Fall Divorces and Tax Issues
Tax issues can arise when people decide to divorce in the fall of a tax year. First, if you get divorced in the calendar year, you cannot file married jointly. That means if the Judge signs your divorce judgment on December 31, 2011, then you can’t file jointly even if you lived together the whole year. Often attorneys may hold the signed judgments until January 2nd of the new year so that the couple has the option of filing jointly for the previous year. It is essential to speak with your accountant as you are going through the divorce process so you have a clear understanding of how the tax situation will work. The accountant can let you know whether it is better to file jointly or separately depending on your situation. Sometimes, it is not an issue money wise to file married jointly so the attorney can file the Judgment in the tax year.
Husband and Wife need to decide which party is going to claim the children on the taxes. In my practice, clients do it different ways. For instance, if there are two children, each parent might take a child. Or parents might elect to take the children every other year. Sometimes it depends on what kind of income Husband and Wife are making when considering a determination. It also matters which parent has custody and how many overnights the children are with each parent. You can add language that allows changing who takes the children if there is mutual written agreement. The IRS doesn’t care which parent takes the child as long as both parents aren’t making the claim.
Keep in mind that spousal support is a tax deduction to the spouse that is paying and it income to the spouse who is receiving the support. Again, it is important to discuss the financial ramifications with your accountant as well as your attorney.
If you are behind with the IRS then it will not matter what the divorce judgment states about who pays what. Both Husband and Wife are responsible for that debt and the IRS will be tracking people down. The cleanest way is to pay off tax liens at the time of divorce. Sadly, with the economy, this is not always possible. Hopefully, the couple can communicate and work through the debt. It is always helpful to consult a bankruptcy attorney to just talk about debt. It doesn’t mean that you have to file at all. The bankruptcy attorney has lots of valuable experience to give creative solutions to certain financial problems. Taxes are an important piece of the puzzle and it would be wise to seek an attorney consultation.