10 Tips for Filing Taxes During Divorce
Your marital status on December 31st determines whether you can file your taxes as a married or a single person. Many couples time the finalization of their divorce based on tax consequences and choose to finalize their divorce before or after year-end as a result. There are many details to consider when filing taxes during or after a divorce.
If you are still married on December 31st then you have two options: you may file your taxes either Married Filing Jointly or Married Filing Separately. If you are divorced on or before December 31st of the tax year, then you can file as a Single person. If you file Married Filing Separately, you and your spouse will have to either both claim the standard deduction or both will be required to itemize their deductions.
When going through a divorce, keep the following tips in mind:
1. Send your lawyer a draft of the return before you file to confirm that the return is consistent with any Court Order and that it is appropriate given the facts of your situation;
2. Try to reach an agreement with your spouse to ensure that the returns are not rejected and to avoid an audit;
3. Know your rights with respect to reported income. Review the possibility of an indemnification agreement with your attorney to ensure full disclosure of all income by both parties, especially if a party to a divorce is not a W-2 wage earner;
4. If you are filing separately, remember that the children can only be claimed by one of you;
5. Understand that you can amend from a Married filing Separately return to a Married filing Jointly return but you cannot reverse a Married filing Jointly return;
6. Make sure your ultimate settlement agreement addresses the matter of filing tax returns, tax liability and the exemptions for your children;
7. Use a tax preparer with whom you feel comfortable. Confirm his/her familiarity with divorce issues to ensure that you are free to ask questions and understand the return;
8. Don’t sign anything until you fully understand the return;
9. Tell your spouse and the tax preparer that you do not want the return electronically filed until you give your express authorization to do so; and
10. Discuss how the refund will be divided or how any taxes due will be paid BEFORE you file to avoid future conflict.
Circular 230 Notice: To ensure compliance with requirements imposed by the Internal Revenue Service, we are informing you that, unless specifically indicated otherwise, any tax advice contained in this communication (including any attachments) was not intended or written to be used, and cannot be used, for the purpose of (i) avoiding tax-related penalties imposed under the Internal Revenue Code, or (ii) promoting, marketing or recommending to another party any tax-related matter addressed herein.
We are always available for free consultation and will certainly guide you through the divorce process. Please contact our office for further information.