I can’t wait to work on my taxes! (Said no one ever.) Tax time is upon us. And whether you file timely or extend as long as possible, your divorce can impact your tax standing. So you’re smart to pay attention to it now, at whatever stage of the process you’re in.
When it comes to divorce and taxes, the key is to know what you need to know. 🤓 The good news is - there’s not actually that much.* Here are 3 things to be aware of as you prepare for tax season:
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#1 The Internal Revenue Service only cares about you 1 day a year.
Your marital status that is. That’s because for purposes of your status for tax filing, the only day that counts is December 31st.
It works like this: You could be married all year long but if your divorce decree is granted on December 31st, for IRS purposes you weren’t married that year. Or, if you were single all year but those wedding bells rang before the ball dropped in Times Square, you’re married to the IRS (well, you know what we mean).
Know that “divorced” is not the same as separated. Even if you lived apart from your spouse for all 365 days, if you don’t have a final judgment of divorce or separate maintenance that year, you’re still considered married.
These rules apply all the time. Except when they don’t. 🧐🧐 Yes, exceptions to the rule abound with the IRS too.
Knowing your marital status is the first step to figuring out your tax filing status. Even then, you probably have more than one option on how to file. But start with the task of figuring out whether the IRS considers you married or not.
#2 The IRS tries to make it a little easier.
If you’ve never visited the IRS website before, you might be surprised by how much guidance they actually provide for free. Here are a few more publications on issues you need to think about, like determining your tax status, figuring out which benefits you can claim, and dependency exemptions.
After reading them, you’ll either have all your questions answered, or run screaming to the nearest tax preparer. Which we recommend, if you can afford it (seeing your tax preparer, not the screaming part). If you’re at all questioning your tax obligations, get help from a tax preparer to make sure you know how your divorce impacts your tax situation. If you can’t afford to hire one, you may qualify for Volunteer Income Tax Assistance (VITA) or Tax Counseling for the Elderly (TCE).
#3 You might qualify for Innocent Spouse Relief.
If you’re going through separation, it’s common to start questioning your spouse’s behavior in a lot of areas. I’ve spoken with plenty of women who were worried their spouse may have done something wrong on their taxes. “If he would do this, maybe he did that too.”
Let’s be clear - we are NOT suggesting your spouse did anything improper. But if you’re worried, it’s worth doing a little investigating. Ask a really skilled friend or a new tax preparer (not the one who filed your return) to do a little looking around for you.
If the returns are clean, you can check that worry off your list. But if something suspicious turns up, you might look into applying for Innocent Spouse Relief. If you qualify, you can be relieved of responsibility for paying tax, interest, and penalties if your (ex) spouse improperly reported or left items off your tax return. (That’s a big deal.)
The criteria to qualify is pretty strict. But the IRS does offer a couple other alternatives. This publication from the gov is a good place to get started and also has the forms you’d need to fill out.
Taxes are no fun. But being aware of how your divorce does - and doesn’t - impact your tax situation might mean you get to keep more $$s in your pocket. And that can be fun.
*This article is not intended as tax advice, and is not exhaustive of the things you may need to consider. It’s important you understand your specific tax situation and seek help from a qualified tax preparer if you don’t.