Another tax season is here for Kansas residents. Many have already filed and are looking forward to a healthy refund. Still, others may be in the midst of filing an extension. Either way, it is a good time to take a look at the current tax code and how it affects working families, particularly working women.
Though two income households have become normal in the United States, the tax code is still set up to benefit one income families. This phenomenon is known as the marriage penalty. When families have only one income, the family tends to move to a lower tax bracket. However, two wage-earning spouses tends to put the family in a higher tax bracket. This higher tax rate does not take into account the extra cost of transportation or child care that is utilized when both parents are working.
The effect of the marriage penalty is not limited to high income earners. Low-wage earners may hesitate to get married when there are financial pitfalls that may occur. As a single low-wage worker, an individual may be eligible for food assistance or earned income tax credit. If two low-wage workers get married, their income will increase, but the couple may see a reduction in assistance that may make financially caring for a family more difficult.
Whether in a high or low tax bracket, it may be difficult to pay taxes owed. In some cases, tax debt may be discharged in a Chapter 7 bankruptcy. However, several criteria must first be met. A bankruptcy attorney can help debtors determine their best legal options to find their way out of debt.
Source: www.npr.org, “Outdated Tax Code Gives Working Spouses A Bad Deal,” Jennifer Ludden, April 13, 2014.