You may have a choice in how to file taxes surrounding divorce
Divorce and Taxes. Neither one are on anyone's happy-things-to-think-about list but if you are going through a divorce, you need to take some things into account before you file your taxes. First and foremost, are you and your ex going to be filing jointly or individually? Your marital status on December 31st of the tax year controls your choices. For example, if you got a divorce on December 31, 2016, then you cannot file jointly for the 2016 tax year. If you divorced on January 2, 2017 or are still going through a divorce, then you have the option of Married Filing Jointly or Married Filing Separately for 2016. Remember, your ex has the same choice and it needs to match yours! Which means that you will need to agree on the best course of action. Hopefully you will either both want to file individually or you will both want to file separately. If you are near the end of the year and ready to finalize your divorce, it might make sense to wait and finalize the divorce in January if you could otherwise have significant tax advantages. Be sure to disucss this with your accountant or tax professional, and make your wishes known to your lawyer.
What's the best way to file taxes in a divorce?
While there are certainly benefits afforded by filing a joint tax return in most cases, there are situations when it does not make sense to do so. If you know that there is no way that you and your ex will be able to agree on what is the fairest way to split either the refund or the amount owed without involving lawyers and incurring fees, it might just not be worth it. (Sometimes 50/50 is the best way out of this one). Or perhaps there are several itemizations coming from each person. From a financial perspective, you should enlist the advice of a trusted accountant or tax preparing professional who may be able to give you the possible outcomes both ways before deciding. No matter what filing status you elect, make sure that your ex is on the same page and knows what to expect, especially if there are tax credits or child exemptions to be claimed. You don't want to claim your children as dependents only to find out that your ex did the same thing, and find out from the IRS. This will involve anger and could be a hassle to straighten out.
If you are not yet divorced but believe that this may be in the works for you, contact Carol O'Connor Cadiz to discuss overall planning strategies and other financial issues that you may be concerned about in the context of your marriage.