Ending a marriage can impact most parts of your life and your taxes are not exceptions. In this post we will discuss steps you should take for your first tax season after you are divorced.
Start early
Do not wait until April. Getting an early start on your tax preparation after your divorce can provide time to address unforeseen issues, locate documents, and prevent stress closer to filing and a possible IRS audit.
Engage a certified public account or tax preparer as soon as possible. Begin locating and sending them your financial and tax documents.
Independence
Obtain a new CPA or preparer if you and your former spouse used them and filed jointly. Although there may be a loss of continuity and convenience, this provides a clean financial break. Your previous accountant or preparer will provide copies of your earlier returns.
Bring tax returns from last year when you meet with your new accountant or preparer and inform them of your divorce. Provide a copy of your divorce judgment so they know about its financial implications.
Open financial accounts in you own name. Do not use any joint accounts that you had with your former spouse or any checks from those accounts.
Independent finances make your business clearer and easier to manage. It also helps insulate you from any tax audit of your former spouse or their financial problems.
Filing status
You may file as married filing separately if you are still married on Dec. 31 and obtain benefit from that filing status. This protects you from any errors in your former spouse’s tax filings, their debts, any fraud they committed or any of their other financial problems.
You should file as single if you are not legally married on Dec. 31. You will not get double deductions, but you do not have to report two incomes and may drop to a lower bracket.
Deductions
A parent who keeps their minor child over 50 percent of the time is entitled to claim the child as a dependent. If the parents share equal time, the parent with the higher adjusted gross income may take the minor as a dependent. The parent who claims the child as a dependent may also waive the exemption if there is a financial advantage.
Parents with two children can claim one child as a dependent. Parents with one child may also take turns claiming the child as a dependent in alternate years. This issue must be addressed in the divorce settlement, however.
Parent claiming the child as a dependent are also entitled to the child tax credit. This credit may not be waived, however.
Attorneys can help seek a decree that meets your financial situation. They also protect your rights.
