How To Make Changes For Tax Purposes After Major Life Events

Life is full of significant changes that can impact your tax situation—from getting married or divorced to welcoming a new child or starting a second job. Each of these events brings its own set of tax considerations and requirements. To help you stay organized and minimize stress, in this blog, we've explained how each change affects your taxes and outlined essential steps needed to make tax filing easier during these major life events.

Marriage: Tax Tips for Newlyweds

When you get married, your tax situation changes significantly, often shifting you into a new tax bracket or providing the option to file jointly, which can lead to substantial savings. However, marriage may also result in the "marriage penalty" if your combined income pushes you into a higher tax bracket. Here’s what newlyweds need to know to simplify tax filing:

• Report a Name Change
  If you've changed your name, report it to the Social Security Administration (SSA). The name on your tax return must match what's on file at the SSA to avoid delays.
  How to Update Information: File Form SS-5, Application for a Social Security Card, available on SSA.gov or at a local SSA office.

• Update Your Address
  Notify the USPS, your employers, and the IRS if you've moved.
  How to Update Your Address: Submit Form 8822, Change of Address, to the IRS.

• Check Withholding
  Newlyweds should update their Form W-4 with their employers to ensure the correct tax withholding. If both spouses work, you may be in a higher tax bracket or subject to additional Medicare tax.
  How to Check Withholding: Use the Tax Withholding Estimator on IRS.gov to make sure you're on track.

• Review Filing Status
  Married couples can choose to file jointly or separately. While filing jointly often provides more benefits, it's wise to calculate both options to determine what's best for you.
  Key Point: Your marital status as of December 31 dictates your filing status for the entire year.

Divorce: Adjusting Your Taxes Post-Separation

Divorce brings significant changes to your tax situation, from altering your filing status to potential deductions for alimony (for divorces finalized before 2019). It may also affect your ability to claim dependents and access related tax credits, as well as change your tax bracket. Here's how to manage your taxes after a divorce:

• Update Your Name
  If you've changed your name post-divorce, update it with the SSA.
  How to Update Information: File Form SS-5, Application for a Social Security Card.

• Update Your Address
  Inform the USPS, your employers, and the IRS of any changes in your address.
  How to Update Your Address: Submit Form 8822, Change of Address, to the IRS.

• Adjust Withholding
  Make sure your Form W-4 reflects your new filing status after the divorce.
  How to Adjust Withholding: Use the IRS Tax Withholding Estimator to determine the correct withholding.

• Review Filing Status
  Depending on your situation, filing as single or head of household may be more beneficial.
  Key Point: Your filing status as of December 31 determines your tax situation for the whole year.

Welcoming a New Child: Tax Considerations for Growing Families

Welcoming a new child brings joy and important tax changes, including eligibility for the Child Tax Credit, the Child and Dependent Care Credit, and the Earned Income Tax Credit. Having a dependent can also lower your taxable income, reducing your overall tax liability. Here’s how to make tax filing easier as you expand your family:

• Get a Social Security Number (SSN) for Your Child
  You'll need an SSN for your child to claim tax benefits.
  How to Apply: Use Form SS-5, Application for a Social Security Card, available on SSA.gov.

• Update Your Address
  If you've moved, make sure the USPS, your employers, and the IRS have your new address.
  How to Update Your Address: Submit Form 8822 to the IRS.

• Adjust Withholding
  Update your Form W-4 to reflect your growing family and any additional dependents.
  How to Adjust Withholding: Use the IRS Tax Withholding Estimator for guidance.

• Claim Child-Related Tax Benefits
  You may qualify for credits like the Child Tax Credit or the Earned Income Tax Credit.
  How to Claim: Ensure you have your child's SSN and review IRS guidelines.

Starting a Second Job: Managing Multiple Income Sources

Starting a second job can increase your income but may also push you into a higher tax bracket, which could result in a higher tax bill. Managing these changes early will help you stay on top of your taxes and keep your finances in check. Here’s what to do:

• Update Withholding
  Ensure both employers withhold the correct amount of taxes to avoid a surprise tax bill.
  How to Adjust Withholding: Use the IRS Tax Withholding Estimator and submit updated Form W-4s if needed.

• Keep Track of Income
  Keep detailed records of your earnings from both jobs for accurate tax reporting.
  How to Track: Use a spreadsheet or financial software to monitor your income and withholdings.

• Estimate Taxes
  Determine if your additional income places you in a higher tax bracket and plan accordingly.
  How to Estimate: Utilize the IRS Tax Withholding Estimator or consult a tax professional.

By staying proactive and organized during these life events, you can make tax season a little less stressful and ensure you're prepared for any changes that come your way.

I hope this post has been helpful! If you have any questions, comment below.

Disclaimer: The content on this blog is for informational purposes only and does not constitute professional financial advice. While I am an accountant and tax professional, the information here should not be relied upon without seeking advice from a professional tailored to your individual circumstances. I disclaim any liability for actions taken based on the content of this blog.