The Tax Impact of a Significant Life Event

You're getting married. You're having a baby. You've decided to take a new job out of state. Each one of these is a significant life event. So what does the IRS have to do with these occasions?

If you didn't already guess the answer, each one of these events has a noteworthy impact to your taxes. Because of this, the IRS makes multiple publications and various online articles available to assist us with these specific occurrences.

Here are a few important ways our life may change, and some general tax information designed to answer our tax questions.

The birth of a child

The IRS has an interesting publication that cites every tax resource you will need when giving consideration to the tax implications of your newly expanded family.

Publication 4156, Life Cycle Brochure, has a checklist of sorts that details everything from the form needed to apply for a Social Security Number, to information on dependents, to all the different tax credits you may now be eligible for. Definitely a must-read for new parents.

You've tied the knot

If you are the blushing bride, consider whether a change is needed to your Social Security records. If you are going to file a joint return and use your new last name, your Social Security card must reflect your married name. Failure to change your name can cause a processing or refund delay, or your personal exemption may be canceled, resulting in a higher tax owed.

Inform SSA of your name change by filing Form SS-5, Application for a Social Security Card, at your local SSA office. Bring your original marriage license as proof of your legal name change.

You probably didn't do a background check on your spouse, but if your mate has a previous tax balance with the IRS that you didn't know about, you can prevent your portion of a jointly filed refund from being offset to his or her balance by filing your 1040 along with Form 8379, Injured Spouse Allocation.

If the situation is a little more serious, and the IRS is holding you liable for a tax balance that you believe to be the sole responsibility of your mate, you can petition the IRS for a reprieve by filing Form 8857, Request for Innocent Spouse Relief.

Job loss

Your foremost guide in this situation should be Publication 4128, Tax Implication of a Job Loss. This pub is full of important tips, such as the taxability of unemployment and severance packages, the tax impact of early IRA distributions, deductible expenses of searching for a new job, and a set of helpful Q& A's.

Starting a new business

If you decide to go into business for yourself, you should familiarize yourself with IRS requirements to send in estimated tax payments. Self-employed individuals who expect to have a tax balance of at least $1,000 or more at the end of the year are required to send in quarterly payments that estimate the amount of tax due on that quarter's earnings. These payments are made via 1040-ES Vouchers.

For more information, see the IRS article Starting a Business?

Planning for retirement

Hopefully your retirement has been some years in the making, and you have given thought to how your investments will pay off in the long run. There are various retirement plans available to you, and each of them carries a set of tax implications.

Learn how to favorably structure your retirement and other income by reading up on Publication 915, Social Security Benefits, Publication 554, Older Americans' Tax Guide, Publication 590, Individual Retirements Account and Publication 575, Pension and Annuity income.

Moving?

Did you know that if you move for the purpose of starting a new job, almost all of your moving expenses are deductable? If you meet a distance test and a time test, you can deduct expenses such as transit expenses, storage fees, actual expenses or a mileage reimbursement if you are using your own vehicle, packing and crating costs, as well as any extra costs involved with connecting or disconnecting utilities.

For more information, see Publication 521, Moving Expenses. If you are selling your home in conjunction with your move, Publication 523 will assist you.

Disaster or personal loss

Hopefully this is a topic that you never have to address, but you should know that the IRS makes special accommodations available to victims of federally declared disaster areas, as well as those who have suffered personal or property losses.

For an updated listing of the tax relief provisions that the IRS has rolled out to recent disaster areas, see the heading Tax Relief in Disaster Situations at irs.gov.

To figure a possible deduction for a casualty or theft loss, see Publication 547.

More from this Contributor:

How to determine if you qualify for Innocent Spouse Relief

How to determine if you qualify for Injured Spouse Relief

10 things that unemployed taxpayers need to know