Tax Implications and Claiming Children Following Your Divorce

If you’ve been through a divorce, then you know how tough it is to prepare for every situation. You really know it’s hard when, the IRS has a special publication with a comprehensive list of circumstances for divorced and separated individuals in its Publication 504. Here is the current URL: http://www.irs.gov/publications/p504/

There are many unique effects of a divorce, as it tends to complicate every aspect of your everyday life. In addition to the many challenges it presents, you must work to untangle your financial situation, and following a complicated divorce, tax issues become even more complex than they already were.

The terms of your divorce are you unique to you, so work closely with your accountant, especially the first time you file taxes after your divorce. This can help you figure out your filing status and possible tax deductions and credits.

Your Filing Status After Divorce

While legal issues might bring discussions down to the level of cold, harsh language and a complicated contract, your divorce is still a very personal event. However, the IRS doesn’t leave room to take things personally – its basic rules are firm and fairly simple.

Your tax filing status is determined by the status of your marriage on the last day of the year. If your divorce is final any time before December 31st, you can file as single or head of household for that year. If your divorce proceedings and paperwork aren’t complete by December 31st, then as far as the IRS is concerned, you are still married and must file accordingly.

If you have one or more child and can meet a few conditions, you can file as head of household and get a substantial tax exemption. To qualify, you must meet these requirements:

You are unmarried or “considered unmarried” on the last day of the year
You must have paid more than half of the cost of maintaining your home for the year
A “qualifying person” lived with you in the home for more than half the year (except for temporary absences, such as school). However, if the “qualifying person” is your dependent parent, he or she does not have to live with you.

Furthermore, you can claim a dependency exemption for your child or children as long as they lived with you in your home for the majority of the year, unless the terms of your divorce order give that right to your former spouse.

If your spouse wants to file a joint return, you don’t necessarily have to agree, but if you don’t file an objection or your own return, then the joint return is valid, even without your signature. If your former spouse is going to file a joint return and you want your own independent return on the record, then file under the status of married filing separately as soon as possible. If you expect this issue to raise a problem, discuss it immediately with your former spouse, or your mediator if the two of you aren’t speaking directly.

If your former spouse files a return that you discover to be fraudulent, you can apply for innocent spouse relief on the grounds that you did not know about or encourage these actions. This will hopefully keep you from incurring any penalties. You can also apply for innocent spouse relief if your former spouse has racked up a large tax bill that you didn’t contribute to.

At WHYmediate?, Find out if mediation can allow you to resolve Divorce conflicts in a positive learning environment.

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