(RIVERWOODS, ILL., February 7, 2007) – The love struck are expected to spend $16.9 billion on Valentine’s gifts this year. This doesn’t include the amount their Valentine may be costing them in taxes, according to CCH, a Wolters Kluwer business (CCHGroup.com).
“Whether your marriage is a tax-savings bliss or bust depends on a variety of factors like whether or not you and your spouse decide to file jointly or separately, your income level and just how attuned you are as individuals and as a couple to making the right tax moves,” said David Bergstein, CPA, a tax analyst for CCH CompleteTax (www.CompleteTax.com), an online tax preparation and e-filing service for the do-it-yourself taxpayer.
So, what can you do this tax season to let your Valentine know they’re special? Here are a few suggestions:
- Volunteer to take charge of the taxes this year. That’s right – track down all forms, get all the information in order and prepare the taxes yourself, with online help or through your tax preparer. Volunteering means you cannot trade doing the taxes for a year’s worth of cooking dinner or taking out the garbage…despite the temptation.
- If you are getting a refund, equally invest in his and her IRAs. It can help score brownie points that you are thinking about your loved one for the long term. Depending upon your income level and other retirement investments, you and your spouse can invest as much as $4,000 each to an IRA account, plus $1,000 each if you are 50 years of age or older.
- Don’t spend the refund on candy or flowers. It’s a joint refund and your spouse is going to think you’re a cheapskate if they are buying half of their own gift.
- If you owe Uncle Sam because your spouse messed up on his or her withholdings from last year’s paycheck, erroneously decided to sell stocks that triggered big taxable gains at year end or managed to lose all the receipts for the charitable deductions you made throughout the year, smile and reply, “Don’t worry, honey. Not a problem.” Remember, it’s just money, not love you’re losing.
- Finally, if you won’t be filing this year – and maybe haven’t for years – only because your spouse simply decides watching TV or shopping is more important than filling out and filing those boring old tax forms, now may be a good time to pursue other relationships…perhaps professional relationships with a tax attorney…and a divorce lawyer. After all, love can really only take you so far.
But Are We Really Good As a Couple?
Another consideration for couples, Bergstein notes, is determining if being a couple is really the best thing when it comes to filing your income tax returns. While filing jointly is generally advantageous because it enables couples to take advantage of more deductions and credits, it doesn’t always result in a lower tax bill. This can be the case when one spouse has significantly higher medical expenses, or incurs substantial unreimbursed employee business or investment expenses.
For example, where one spouse has medical expenses that would exceed the 7.5 percent adjusted gross income threshold on a separate return but not if filing jointly. Say a couple had a 2006 total adjusted gross income (AGI) of $120,000 and had sufficient deductions to exceed the standard deduction. The husband’s AGI was $40,000, with unreimbursed medical expenses of $4,800, while the wife’s income was $80,000, with only $1,000 in unreimbursed medical expenses. Filing married, jointly, they would not be able to deduct any of the medical expense because they do not exceed 7.5 percent of their combined AGI. Filing separately, however, the husband could deduct unreimbursed medical expenses above $3,000 as that exceeds 7.5 percent of his AGI; so he could deduct $1,800 in unreimbursed medical expenses. In a case like this, it’s worthwhile to check to see if filing separately would lower their tax. However, among other things, filing separately generally means neither person can claim the child and dependent care credit, educational credits or the earned income credit.
“To be absolutely certain whether joint or separate returns are better, you should compute your tax liability both ways and compare the results,” according to Bergstein. “Ultimately, you may be a great couple. Share a dinner and an evening out, but keep the tax forms separate.”
About CCH CompleteTax
CCH CompleteTax, an online tax preparation and e-filing service for the do-it-yourself taxpayer, continues to set the standard when it comes to making online tax prep and e-filing easy, efficient and affordable. CompleteTax offers comprehensive support to help taxpayers through each step and allows them to prepare and e-file a federal income tax return for just $25.95 and a state income tax return for $12.95. Taxpayers can try before they buy, as CompleteTax does not require payment until a return is ready to be e-filed or printed and mailed.
About CCH, a Wolters Kluwer business
CCH, a Wolters Kluwer business (CCHGroup.com) is a leading provider of tax and accounting law information, software and services. It has served tax, accounting and business professionals and their clients since 1913. Among its market-leading products are The ProSystem fx® Office, CCH® Tax Research NetWork™, Accounting Research Manager® and the U.S. Master Tax Guide®. CCH is based in Riverwoods, Ill.
Wolters Kluwer is a leading global information services and publishing company. The company provides products and services for professionals in the health, tax, accounting, corporate, financial services, legal and regulatory, and education sectors. Wolters Kluwer has annual revenues (2005) of €3.4 billion, employs approximately 18,400 people worldwide and maintains operations across Europe, North America, and Asia Pacific. Wolters Kluwer is headquartered in Amsterdam, the Netherlands. Its shares are quoted on the Euronext Amsterdam (WKL) and are included in the AEX and Euronext 100 indices. For more information, visit www.wolterskluwer.com.