April 15th, the absolute, this-is-it deadline for filing taxes, is quickly approaching. Was this your year of change – did you separate from your spouse, file for divorce and/or receive a divorce judgment from the court? If so, all of those changes will impact your tax filing status. Parties who have recently gone through the separation and divorce process often ask themselves this time of year: How do I file? Who gets to claim the children as dependents on their state and federal tax returns? Do I file married filing jointly, married filing separately, single or head of household? Parenting plans, contracts, court orders and IRS regulations all play a role and part in determining which parent gets to claim the children as dependents and who qualifies to file as head of household.
The first question you’ll need to consider: What was your marital status on the last day of the calendar year? The answer will determine how you file going forward. If a divorce judgment was entered on December 31th, then you must file as single, but you may be entitled to file as head of household if you maintained a home and were the primary custodian of the children during that tax year. If you filed a complaint for divorce and the judgment was not entered by December 31st then you may have choices. Do you file married filing jointly, married filing separately, or do you meet one of the exceptions to file as head of household? Seeking separate advice from a Certified Public Accountant (CPA) is important. Most family law attorneys can provide guidance, options and creative ideas when it comes to filing taxes, but they cannot replace the advice and assistance of a CPA.
Income also matters. When parties are going through a separation and ultimately divorce, deciding who gets to claim the children as dependents (and as a result get the child tax credit) may be of greater value to one party than the other. If one party stands to gain far more by claiming the exemption (and credit) than the other party, then it may be worth negotiating that issue as part of the separation/divorce process. Often, family law attorneys refer to this option as a “buy out” where one party “purchases” the exemption for what the other party would have received in a refund had they claimed the children. It is not always easy to determine, but it is a good option, worthwhile to research and consider. That said, for many, agreeing to claim the children in alternating years may be an easier solution.
The bottom line is that separation and divorce create another layer of complexity when it comes to the tax season. It is important to spend the time and finances now to determine the best course of action when filing, versus spending the time and money later to defend an audit.
Written By: Sodoma Law Attorney Nadia A. Margherio