6 tax tips for Kim Kardashian and other newlyweds
Saturday, August 20, 2011
Did Internal Revenue Service Commissioner Doug Shulman get an invitation to Kim Kardashian's wedding?
Or was the IRS release yesterday of tax tips for recently married couples just a coincidence?
Yeah, I know, the IRS announcement probably doesn't have a thing to do with this evening's celebrity nuptials.
But it certainly is timely, since taxes apply to Kim and her soon-to-be husband Kris Humphries, too.
So let's look at the IRS' wedding gift of tax-themed advice for Kim and Kris and all young and young-at-heart lovers tying the knot.
1. File name change paperwork
As soon as Humphries put the $2 million dollar engagement ring on Kim's finger, rumors started that the reality television star would take her NBA player fiancé's last name after they exchanged their vows.
Others quickly countered that's not going to happen since Kardashian is her very profitable brand.
Even Kim's mom Kris, who did change her surname when she married Bruce Jenner but reportedly is considering returning to a KK moniker herself, says her daughter should keep the name that's made her famous. "I don't think she should take his name and be Kim Humphries," Kris said. "She needs to be Kim Kardashian because she's worked so hard to get where she is."
As someone who's kept my name during almost 30 years of marriage, I say stay Kim K! But it's a personal decision.
If you decide to take your new spouse's last name, notify the Social Security Administration so that your new name and Social Security number will match when you file your next tax return. File a Form SS-5, Application for a Social Security Card, to make the change. You can download the form, pick one up at your local SSA office or get one mailed to you by calling 800-772-1213.
2. Let folks know your new address
Let the IRS know where you're living. Send the agency Form 8822, Change of Address. While you can download the form (or order one by calling 800–TAX–FORM/800–829–3676), you must snail mail the paper copy.
And speaking of your mail carrier, be sure to also notify the U.S. Postal Service of your new address so that it can forward any IRS correspondence or refunds.
3. Share the details with your workplace
Even if you didn't invite your boss to the wedding, he or she also needs to know about your address and/or name changes. That's the only way to ensure your Form W-2, Wage and Tax Statement, has correct information. It will help in your tax filing next year if your personal information matches. The workplace address change also will make sure your W-2 gets to the correct abode.
4. Review your withholding
When both a husband and wife work, the combined income may place the couple in a higher tax bracket. Use the IRS Withholding Calculator to figure out the correct amount of withholding each spouse needs to have taken from paychecks now that you'll likely be filing a 1040 together.
When you get the appropriate numbers, adjust your withholding by giving your employer a new Form W-4, Employee's Withholding Allowance Certificate.
5. Select the right tax form
When tax-filing season rolls around, be sure to select the right individual income tax form. The choice can help save money. Newlyweds might now have enough deductions to itemize instead of claiming the standard deduction. If so, you'll have to file the long Form 1040, not a 1040A or 1040EZ.
6. Pick the proper filing status
Just as important as your paperwork is your filing status. Your marital status on Dec. 31 determines whether the IRS considers you the married for that full year.
You also have the option of choosing to file your federal return jointly or separately. While it's usually in a couple's best tax interest to file one return, there are cases when filing separately is warranted. Although it's more work, figuring your taxes both ways can help you find out which filing status will result in the lowest tax bill.
A few more wedding tax gifts
I can't let Uncle Sam have all the wedding fun, so here are a few more tax issues for newly (or even long-time) married couples to consider.
- In consolidating your residence, don't forget the taxes. A married couple gets twice the tax break ($500,000) when they sell a residence than do single homeowners ($250,000). But to get that bigger tax benefit, both husband and wife must meet residency requirements. Be sure you both live in the property for at least two of the five years before you sell so you can get the full profit exclusion amount.
- Your new combined earnings could affect your retirement contributions, for both a deductible traditional IRA and a tax-free Roth account. Income limits apply to both types of plans. Check the amounts in IRS Publication 590. If you put money into an IRA before you said "I do," confirm that you're still eligible if your account is a Roth or if your contribution is still deductible if it's a traditional IRA. If you haven't contributed, consider whether you should move your IRA to a more favorable account.
- If you have a medical flexible spending account (FSA) at work, marriage is a change in family circumstances that enables you to make mid-year changes. You might want to consider increasing your contributions to this tax-favored company benefit plan to cover your new spouse's out-of-pocket medical costs for the rest of the year.
All of these tax issues can, of course, wait until after the honeymoon.
And taking a break for tax tasks might even be a welcome interruption of the writing of all those thank-you notes that await your return.
By the way, you don't have to send the IRS or me a note for our tax tip gifts. Making your new marital tax responsibilities a bit easier and less costly is thanks enough for us.
You also might find these marriage related posts of interest:
Shes pretty Smart.. im sure shes protecting her Empire :)
Posted by: Johnny | Sunday, September 18, 2011 at 04:09 PM
It is very nice for the IRS to provide these tax tips for those newly married couples. It seems like a nice way to make things easier for everyone.
Posted by: Blue Tax | Wednesday, August 31, 2011 at 09:13 AM