Marriage

Same-sex marriage to boost state tax revenue

Westchester NY accountant Paul Herman of Herman & Company CPA’s is here for all your financial needs. Please contact us if you have questions, and to receive your free personal finance consultation!

By Bankrate

taxes-blog-Same-sex-marriage-will-boost-state-tax-revenue

 

The Supreme Court’s ruling legalizing same-sex marriages across the United States was a victory for the couples who long fought for equal marital rights.

It also could prove to be a reason for state treasuries to celebrate.

The Williams Institute at the UCLA School of Law says that the increased number of weddings could produce a national economic boost of up to $2.6 billion in just the first three years that same-sex marriage ceremonies are performed nationwide.

That should lead to a total of $184.7 million in new tax revenue, says the law school think tank.

More wedding money

The money, according to the group’s data, will come from the expanded wedding services as gay and lesbian couples head to the altar.

Businesses that provide wedding planning, catering, venue and myriad other wedding-related services naturally will see their incomes and taxes increase.

So will ancillary industries, such as the travel and lodging sectors that will have the couples’ out-of-town wedding guests as new customers. This spending boost can lead to an increase in state and local tax revenue and an influx of tourism dollars that benefit local businesses.

More state income taxes possible

In addition, the Williams Institute estimates more than 13,000 new jobs will be created nationwide, thanks to the growing number of nuptials.

For the 41 states that collect income taxes, that will mean additional taxes from the new workers within their borders.

Some states also could see increased tax collections simply from the new couples’ filing status changes.

Now that same-sex couples can fill out returns as married filing jointly in states with income taxes, some of the new married couples could see their taxes go up as their combined incomes push them into higher tax brackets.

No income tax, no problem

Even the states that don’t levy individual income taxes should benefit substantially.

In my home state of Texas, for example, Williams Institute researchers estimate that more than 23,000 couples will marry during the first three years of legal same-sex marriage, providing the Lone Star treasury with nearly $15 million in tax revenue on total wedding spending of almost $182 million.

The financial forecast is similar for Florida, another large, no-income-tax state that offers lots of beach venues where couples can exchange vows.

Tax planning for all

Of course, the opposite is true, too. States could see a dip in their revenue, thanks to the newly married same-sex couples.

This might happen, for example, if only one spouse works. By now being able to file a joint state tax return, the same-sex newlyweds could see lower tax bills.

So states, just like their taxpaying residents, will be doing some tax planning to see how the new marriage equality law affects their bottom lines.

Generally, however, more wedding business will be good not only for the happy couples, but for the states’ economies and tax collectors.

Herman and Company CPA’s proudly serves Bedford Hills NY, Chappaqua NY, Harrison NY, Scarsdale NY, White Plains NY, Mt. Kisco NY, Pound Ridge NY, Greenwich CT and beyond.

Weddings Mean Tax Changes & Small Business Resources

Westchester NY accountant Paul Herman of Herman & Company CPA’s is here for all your financial needs. Please contact us if you have questions, and to receive your free personal finance consultation!  

Weddings Mean Tax Changes

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It may not be as high on the wedding plan checklist as the venue, invitations and attire, but there are important tax issues created by a marriage that warrant some prompt attention following the wedding.

Name change. Anytime names are changed, it should be reported to the Social Security Administration (SSA). The name associated with an individual’s Social Security Number (SSN) should match the name on the tax return. To change a name with the SSA, file Form SS-5, “Application for a Social Security Card.” The form is available from www.ssa.gov, by calling (800) 772-1213, or from the local SSA office.

Address change. Let the IRS know about an address change by filing Form 8822, “Change of Address.” Also notify the U.S. Postal Service at www.usps.com to forward mail. You may also report the change at your local post office.

Change tax withholding. A change in marital status requires that a new Form W-4, “Employee’s Withholding Allowance Certificate,” be furnished to the employer(s). Combined incomes may move the taxpayers into a higher tax bracket. Search www.irs.gov for the IRS Withholding Calculator tool for help completing the new Form W-4.

Change in filing status. Marital status is determined as of December 31 each year. Spouses can choose to file jointly or separately each year. We can help you make that determination by calculating your tax liability both ways.

Change in circumstances. Taxpayers receiving an advance payment of the health care premium tax credit in 2014 should report changes in circumstances, such as a change in income or family size, to the Health Insurance Marketplace. Also, the Marketplace should be notified when you move out of the area covered by your current Marketplace to ensure you get the proper type and amount of financial assistance.

 

Herman and Company CPA’s proudly serves Bedford Hills NY, Chappaqua NY, Harrison NY, Scarsdale NY, White Plains NY, Mt. Kisco NY, Pound Ridge NY, Greenwich CT and beyond.

Employment Tax Withholding– Refunds and Adjustments for Same-Sex Married Couples

Scarsdale accountant Paul Herman has all the answers to your personal finance questions! Federal income and employment tax rules provide exclusions from gross income and from wages for specific benefits employers provide to the spouse of an employee. Prior to the Windsor decision, married same-sex taxpayers were excluded from receiving the benefit of these provisions. Same sex marriage and tax tips from scarsdale cpaAs a result, employers withheld and paid employment taxes on certain benefits provided to the same-sex spouse of an employee because (1) the marriage was not recognized and (2) the benefits were not treated as excludable from gross income or from wages for federal income or employment tax purposes.

Following the Supreme Court’s decision in Windsor, the IRS provided guidance to employers and employees on how to make claims for refunds or adjustments (corrections) of overpaid payroll taxes. Specifically, taxpayers who overpaid FICA (Social Security and Medicare) taxes and federal income tax withholding for certain benefits provided and remuneration paid to same-sex spouses may now be entitled to a refund of or an adjustment to their withholding.

The IRS has provided two alternative procedures for employers to correct the overpayment of employment taxes attributable to same-sex spousal benefits:

  1. An employer can repay its employees for the over-collected FICA and federal income tax withholding with respect to same-sex spousal benefits for the first three quarters of 2013 during the fourth quarter of 2013. The employer will then reduce fourth quarter wages, tips, and other compensation on its fourth quarter Form 941.
  2. An employer that does not reimburse the employee’s over-withholding by December 31, 2013, can file one Form 941-X for the fourth quarter of 2013 to correct FICA taxes paid in all four quarters of 2013. This procedure will correct overpayments of FICA taxes for same-sex spouse benefits paid in 2013. The employer does not correct for over-withheld income taxes; instead, the employees will receive credit for the over-withheld income taxes when they file their 2013 federal income tax return.

The IRS has also provided a special administrative procedure for employers to make adjustments or claims for overpayments during years before 2013 still open under the statute of limitations (2010, 2011, and 2012). For these years, an employer can file one Form 941-X for the fourth quarter of each open year. This fourth quarter Form 941-X would include adjustments or refunds of all overpayments of FICA (but not income) taxes with respect to same-sex spousal benefits provided during that entire year.

Our Scarsdale tax preparers here at Herman & Company CPA’s are here for all your financial needs. Please contact us if you have questions about these provisions or any other tax compliance/planning issues, and to receive your free personal finance consultation!

 

Herman and Company CPA’s proudly serves Armonk NY, Bedford Hills NY, Chappaqua NY, Harrison NY, Scarsdale NY, Mamaroneck NY, Stamford CT and beyond.

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New Tax Rules for Legally Married Same-Sex Couples

Scarsdale accountant Paul Herman has all the answers to your personal finance questions! The following new tax rules have been created to accommodate legally married same-sex couples:

The U.S. Supreme Court’s decision in the Edith Windsor Case, invalidating a key provision of the Defense of Marriage Act, raised many questions regarding the federal income tax rights and responsibilities of same-sex couples. New Marriage Tax Rules for Same-Sex Couples from Scarsdale accountant Paul Herman  The U.S. Department of the Treasury and the IRS recently ruled that same-sex couples, legally married in a jurisdiction that recognizes their marriages, will be treated as married for federal tax purposes. This ruling applies regardless of whether the couple lives in a jurisdiction that recognizes same-sex marriage or a jurisdiction that does not. However, the ruling does not apply to registered domestic partnerships, civil unions, or similar formal relationships recognized under state law.

Same-sex couples will now be treated as married for all federal tax purposes (income, gift, and estate taxes) where marriage is a factor. The ruling applies to filing status, personal and dependency exemptions, the standard deduction, employee benefits, IRA contributions, and the earned income and child tax credits.

For 2013, legally married same-sex couples must file their tax return using either the married filing jointly or married filing separately filing status. For years prior to 2013, these couples may, but are not required to, file amended returns choosing to be treated as married for federal tax purposes for one or more prior tax years still open under the statute of limitations.

Our Scarsdale tax preparers here at Herman & Company CPA’s are here for all your financial needs. Please contact us for all inquiries and to receive your free personal finance consultation!

Herman and Company CPA’s proudly serves Bedford NY, Mount Kisco NY, Larchmont NY, Purchase NY, Rye NY, Harrison NY, Scarsdale NY, Greenwich CT and beyond.

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Getting Married: FAQs

Scarsdale CPA Paul Herman has all the answers to your personal finance questions! Getting married is an exciting lifetime milestone, but with it also comes major changes to your finances.

Marriage and finance faqs from scarsdale tax preparers

Get to know these FAQs before the wedding!

 

The following are frequently asked questions our Westchester CPA firm regularly receives regarding marriage and your financial situation:

 

 

Unmarried couples don’t:

  • Inherit each other’s property automatically. Married couples have the state intestacy laws to support them if they do not have a will. Under the law, the surviving spouse will inherit (at the minimum) a fraction of the deceased spouse’s property.
  • Have the privilege to speak for one another in a medical crisis. In the case that your life partner loses capacity or consciousness, someone will have to make the go-ahead decision for a medical purpose. It should be you, but if you haven’t filed certain paperwork, you may not have the ability to do so.
  • Have the privilege to handle one another’s finances in a crisis. A married couple that jointly own assets is less affected by this problem than an unmarried couple.
▼ How should unmarried couples protect their estate and financial holdings?

Here are some important steps to take for couples that are unmarried:

  • Draft wills. The chances of the intentions being followed through with after a death are greater if both partners make wills. Without wills, the probability of the unmarried surviving partner having no rights is more likely.
  • Think about owning property together. This is a way to guarantee that property will pass to the other joint owner at the time of the other’s death due to the right of survivorship.
  • Make a durable power of attorney. This will permit the partner to sign papers and checks and take care of other financial issues on his/her behalf should one become incapacitated.
  • Make a health care proxy. Also known as a medical power of attorney, this permits the partner to talk on your behalf to make medical decisions, should you become injured.
  • Have a living will. This lets your wishes regarding artificial feeding and other measures to prolong your life be known.
▼ Is more insurance necessary for married couples?

In the case of death, life insurance will provide a form of income for your dependents, children or whoever is your beneficiary. Because of this, married couples usually require more life insurance than singles.

Having someone dependent on your income will determine if you need to have life insurance. If someone such as a child, parent, spouse or other individual is dependent on your income, you should have life insurance. The following are situations where life insurance is necessary:

  • Single parents or families with young children or other dependents. The younger your children, the more insurance is necessary. Insurance should be in proportion to the amount earned. If both spouses are working, they should both be insured. If both earners cannot afford to be insured, the primary wage earner should be the first to be insured and the secondary will follow. To fill the insurance gap, a less expensive term policy may be used. Insurance should be bought to cover the absence of services such as childcare, bookkeeping, housekeeping, which are provided by the spouse that works within the home. The insurance that covers the non-wage earner is secondary to the insurance that covers the wage earner’s life, if funds are scarce.
  • Adults that have no children or other dependents. You will need less insurance than people in the previous situation if your spouse can live comfortably without income. However, some form of life insurance is still necessary. You will want at least enough to cover burial expenses, to pay off any debts you may have acquired, and to provide an easy transition for the surviving spouse. You may want to buy more insurance if you think your spouse would go through financial hardship without your income or if your savings aren’t adequate. This depends on your salary level as well as the amount of your spouse’s, the amount of savings you have and the amount of debt incurred.
  • Single adults without dependents. Unless you would like to use insurance for the purposes of estate planning, you will only need insurance to cover expenses for burial and debts.
  • Children. Typically, children only need life insurance to cover burial expenses and medical debts. An insurance policy could also be used as a long-term savings instrument, in some instances.
▼ Who needs to be notified if a spouse changes their name after marriage?

All organizations that you had correspondence with while using your unmarried name should be notified. You can begin with the following list:

  • The Social Security Administration
  • Department of Motor Vehicles
  • Post Office
  • Investment and bank accounts
  • Employer
  • Voter’s registration office
  • School alumni offices
  • Credit cards and loans
  • Club memberships
  • Retirement accounts
  • Subscriptions
  • Passport office
  • Insurance agents
▼ Should I update my will when I get married?

Definitely. When an important life event occurs such as marriage, it should be updated. If not, your spouse and other beneficiaries will not get what is meant for them at the time of your death.

▼ After marriage, what are the tax implications?

You are entitled to file a joint income tax return upon marriage. Although this simplifies the filing process, you will more than likely discover that your tax bill is either higher or lower than when you were single. It’s higher when you file together, as more of your income is taxed in the higher tax brackets. This is commonly known as the marriage tax penalty. In 2003, a tax law that intended to reduce the marriage penalty went into effect, but this law didn’t get rid of the penalty for higher bracket taxpayers.

Once married, you may not file separately in an attempt to avoid the marriage penalty. Actually, filing as married filing separately can raise your taxes. For the optimal filing status for your situation you should speak with your tax advisor.

▼ Can married couples hold property?

Yes. After marriage, there are many ways of owning property. They differ from state to state.

  • Sole tenancy, which is when one individual has ownership. The property is passed on in accordance with the will at death.
  • Joint tenancy, with the privilege of survivorship. Two or more people have equal ownership. The property is passed to the joint owner upon death. This should be used to effectively avoid probate.
  • Tenancy in common, property has joint ownership with the privilege of survivorship. The property is passed on according to your will upon death.
  • Tenancy by the entirety, like joint tenancy, with privilege of survivorship. This doesn’t allow a spouse to get rid of the property without the other’s consent and is only possible for spouses.
  • Community property, property that is gained through marriage that has equal ownership. States such as AZ, CA, ID, LA, NV, NM, TX, WA, and WI allow community property.

Our Scarsdale tax preparers here at Herman & Company CPA’s are here for all your financial needs. Please contact us for all inquiries and to receive your free personal finance consultation!

Herman and Company CPA’s proudly serves Bedford Hills NY, Harrison NY, Larchmont NY, Scarsdale NY, Rye Brook NY, Pound Ridge NY, Purchase NY, Stamford CT and beyond.

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Any U.S. tax advice contained in the body of this website is not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.