Filing Taxes During and After Divorce

It seems like only a few weeks ago that we turned the calendars over to 2017, and now, March is already half gone. While some may wonder how time seems to go so quickly, others are acutely aware of an upcoming deadline. In most years, personal income tax returns are due on April 15, but thanks to some quirks in the calendar, this year’s due date has been pushed back to April 18.

Tax season can present challenges for any family, but those who are in the midst of a divorce—or have recently had theirs finalized—may face additional complications. It is important to understand what your rights and responsibilities are in advance so that you can remain in full compliance with the law and your divorce settlement.

Filing Status

Depending on if and when your divorce judgment was entered, you may have options regarding how to file your taxes. Your marital status on December 31 of last year determines the choices available to you this year. If your divorce was completed and finalized by the end of 2016, you and your ex-spouse file separate returns. If you were still legally married—meaning that your divorce judgment was not entered yet—on December 31, 2016, you have the option of filing jointly with your spouse, even if you are now divorced. A joint return typically offers the most advantages for both parties, but a knowledgeable attorney can help you determine which avenue is best for you.

Tax Refunds

Any refund issued on a jointly-filed tax return will almost certainly be considered marital property. If you filed separately, a portion of your refund may also be considered marital property—but only if it accrued while you were still married. As with all other marital property, you and your spouse will need to decide how the refund will be divided or if one of you will keep the entire amount.

Dividing Property and Tax Liabilities

In most cases, transferring property from one spouse to the other in a divorce does not create additional tax liabilities as a result of the transfer. This does not mean that taxes will never apply. For example, if you acquired your spouse’s real estate interests as a result of your divorce agreement, you will probably not be subject to taxes for the transfer. You will, however, be responsible for appropriate taxes on income generated by the property. There may be other situations—particularly in high-asset divorce cases—in which your property settlement could create new tax liabilities, so be sure to discuss the matter with your attorney.

Claiming Children

Generally, the parent who has been granted a majority of the parenting time will be able to claim them as dependents on separately-filed return. It is possible, however, to draft an agreement which allows for other arrangements as well, including claiming children in alternating years or, for couples with multiple children, each parent claiming one or more children. In most cases, such an agreement will be entered as part of the divorce judgment so there is no uncertainty in future tax years.

Let Us Help

If you have questions about taxes and divorce, contact an experienced Orland Park divorce attorney. At Kezy & Associates, we will work with you in protecting your rights and can assist with all aspects of your divorce. Call 708-518-8200 for a free consultation today.