Divorce may legally dissolve a union but it does not dissolve the tax liability the former couple shared. The adage, “[i]n this world there is nothing that is certain except death and taxes,” absolutely holds true in this instance. By taking an active role in the way your divorce decree is written and by familiarizing yourself with the terms in it, you will better understand your tax implications.
If on the last day of the tax year you were legally married, you are able to file jointly. Most people choose this option if it’s available to them because it typically results in the lowest tax burden. However, be aware that filing jointly means that you are both fully liable for the contents of the tax filing. The option of the “married filing separately” status is also available. Prior to filing, both parties have to determine how these filing statuses will affect their tax liabilities and benefits.
If you were legally divorced by the end of the tax year, you may be able to file as a single individual or as a head of household. Filing as a head of household can be more beneficial tax-wise, but you must meet certain conditions. In order to qualify, you must have paid at least half of the cost of maintaining a home and must have lived in the home with a qualifying dependent for over half the year.
These are simply two possibilities. Unfortunately, situations during the divorce don’t always have the most pleasant outcome, and you may be stuck footing the bill. Even if you, as a former spouse, did not generate any of the income or deductions on the return, you could be held responsible to pay all of the taxes simply because you signed the return.
The IRS can provide some solace in the form of the innocent spouse relief. By evoking this, you can be relieved of responsibility for paying the tax debts if your former spouse omitted or improperly reported items on your tax return. However, if you are jointly and individually responsible for the tax debt, that does not qualify for relief. This might be a result of a joint return you both signed and filed while married. The IRS is able to collect that debt from either you or your former spouse. Contact your attorney at Heartland Law or a tax professional for more information on your options. Call (816) 842-6700 or Email us by clicking on the link.