Divorce and Taxes
FAQ's Answered by the Pros
How do I file taxes if my spouse and I are talking about divorce and we don't agree on anything?
A. You can file as married filing separately or request an extension on filing until your status is clearer. Remember an extension does not mean an extension on payment -the estimated taxes have to be paid -just the paperwork is extended. If you are expecting a refund on a joint filing, it will be part of the assets to be divided after legal separation or divorce proceedings are filed.
Should Taxes be filed as Married Filing Separately or Separated- if the divorce is not final?
A. This is an easy way to separate finances and the sooner it is adopted the easier the bookkeeping will be in the future. Filing separately also protects one from tax problems the spouse might incur if they do not do their taxes correctly. Even if you are not legally divorced you can keep separate records and file separately as "Separated" or use the "Married Filing Separately" -ask your tax professional which will be to your best advantage.
How do I file my taxes once my divorce is final?
A. Taxes have to be paid after divorce and the first filing can be complicated. Who gets to deduct the children? Who gets head of household status? Believe it or not these items are negotiated and agreed upon in the divorce and custody agreement and are allocated, not predetermined. Some families agree to have one parent deduct the two older children and another deduct the youngest for more years which makes it come out to a similar dollar amount. Whatever is in that agreement must be performed -so if your ex-spouse has the children as deductions you cannot put them as deductions on your taxes even if they live with you. The IRS tracks social security numbers and if the children's show up twice you are both in trouble and can end up with tax penalties as well as be taken into Family Court again, both expensive alternatives. Make sure you read and understand your divorce and custody agreement before you file your taxes.
When one party buys the house from the other how does the IRS view it?
A. Usually, if one party keeps the house of residence they will sign a Quit claim DEED to the soon to be ex-spouse. If you transferred your home (or
share of a jointly owned home) to a spouse or ex-spouse
as part of a divorce settlement, you are considered to
have no gain or loss by the IRS. You have nothing to report on your
tax forms. However, confirm with your tax professional.
Alimony, Maintenance and Child support -Are they Taxable?
A. Generally speaking, Alimony or Maintenance payments to an ex-spouse are tax deductible for the person paying and taxable for the person receiving them. Child-support payments are not tax deductible for the person paying and are not taxable to the person receiving them.
If I am married at the end of the year then I can claim married all year -what about divorce?
A. If you get a final decree of divorce or separate maintenance by the end of the tax year, you are unmarried for the entire year in the eyes of the IRS. See your attorney or tax advisor for questions.
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