NEW YORK -- ( MainStreet) -- So you got married in 2011? That's great, but the Internal Revenue Service doesn't have all year for you and your spouse to decide how you'll file your taxes. There is one basic truth for newlyweds during tax season: Whatever your marital status was Dec. 31 is what the IRS considers you for all of 2011. From there it gets a bit more complicated.
A married couple's first kiss after taking their vows essentially kisses both of their "single" tax filing statuses goodbye. From here on in, they're left with two options: married filing jointly and married filing separately. The former generally results in the lightest tax hit by giving couples a few breaks, including a credit for child- and dependent-care expenses, deductions for student loan interest and a lifetime learning credit. This wasn't always the case, but George W. Bush's tax cuts in 2001 and the Tax Relief Act in 2010 helped expand the lower tax brackets for joint filers and make it a bit easier on big earners and their low-earning spouses. "Historically, two singles cohabiting would pay less than a married couple, but that was changed with the Marriage Penalty Relief Act," says David B. White, certified public accountant and president and founder of David B. White Financial in Bloomfield Hills, Mich. "Generally speaking, married filing jointly is going to be lower than married filing separately, especially if there's an imbalance of earnings where you would forfeit expenses and deductions for the person who doesn't have much income."
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Filing separately doesn't help when it's time to balance the books, either. Couples filing jointly can deduct $3,000 in capital losses against ordinary income. Those filing separately, however, can deduct only $1,500 in losses and can't use one spouse's losses to offset another's gains. It's a big reason why only 4.5% of married couples filed separately in 2009, the last year for which data were available. Married couples filing separately made up less than 2% of all returns filed that year, but that didn't necessarily mean they were making the wrong call.
"Usually when you're filing a joint return, what you're saying when you sign that return is that it's a true, accurate return," Criscuolo says. "In some situations, a spouse isn't auditing their other spouse and making sure everything is claimed and reported properly." White says he has encountered married clients who will cover up the numbers on the couple's tax return and simply ask their spouse to sign it. Not only should a spouse never do such a thing, but they should file separately without hesitation. "The biggest reason that I know of that people file separately is distrust: If you expect dishonesty or that someone is overstating deductions, understating income or you think there are hidden assets, then you don't want to put your name on a tax return with somebody else," White says. "I have clients that file separately for that very reason, and there's an 'innocent spouse' law to help protect you, but that's a little bit like going to traffic court to prove you're innocent after you've been given a ticket. It's better not to get the ticket in the first place." So how do you know for sure which filing method will work best for you? Folks who file their own taxes are going to want to use some tax preparation software to compute their return for joint and separate filing and compare the results. If tax returns are prepared for a couple by a third party, this will usually happen automatically. Before that happens, however, a couple will want to make sure all financial information is in order before facing the IRS unprepared. White recommends doing a dry run on a tax return early in the year just to make sure the withholding on a couple's combined income is sufficient to make up for the hike in earnings since they were single. If a couple is filing electronically, a spouse changing his or her name will want to notify Social Security immediately to ensure that all the information matches up. If there are children coming into the family whose names are changing as a result, their Social Security information will have to change, too. Form SS-5 is an easy way to make the switch. If a couple is moving after the wedding day, they'll want to cozy up to form 8822 as the best way of keeping the IRS apprised of the change. Jason Notte. >To follow the writer on Twitter, go to http://twitter.com/notteham.