Statistically speaking, about half of marriages in the US end in divorce. This means that it's a reality that many people face. You have to deal with a lot during a divorce, not to mention more complicated paperwork during tax time. Read these tips from Kathy Pickering, executive director of The Tax Institute at H&R Block, to make sure you're on top of things for tax day.
Selecting the Right Filing Status
Your marital status on Dec. 31 of the year you are filing tax returns for determines your filing status.
This means taxpayers who are not divorced on that date must continue to use one of the filing statuses for married couples, which are married filing jointly and married filing separately. In some cases, married taxpayers may be able to use the head of household filing status even without being divorced if you have lived apart from your spouse for more than half of the year and provided more than half of the maintenance for your household, which includes son, daughter, stepson, stepdaughter, or eligible foster child.
Being divorced could qualify you to file as head of household if you also meet these two conditions:
- You paid more than half the cost of keeping up your home.
- You had a qualifying dependent living in your home more than half of the year.
Divorced taxpayers who do not qualify to use the head of household status will generally file as single.
Changing Your Name
Depending on where you are now in the divorce process, your name and/or address could've changed.
- After a name change, remember to request a new Social Security card with your new name. Your name on your tax return must match what the Social Security Administration has on file. If it doesn't, it could take much longer to process your tax return and delay the issuance of a tax refund.
- File Form 8822 with the IRS to change your address of record.
Alimony Is Taxable and Deductible
Remember that alimony is taxable and deductible.
- The payer may claim the payments as an above-the-line tax deduction, which means it can be deducted by taxpayers who don't itemize and still reduce taxable income.
- The recipient must claim alimony as taxable income.
- For some recipients, it is beneficial to adjust the amount of withholding on their W-4 or make estimated payments to help avoid having to pay all the taxes resulting from the alimony payments at one time. Making quarterly estimated tax payments is another option.
Claiming Children as Dependents
In most cases, the custodial parent (the parent the child spends more nights with) will claim the children as their dependents. However, noncustodial parents can claim children as their dependents with the proper written consent of the custodial parent.
If you are the noncustodial parent, the custodial parent must give you a completed Form 8332 releasing your child's exemption to you. You must attach this form to your return.
If the custodial parent releases the exemptions, the noncustodial parent would also claim the Child Tax Credit for children who are under 17. The custodial parent, if eligible, would claim the Earned Income Tax Credit and the Child Care Credit and file as head of household.
Child support isn't tax-deductible for the payer, and child support isn't considered income for the recipient and therefore should not be reported on income tax returns.
Protection If You Suspect Your Spouse Incorrectly Reported Their Income
Divorce, separation and remarriage can often prompt people to review their tax history and sometimes seek relief. These are the types of protection the IRS provides for eligible spouses:
- If one spouse owes back taxes or has other past-due obligations (e.g., child support) for which the IRS can hold back some or all of a joint tax refund, the other spouse can request injured spouse relief.
- When injured spouse relief is granted, the injured spouse may be able to get their portion of a tax refund, while their spouse's portion would offset the past-due debts.
- Married taxpayers who suspect a past joint tax return may have understated income and tax without their knowledge may seek relief from joint tax liability by requesting innocent spouse relief. This relief is available in these three categories, each with its own set of qualifications:
- Innocent spouse relief.
- Separation of liability.
- Equitable relief — a recent change has removed the two-year time limit for requesting this specific type of relief, which the IRS says is often sought by people who faced difficult or intimidating situations, such as domestic abuse.
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