OVERVIEW
Are you recently married? There are some important things you should know about filing jointly. Watch this video to learn more.
Video transcript:
Hello, I’m Tammy from TurboTax with some important information about your income tax withholding. Will you be changing your tax return filing status to single or married filing jointly soon? If so, you should consider updating your W-4 since you may need to increase or decrease the amount of tax being withheld from your wages.
The reason your employer withholds tax from your salary is because the IRS requires you to pay income taxes as you earn your income—long before you even file your tax return. But if you underpay your tax by too much, you may end up incurring an underpayment penalty charge for paying your taxes late.
Two important factors that influence how much tax is withheld from your wages are your filing status and number of allowances you report on the W-4 form you give to your employer. The W-4 allows you to report allowances for various items you anticipate reporting on your tax return, such as for your dependents and tax credits.
In addition to the allowances you report, the amount of tax withheld also depends on whether you select single or married on your Form W-4. In other words, even if the number of allowances you claim remains the same, if you change the filing status on your W-4, you will see your withholding increase or decrease. This is because single and married filing jointly taxpayers are subject to different tax brackets.
However, the range of income that each bracket covers is different for single and married taxpayers. For example, the 10-percent tax bracket for married taxpayers covers a larger amount of taxable income than for single taxpayers. Essentially, this means that if you were to calculate the tax on the same amount of taxable income, you would come up with different tax bills just by changing your filing status. This is why it’s important to update your W-4 even if the only change you make is to your filing status. Otherwise, you run the risk of paying too much or too little tax.
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