Taxes & Divorce
When getting a divorce, filing taxes may be the furthest thing from your mind. However, many tax issues arise when spouses or registered domestic partners separate or divorce, which has the potential further complicate the already stressful dissolution of marriage process. When structuring a marital settlement agreement, the family law attorney needs to be aware of taxes & divorce issues or one or both parties may get stuck with substantial taxes and related penalties.
Filing Your Yearly Taxes When Getting a Divorce
When filing taxes you are required to choose a tax filing status. You can choose to file as single, married (filing either a joint or separate return), head of household, or a widower with a dependent. When filing, you are required to report half of your community property and all of the income that you earned on your own. Given that both you and your spouse are responsible for any tax liabilities or penalties should you if you file a joint return, it may be wise to file separately. It’s important to note that the tax filing status is determined by the status you had on December 31st of that fiscal year. Thus, it is often ideal to ensure that your divorce if finalized by the end of the year, in order to avoid penalties that may come as a result of the married filing separately tax status.
Important Facts About Taxes During or After Divorce
A large complication that may arise as result of divorce & taxes is the issue of who will get to claim the dependency exemption. For those who fall under a certain tax bracket, these exemptions can typically be claimed by the parent who has physical custody of the children. In addition, child care expenses can often be used as a deduction on the custodial parents’ taxes. You must have your dependent’s social security numbers in order to claim them on your tax form, however, so be sure to have that information on hand when preparing your return.
Another important fact about taxes during or after a divorce is that spousal support may be able to be claimed as a deduction by the paying spouse. It’s best to consult with an attorney to find out how to deal with divorce taxation, so that you are aware of how the tax laws affect you.
Hiring an Attorney to Handle Divorce Taxation Issues
There are many issues that arise as a result of taxes during a divorce or immediately following the dissolution of a marriage or domestic partnership. The attorneys at Walzer Melcher can assist you in order to make filing your taxes a less frustrating process. Given that the tax laws are always changing, having an attorney to help you navigate through the often complicated task of completing tax returns, especially when going through such a major life change as a divorce, can result in greater tax benefits and advantages.
Please see the articles below or contact us for further information.
ARTICLES AND INFORMATION
- IRS Publication Divorced and Separated Individuals
- Tax Issues When Dividing Property Incident to Divorce.
Although most transfers between spouses or former spouses in the context of a marital dissolution will be non-taxable, there are some important exceptions. This article discusses the tax rules regarding property divisions in detail.
- A Step Toward Tax Equality for Registered Domestic Partners.
The IRS has determined that registered domestic partners in California should receive the same tax treatment under federal law as married couples with respect to the reporting of community property income
- “Make the Tax Code Your Friend-and Alimony More Palatable” by Christopher C. Melcher.?Published in Family Advocate, Vol. 34, No. 3, (Winter 2012) p. 16-19. © 2012 by the American Bar Association. Every time we negotiate an alimony agreement or argue over alimony in court, we are doing a form of tax planning.
- Do you qualify for a tax deduction for your spousal support payments?
In order for alimony or spousal support to be tax-deductible to the payor, the requirements set forth in 26 U.S.C., § 71 must be satisfied. Each requirement is discussed in this article.
- Tax Deductibility of Attorney’s Fees
- Family Law Taxation California Style