Thursday, March 3, 2011
TAX RETURN TIME: FIVE TIPS THAT CAN BENEFIT MARRIED COUPLES
MANHATTAN -- Couples face many options when filing their taxes, and some can bring large benefits, according to a Kansas State University tax expert.
Amy Hageman, assistant professor of accounting at K-State, researches antecedents and consequences of tax policy, and judgment and decision-making by taxpayers and tax professionals.
Hageman says married couples should consider the following five tips before filing their tax returns:
* Decide if you wish to file as "married filing jointly" or "married filing separately." For almost all couples, filing jointly will result in the greatest tax savings, but it doesn't hurt to determine your tax liability under each of these filing designations before making a decision, Hageman said.
* To be considered married for tax purposes, you must be legally married on the last day of the tax year, Dec. 31, 2010. Otherwise, you're considered single for tax purposes.
* Both spouses' withholdings should be checked on their W-4s. In marriages where both spouses work, underwithholding, or not having sufficient tax withheld throughout the year, may be more of a problem than overwithholding, Hageman said. To make sure the appropriate amount of federal income tax is being withheld during the year, she recommends using the IRS withholding calculator at http://www.irs.gov/individuals/page/0,,id=14806,00.html.
* Watch out for the marriage penalty, or see if you can benefit from a marriage bonus. If spouses have similar incomes and are in a 25 percent or higher tax bracket, they may face a marriage penalty. This means paying higher income taxes collectively than if each spouse were single. On the other hand, if spouses have unequal incomes, such as a high-income earner and a nonworking spouse, the couple will typically pay less in income taxes than if each were single -- hence the bonus, Hageman said.
* Tax return processing should no longer be delayed for couples who itemize. Due to tax law changes made in late 2010, taxpayers who itemize their deductions or claim deductions for educator expenses, higher education tuition or fees, or state and local sales taxes, were going to have to wait until the IRS was ready to accept and process their tax returns. This change would affect many married couples, who are more likely to itemize their deductions, particularly if they are homeowners and taking the deduction for interest paid on home mortgages. However, the IRS announced Feb. 15 that it had begun processing all individual tax returns. Married couples should be able to file and have their tax returns processed without further delay, Hageman said.