One of the biggest mistakes two people make when going through a divorce is not considering taxes and the IRS and how they can affect you and your family during this delicate time. It is important to remember that, even during a divorce that is filled with conflict and complications in other areas, taxes are one area in which the divorcing couple should strive for unity. Working together to cover all possibilities when it comes to taxes can help to prevent major consequences in the future.
When you are considering a divorce, there are several things that you need to be aware of and keep at the forefront of your mind when it comes to the IRS.
The Status of Your Marriage at the End of the Tax Year
It is important to determine what the status of your marriage was at the end of the tax year before you proceed. The general rule is if your divorce was finalized before midnight on the last day of December, then you and your previous spouse will file two separate taxes. However, if your marriage continued into January, you will file jointly for that tax season.
Child Support Considerations
During divorce agreements, it is important to consider how child support, child care, alimony, and family support may affect the taxes of both parties. For example, certain of these items may be deductible from your taxes such as alimony and child care, while others may not be. Special circumstances may apply to certain cases so it is important to have a tax adviser look at all of the specifics of your divorce to avoid being surprised by something down the road.
Determine Who Will Claim the Children as Dependents
One of the considerations that can be tricky to navigate is the matter of who will claim the children as dependents on their tax returns. It is good to determine this clearly ahead of time to avoid confusion and fighting later on. In some cases, this may be determined as part of the divorce agreement. If not, the custodial parent will claim the children on their tax returns. If you are the custodial parent, it is always best to file your taxes as early as you can in the event that your ex-spouse attempts to claim the children as their dependents.
Consider Which Divorce Fees May be Deductible
Most legal fees relating to the divorce are likely not tax deductible. However, certain fees such as tax advice services may be tax deductible. Work with your tax adviser to get the maximum amount of deductions from the divorce proceedings that you can.
Review Your W-4
After the divorce is finalized, be sure to update your W-4 to reflect your new status. You can opt to have more taxes taken out of each paycheck to avoid a heavy payment at the end of the season.
When it comes to divorce, taxes can add even more stress to an already complicated situation. It is important to try to work together if you can to save both as much money as you can on taxes. It is always helpful to get advice from a tax professional who is experienced in divorce situations.