If you are contemplating or currently going through a divorce at this time of the year, you will reach a point where you must decide whether to file taxes jointly or separately. Tax questions are best directed to a CPA (certified public accountant). If you don’t have someone prepare your taxes, now is the time to consider talking to a CPA.
According to the Internal Revenue Code, there are five filing statuses: 1) Single; 2) Married Filing Jointly; 3) Married Filing Separately; 4) Head of Household; and, 5) Qualifying Widow(er) with Dependent Child. Your marital status on the last day of the year determines your marital status for the entire year. For example, you would have to still be legally married on December 31, 2015 in order to file as a married person for the 2015 tax year.
Most married persons who are divorcing are trying to decide between two tax filing statuses: Married Filing Jointly or Married Filing Separately. It is almost always better for you to file a joint tax return, and this is also the position a family court judge will take on this issue. There are several reasons for this. The main reason to file a joint return is that you’re much more likely to get a refund filing jointly than if you file as married filing separate.
If you decide to file separately, this will raise many questions, and it is not a good idea unless you and your wife have discussed this matter prior to your filing your taxes. If you make a unilateral decision to file separately, and you claim all the deductions and exemptions, you can expect there to be trouble later. Agreeing on which exemptions to claim and which deductions to claim is difficult and requires proper tax advice, so all signs point to filing a joint return.
One caveat to watch for filing a joint tax return with a divorcing spouse is to confirm the bank into which the tax refund is going to be deposited. You need to have access to this account, and you need to have an agreement on how the refund will be divided. Do not make the mistake of directing a tax refund to an account in your spouse’s name only or setting yourself up where your spouse can take the entire refund without your consent. If the division of the tax refund is in dispute, your attorney can draft a court order for the funds to be held in escrow until there is an agreement or court determination.
There are, of course, exceptions to the idea that it is beneficial to file a joint tax return. Among other concerns, one reason is that your spouse may have tax debt, or may have improper tax withholdings that will cause them to owe money, or many other tax and liability issues. Again, consulting with a qualified tax professional is key in making this decision.
If your spouse has traditionally submitted joint tax returns without your review or signature, now is the time to inform them in writing that they do not have your consent to do so this year, as you need to participate in this process.
A Judgment of Divorce or Separate Maintenance should contain provisions for current and prior years’ tax returns and other issues. If you have minor children, the most obvious concern is who will claim the children as a dependent. This issue needs to be addressed in the final judgment. You may also need to address other issues, including tax liability from prior years, mortgage interest and property tax deductions, unrealized capital gains or losses, and similar types of issues.
Tax refunds or liabilities can add up to huge dollar amounts and should be given thorough attention as you go through this process. Proper advice from a divorce attorney is a good start, and proper advice from an accountant is crucial.