Getting divorced is one of the most significant and stressful events a person can go through. Unfortunately, it also has a considerable impact on another stressful event: filing your taxes.
If you recently got divorced or plan to get divorced between now and the end of the year, you will need to keep in mind the fact that come next April, your tax filing situation will be quite different. As detailed in this article on the IRS website, there are a few big changes in particular you can anticipate.
- Claiming your kids as dependents can get complicated. Only one person (generally the custodial parent) can do this and whoever claims the exemption may be eligible to a tax credit for qualifying children. In most cases, the parent with whom a child lives more often will be considered the custodial parent; in cases of equal custody, the parent with the higher income will be considered the custodial parent.
- Child and/or spousal support should be reported. There are various rules regarding how these payments are reported and categorized, but generally speaking, the payer of spousal support can deduct alimony paid and the recipient must report it as income. Child support is neither taxable nor deductible.
- How you divide your assets will affect your tax obligations. Property sales, transfers, gifts and interest accumulated can all influence how you file your taxes and what you can expect to owe or receive. Shifting ownership of assets may seem like a good thing for your divorce settlement, but the tax implications of such agreements should not be taken lightly.
- There will be added paperwork. Instead of filing one return, you and your ex will each be filing separate returns. You will also need to have a new W-4 completed for your employer if you divorce. You may also need to fill out forms regarding dependencies, retirement accounts and deductions.
Every case is different, but these are some of the more common changes people experience when it comes to post-divorce tax filing.
Considering all the changes and stress you can be feeling when it comes to this situation, it can be a beneficial decision to consult a tax attorney with any questions or concerns you have regarding filing your tax returns, back taxes or the filing process as a divorced taxpayer.