state sports betting in 2018, industry experts believe betting on sports will become legal in our state sooner rather than later, and it could have a major impact on Maryland’s economy.

In fact, with the flurry of legislative activity surrounding legalized sports betting in the United States over the past year, it seems the question isn’t if Maryland will someday have legal sports gambling, but rather when. But what would legalization mean in terms of taxes for the lucky winners (or unlucky losers)?

Keep reading to learn more about state-sanctioned sports gambling and find out how it could affect Maryland residents and their taxes. Read more

Quarterly Estimated Taxes

Quarterly Taxes Are Due Next Month — Are You Prepared?

Quarterly Estimated Taxes Are Due Next Month — Contact S.H. Block Tax Services With Questions

For independent contractors and small business owners who pay quarterly taxes, another important date is right around the corner. The final quarterly payment for 2018 income taxes is due on January 15, which is now less than one month away.

Some contractors and business owners struggle to budget throughout the year or fail to keep accurate records of their financial transactions. Those mistakes can cause major issues when taxes come due, which can in turn lead to unnecessary fees and penalties.

Keep reading to learn more about quarterly taxes, including how you can file and pay accurate taxes on time at crucial dates throughout the year. Read more

Nonresident Income Tax Returns

Do I Need to File a Nonresident Income Tax Return?

Many people who live in Maryland work in other states, and many people who live in other states maintain employment here in Maryland. This is true of full-time, part-time, and self-employed individuals, and it’s especially common for residents of the greater Baltimore area. Living and working in two different areas can make things a bit tricky during tax season, so we want to clear up any confusion and make things as simple as possible for you when it comes time to file your returns this spring.

Keep reading to learn more about nonresident returns, including when you’re required to file a nonresident return and even some instances where people who live and work in different states are not required to file a nonresident return. And, as always, if you have any questions about your filing status or other issues, please reach out to our team at S.H. Block Tax Services for help. Read more

Work Opportunity Tax Credit

The Work Opportunity Tax Credit Could Impact Your Bottom Line

Your business might be eligible for the Work Opportunity Tax Credit if you’ve hired people with histories that might have otherwise prevented them from securing gainful employment.

Keep reading to learn how the Work Opportunity Tax Credit (WOTC) incentivizes diverse hiring practices while also giving marginalized members of society and struggling individuals a chance at a new start. Read more

Independent Contractor Income Tax

New Law Creates Income Tax Cut for Independent Contractors

While the merits and drawbacks of the Tax Cuts and Jobs Act are subject to constant debate on cable news networks and at water coolers around the country, experts from both sides of the political aisle agree the bill was designed to create significant tax cuts for corporations and wealthy individuals. However, if you look closer, the law also contains potentially valuable tax cuts for independent contractors and the self-employed.

Keep reading to learn how you could potentially save big or even increase your refund this tax season if you’ll be filing as an independent contractor or a self-employed individual. Read more

Currently Not Collectible

S.H. Block Tax Services Can Help You File for CNC Status

Our office has received several phone calls about filing for currently not collectible (CNC) status recently, but most of those callers had little knowledge about what the program entails or their potential eligibility. Of course, we’re happy to help anyone who comes to us with tax problems, but we thought we would take the opportunity to define CNC and clarify some of the more common misconceptions about what the program does and who might qualify.

Keep reading to learn whether you might be eligible for CNC and find out how S.H. Block Tax Services can help you file for consideration. Read more

Vacation Rental Home Taxes

What a Trip! 5 Tax Tips for Vacation Rental Owners

In recent years, vacation rental homes have become one of the preferred travel options for jet-setters around the world — especially in the United States. Companies like Airbnb, VRBO, and FlipKey have created a vacationing model that is both affordable and comfortable, and this model also provides a more authentic experience for visitors and their families compared to a traditional hotel.

Despite the rise of this business model and the resulting profits, many owners don’t know that income from renting out their homes (or rooms in their homes) to vacationers is taxable, which could lead to complications come tax season.

Keep reading to learn five tax tips that could minimize or even eliminate taxes from renting out your home with Airbnb or a similar service. Read more

Tax-Related License Hold

Need Help Releasing a Tax-Related License Hold? S.H. Block Tax Services Is Here to Help

Every day, millions of Maryland residents rely on their state-issued drivers’ and business licenses to earn a paycheck, take care of their families, and have fun during their free time. Our cars, trucks, motorcycles, and professions enrich our lives and allow us to prosper as productive members of our communities.

Still, operating a business or vehicle in Maryland is a privilege that you should never take lightly, especially since our state government can revoke that privilege at any time. In recent years, the IRS and the State of Maryland have undertaken more aggressive collection efforts, and they know license holds are an extremely effective tactic. If you owe outstanding taxes or have failed to file your personal or business returns in recent years, this initiative could directly affect you.

Keep reading to learn how S.H. Block Tax Services can help lift your tax-related license hold by minimizing or even eliminating your tax liability. Read more

Tax Extension

An Extension to File Your Taxes Is Not an Extension to Pay Your Taxes

An Extension to File Is Not an Extension to Pay — Contact S.H. Block Today to Resolve Outstanding Liabilities

If you requested an extension to file your taxes last spring, you weren’t alone: the IRS estimates that more than 11 million people applied for an extension to file their taxes in 2017. Yet despite so many taxpayers choosing this option, our team at S.H. Block meets dozens of clients every fall who don’t understand what their approved extension means and how it could lead to additional penalties and interest that increase the overall tax debt.

Keep reading to learn about how these extensions work and what to expect as you prepare for the late-filing deadline on Monday, October 15. Read more