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The bite dual-income couples take after the wedding: an unrevised W-4 and a big balance due
After the wedding your salary hasn't changed and your job hasn't changed, so it never occurs to most people to touch the W-4. Then they file the following year and owe several thousand dollars.
Where the problem comes from
A W-4 tells your employer how much tax to withhold from your paycheck. Its math assumes the status you wrote on it.
Before the wedding you each filled one in as single. Single withholding is calculated on the basis that this person has only this one income.
When filing jointly after marriage, combining both incomes pushes you into higher tax brackets, yet both employers are still withholding as if you were single.Neither side withholds enough, and together that's a gap.
This is what the so-called marriage penalty actually looks like for a dual-income household. The closer the two incomes are, the larger the shortfall.
When you find out
At tax time. And after you've already spent those paychecks.
If the gap is big enough, interest or an underpayment penalty may be added on top.
The fix: recalculate with the official tool
The IRS website has a free Tax Withholding Estimator. Run it right after the wedding.
It asks for both incomes, current withholding and deductions, then tells you how to fill in the W-4.
What to have ready: both of your recent pay stubs and last year's return. Twenty minutes now beats a bill next year.
Which part of the W-4
The current W-4 has a section specifically for multiple incomes (Step 2), with three approaches:
- Use the IRS online estimator (most accurate)
- Use the Multiple Jobs Worksheet on the form
- If your incomes are similar, just tick the checkbox (simplest, but rougher)
You can also specify an extra amount to withhold per paycheck in Step 4(c). If you calculate a $2,400 gap, divide it by the remaining pay periods and enter that to close it.
Handle these at the same time
Since you're going into the HR system, do these together (see item 17 of the checklist): your name, adding your spouse to health coverage, and the 401(k) and life insurance beneficiaries.
Note especially that health coverage has a time windowAn employer group plan's statutory minimum is 30 days, not the 60 you commonly see online (that's the ACA Marketplace rule).
One detail about timing
Filing status looks at your situation on December 31status on that day (see item 16 of the checklist). So even if you get married in December, the entire year counts as married, while your withholding for the whole year was calculated as single.
For a year-end wedding that gap is especially large, because there's no time left to adjust. All the more reason to run the numbers early and, if necessary, withhold extra in the last few pay periods.
Read another item first if you have student loans
If one of you carries large federal loans on IDR, whether to file jointly at all needs re-evaluating (see item 62 of the checklist). Decide the filing status first, then adjust the W-4.
In one line
Spend twenty minutes on the IRS estimator after the wedding, especially if you're dual-income, and especially if you married at year end.