I constantly get asked, “how do I file my taxes during a divorce?” This is one aspect of divorce that is often overlooked as there is no easy answer to this question. How you (and your former spouse) will file your tax returns during or after your marital dissolution depends on a multitude of factors. The decisions you make on this can have far-reaching financial consequences, so be sure to talk to your family law attorney and accountant so that you understand what lies ahead. Here are answers to some of the most common divorce tax questions we hear from clients.
Do I file as single or married?
Your tax filing status is determined by your marital status on the last day of the tax year. In other words, if you are still legally married on December 31, you are considered married for the entire year; if your divorce is final any day before December 31, then you are considered divorced for the entire year.
If you are legally separated, the IRS follows state law for determining your marital status. In California, the rules can become complicated, especially if you are in a same-sex marriage or a registered domestic partnership (RDP), so be sure to talk to your attorney.
Are support payments taxable?
The spouse who pays support can deduct the payments on their tax returns, while the spouse who receives support must claim it as taxable income. Child support comes out of post-tax dollars. The IRS has strict guidelines as to what qualifies for a spousal (or alimony) deduction, so be sure to discuss your situation with an accountant.
Both California and federal law allows the custodial parent to claim dependency exemptions for children from the marriage. However, parents are permitted to choose and agree to a different route.
For decisions regarding spousal support and dependency exemptions, trust your family law attorney and accountant to help you understand your options. No matter what you decide, keep detailed records, including the date and amount of each payment. This will help you resolve any potential disputes between you and your former spouse.
Can I deduct divorce tax advice?
It may be possible to claim divorce tax advice (and accountant fees) as a deduction on your federal and state returns. You cannot deduct any expenses related directly to your divorce, but deducting certain fees and expenses paid to professionals who help you prepare your tax returns may save you quite a bit in the amount of taxes you owe.
What are my responsibilities if a joint return is filed?
There are times that signing a joint tax return with your former spouse can lead to unanticipated problems. If you file with your ex, be sure to obtain a copy of the returns in time for your attorney and tax preparer to review them before you sign. You may also want to protect yourself with an indemnification agreement. Laws regarding “innocent spouse” status protect spouses who fall victim to an ex-husband’s or wife’s inaccurate joint tax return.
For more detailed information on how to file taxes during your divorce, you may wish to consult IRS Publication 504, which covers everything divorced or separated individuals need to know.
Even in the best of circumstances, divorce is a stressful time. Throw in complicated tax law and you may find yourself overwhelmed by the financial decisions that need to be made. An experienced family law attorney can help. For more information or to schedule a consultation, call us at 619-289-7948. We look forward to helping you.