Explanation and advice needed on how to figure out taxes and withholding now that I'm married.

January 6, 2009 10:23 AM

Explanation and advice needed on how to figure out taxes and withholding now that I'm married.

I got married in August of 2008. For that year, I made about $25,000 while my husband made about $10,000. In a "normal" year, he will be making about $18,000, as he only worked about half of 2008.

I am a full-time student with yearly tuition of $12,000.

For most of 2008, we each had 1 allowance on our W-4s. We both were taxed as single until September, at which time I changed my W-4 to Married with 2 allowances, and my husband changed his to 2 allowances but was still being taxed as Single.

I have searched high and low for advice and information about taxes, refunds, withholding, and allowances for married couples who plan to file jointly, but nothing I've found agrees with anything else. Some say that you only need to worry about changing your allowances if you're below a certain income level. Others say the "marriage penalty" only exists if you have a six-figure income. I have also read that it's best for each person to just put a zero for their allowances so that the maximum is withheld and you avoid owing at tax time.

What can we expect this tax year, and should we change our withholding and/or allowances for 2009? If so, what to? Can anyone point me to sites, books, or other resources that have updated information on this sort of thing?

If it matters, in the past I have done my taxes online via TurboTax and have always gotten a refund.

posted by anonymous to work & money (7 comments total)

You need to see an accountant.
posted by charlesv at 10:57 AM on January 6 [2 favorites has favorites]

There is a worksheet on Page 2 of the W-4 for married working couples. If you've both already filled this out, and don't have the option of changing it with your employers, you definitely need to see an accountant. We were totally screwed by not understanding the special rules for working married people.

In the meantime, here's a PDF of the W-4 form, and the IRS should have their withholding calculator back online in a few days.
posted by bryanjbusch at 11:07 AM on January 6

I am not an accountant, tax lawyer, or tax professional. But it sounds to me like your salaries are low enough that the "marriage penalty" probably won't affect you. In addition, the Bush tax cuts rolled back or reduced the marriage penalty for many couples.

However, I had a near panic attack yesterday when I filled out a new W-4 (we got married in September of 2008). The two-earners worksheet on the W-4 is incredibly confusing, and the way I was doing it, it was telling me I had to withhold an additional $200 per paycheck (!!!) in order to not owe taxes at the end of the year. My husband's calculations were telling him to withhold $130 per paycheck. Between the two of us, that would reduce our monthly take home pay by $660, which is freaking ridiculous and I am hoping is wrong. I was in tears at my desk, though, thinking about making that work.

Basically, my plan is this:
1. Stop panicking.
2. Wait to get our W-9s for 2008.
3. Use the online TurboTax or taxact.com software, which will probably walk us through how best to file and give us an idea of what we're going to owe or not owe. I know that these programs ask you questions like "did you get married in 2008?" and will probably help you decide if you should file jointly or separately.
4. Using this information, determine our withholdings for 2009. These can be changed at any time, so a few weeks of them staying as is won't be a big deal.
5. If we still are unsure what to do, hire an accountant to help.

(FWIW, my husband and I have similar salaries and as a household earn six figures before taxes and contributions to retirement and the like, so our situation may be very different from yours.) Good luck!

I really, really wish someone had told me we should adjust our withholdings *before* we got married, because if you got married in 2008 the IRS considers you as being Married throughout all of 2008. I'm now expecting a rather large tax bill for 2008, which really freaking sucks.
posted by misskaz at 11:16 AM on January 6

so not an accountant, but i would say both of you shouldn't claim 2 exemptions. Basic rule I have heard is the person making the most should claim married take all the exemptions and the other should claim no exemptions. The reasoning behind this is combining salaries often bumps a couple up a tax bracket and there is a resulting bill because witholding for both people was for the lower tax bracket.

However, this may not apply to the two of you due to your income level. Also you may be eligible for a tax credit that won't require itemizing due to your tuition which would help. I can't remember how that works exactly and depends on your situtation.

If your goal is to come out fairly even at the end of the year, neither owing nor getting a refund, an accountant is your best bet.
posted by domino at 1:17 PM on January 6

Disclaimer: I am not an accountant or professional tax preparer (yet).

"I am a full-time student with yearly tuition of $12,000."

I hope you're taking your Lifetime Learning tax credit. It sounds like you qualify for the maximum amount ($2000) and as a tax credit it counts as taxes paid, so you don't need to have as much tax withheld from your paychecks (and thus can claim more exemptions without worrying about owing).

For 2009, based on the information given and assuming you will pay the same amount in tuition again, it sounds like these will be your 1040 numbers (assuming the form and tax rates are similar to 2008):
line 7 wages: 43,000 (your $25K plus husband's expected $18K)
line 40 standard deduction: 10,900
line 42 personal exemptions: 7,000
line 43 taxable income: 25,100
line 44 tax: 2959
line 50 education credits: 2000 (Lifetime Learning credit)
line 61 total tax: 959

Take that 959 and divide it by the number of pay periods per year (12 if paid monthly, 24 if paid twice a month, 26 if paid every other week) and compare it to how much you and your husband are having withheld for income taxes each pay period.

"I have also read that it's best for each person to just put a zero for their allowances so that the maximum is withheld and you avoid owing at tax time."

No no no no no no no, unless you like giving the IRS an interest-free loan of your money.

Your goal should be to get as close to even as possible -- no refund and no taxes owed.
posted by Jacqueline at 4:42 PM on January 6

Each person gets an exemption on the 1040. Single and separate filers is easy, each person claims themselves. Married filing jointly claim two (or more depending on kids).

On the W-4, you can put whatever you want, as long as what gets withheld is enough to cover what you will owe in taxes. Do not go under what you will owe, or there will be issues. But as the worksheet instructs, you can put more exemptions on there than you are entitled to, as long as it's correct.

There's nothing wrong with putting zero in, IF you like the forced savings and big refund check every year, and don't really care that you are loaning Uncle Sam money interest free. For some people the benefit of the big refund and knowing you will not owe anything at tax time outweighs the costs.

One person's marriage penalty is another person's single penalty. Dollar for dollar, married people filing jointly pay less in taxes than single people.
posted by gjc at 5:12 PM on January 6 [1 favorite has favorites]

If you cannot afford an accountant - and they can be pretty cheap - get lots of forms and work up your taxes different ways.

Whenever my accountant finds out who I am dating, she often tells me what I could gain by wedding the guy. She does this without knowing exactly what the guys makes, however, so I can only guess at her true motives.

Also, I have no idea what your lifestyle is but if you do anything for non-profits, be sure to get in-kind receipts and keep track of milage.
posted by Lesser Shrew at 8:32 PM on January 6