Just as getting married brings a variety of tax implications and changes, getting divorced has its own repercussions. If you’re going through a divorce, you should be aware of those implications as you prepare to file your tax return.
- Your filing status may change prior to your divorce becoming final.
- When a joint return is filed, any tax, interest and/or penalties due are the joint and individual responsibility of both parties.
- If there is a joint liability, there are three ways to find relief. We will explore these briefly.
Which filing status should you choose?
If your divorce decree has not been finalized, you may either file your return as married filing jointly, married filing separately or, in certain situations, you may be considered unmarried and may file as head of household. You’re considered unmarried on the last day of the tax year if you meet the following tests:
- You file a separate return.
- You paid more than half the cost of keeping up your home for the year.
- Your spouse did not live in your home during the last 6 months of the year.
- Your home was the main home of your child and you can claim an exemption for the child.
If you don’t meet the tests listed above and your final decree of divorce has not been issued by the last day of the tax year, you will need to file as either married filing separately or married filing jointly.
What is each spouse responsible for?
While you continue to file a joint return, both you and your spouse may be held responsible, jointly and individually, for the tax and any interest or penalties due on your joint return. Even if all income is earned by one spouse or taxpayer, the other spouse or taxpayer may be held liable for all the tax due. Even if your divorce decree states that your former spouse will be responsible for any amounts due on previously filed joint returns, you are still not absolved from your liability with the IRS.
How can you find relief for joint liability?
There are three ways to find relief for joint liability, and they are available no matter the extent of the liability. Those three types of relief are innocent spouse relief, separation of liability and equitable relief. Each kind of relief has different requirements, and you must file Form 8857, Request for Innocent Spouse Relief, to request relief under any of the three categories.
- Innocent spouse relief may be granted if your spouse or former spouse made errors on a previously filed joint return and you owe additional tax as a result of those errors.
- Separation of liability relief may be granted if you are now divorced, legally separated or have lived apart at all times during the 12-month period prior to the date you file Form 8857.
- Equitable relief is the only type of relief available for unpaid tax. In this situation, the IRS would determine that it would be unfair to hold you responsible for the liability.
These few items just scrape the surface of the myriad of tax issues arising from a divorce. Please contact someone in our Family Law Services practice to learn more about how we can help you navigate through your tax issues during divorce proceedings.
Melinda Mergelsberg, EA, is a tax professional in the Forensic, Advisory and Valuation Services department in Kaufman Rossin’s Ft. Lauderdale office. Kaufman Rossin is the fastest growing CPA firm in the U.S. Melinda can be reached at firstname.lastname@example.org.