Dealing With Tax Issues When Going Through A Divorce

One common concern among spouses who are separated or filing for divorce concerns taxes. After years of filing joint returns, reporting shared assets and claiming deductions together for mortgages and child care, serious concerns can arise if you are living apart, have divided accounts and property, or are involved in timesharing arrangements with your children. In some cases, any tax refund you may have been entitled to in the past was eaten up by tax liability owed by your spouse. While it is vitally important to have your taxes handled by a licensed, trustworthy preparer, the following can help you know what to expect this tax season.

Your Filing Status

Filing taxes while either going through or fresh from a divorce may be a new and unfamiliar experience to you, but it is something the Internal Revenue Service deals with regularly. In the past, you may have filed returns with your spouse jointly, which offers tax benefits in terms of the marriage credit you may claim. While you may have had more deductions, a married filing jointly status also means you share one another’s tax debts. Unless there are extenuating circumstances involved, you may now wish to file separately, but are you considered as married or unmarried? Under IRS guidelines, there are several factors to consider in determining your filing status:

Unmarried: Regardless of how long you were separated or when your divorce was filed, if you have obtained an official divorce decree before the last day of the filing year, you are considered unmarried for tax purposes.
Married: Regardless of how long you have been separated, if you have not received a divorce decree or order of separate maintenance, your filing status is considered married for tax purposes.
Considered Unmarried: This is a special classification which allows you to file as head of household, which reduces your overall tax liability and allows you to increased deductions. You can claim ‘considered unmarried’ status and file as head of household if you have been separated for at least six months, maintain more than half the cost of your home, and it is considered as the primary residence of your child for more than half the year.

Tax Credits and Liability

If you are considered married, filing separately or as the head of household could prevent you from being held liable for any of your spouse’s tax debts. This status does require you to determine who will claim credits and allowances for your children. If you have a timesharing arrangement in which both spouses share parenting time as well as costs and expenses, this may be a matter for your attorney to negotiate, while other issues will likely need to be brought to your tax preparers attention. A 2016 Huffington Post report on divorce and taxes outlines some of the potential issues you will want to consider:

Taxes and deductions for alimony and maintenance;
Health care expense credits and deductions;
Taxes owed for jointly held properties and businesses;
Taxability of asset and retirement fund transfers.

Reach Out to Us for Help

If you are separated or contemplating a divorce, contact the Vanessa L. Prieto Law Offices, LLC today. Our experienced Florida divorce attorney can help address your questions and concerns, while acting as a strong legal advocate to ensure your rights and protected.

Resources:

irs.gov/publications/p504/ar02.html

huffingtonpost.com/joseph-e-cordell/common-tax-issues-for-the_b_9141790.html