Tax Season and Separation or Divorce – What You Need to Know

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If your divorce was not final before December 31, 2018

For a significant number of divorcing clients at our Utah County law firm, the tax return that they file for the year after their separation presents challenges. If your divorce is not final before the 31st of December, you are considered married by the IRS. This challenge becomes apparent when they go to file taxes. You have a few choices when it comes to filing that lovely 1040 form.

Married, filing jointly

You can file as married, filing jointly. In this case, you and your spouse file jointly, claim each of the children, if any, and take the Earned Income Tax Credit if you are entitled. The refund would be split as you agree, like 50/50. Many tax filing programs give you the option of depositing the return into multiple bank accounts. This allows you both to take advantage of the higher standard deduction, claiming children as dependents, etc.

It is important to note that if there is an audit, or significant tax liability by one spouse, both parties are on the hook.

Head of household

If the separation was before May 31 of the tax year, there is a dependent, and if the party has paid at least 51 percent of the cost of maintaining the home, they qualify to file as head of household. While this seems fairly straightforward, it is better to talk to a tax professional if you are considering filing as head of household, to ensure that you are fully qualified to do so, avoiding potential trouble with the IRS.

Your divorce was final before the tax year ends

Presuming that physical custody is split, support, and medical obligations are met, there are several ways that people handle the inevitable discussion of which parent claims the child(ren). For an even number of children, the easiest and most common solution is that the parents each claim half of the children on their taxes. The parent with the most number of physical custody nights and/or the parent with the higher adjusted gross income can claim the child as their dependant. The parent with whom the child spends more nights is entitled to claim head of household status and the Earned Income Tax Credit in most cases.

IRS Form 8332

If you, as the custodial parent, and as part of your divorce orders, don’t claim one or more of your children, which is common, you need to provide a signed IRS Form 8332 to your ex. This form gives your ex the legal right to claim your child for the child tax deduction, but not the Earned Income Tax Credit, which remains with you. It can be completed annually or set to expire at a later year. “For those who have a provision in their permanent orders that includes a provision that support and medical coverage needs to be current for a non-custodial spouse to claim a child or children, it is wise to sign a new form annually,” advises a leading Provo divorce lawyer. The permission given in Tax Form 8332 can be revoked by the custodial parent at any time, with the same form, signed and sent to the IRS.

If you have further questions, please contact a divorce attorney in Provo, Utah.

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