How to File Your Taxes After a Divorce

If you usually do tax returns jointly but you’re currently going through marital separation, you may be wondering how to file your taxes after a divorce.

Filing taxes is stressful enough without this added complication. However, it’s important to understand how divorce impacts your tax obligations; this knowledge could save you money and time, not to mention stress.

If you’d like a more detailed explanation of how these principles are likely to apply to your personal situation, you should consider contacting us to schedule a free initial consultation about your case.

Adjusting Your Tax Approach After a Recent Divorce

If this is your first year filing taxes after your divorce or legal separation, you’ll need to make significant adjustments. We’ve set out the most important first steps here.

Understand Your Filing Status

Your filing status is determined by your marital status as of December 31 of the tax year. This is the year for which you’re paying your tax, not the current year. If your divorce was finalized by this date, you cannot file jointly for that year.

You should note that only legal separation and divorce will change your tax filing status. If you’re living separately from your spouse but still technically married, the tax authorities will treat you as a married couple.

If you can’t file jointly, there are two possible filing statuses that may apply to you. These are:

• Married filing separately: This is an option if you did not obtain a divorce judgment NISi prior to December 31 of the tax year.
• Head of Household: This is available if you lived separately from your spouse for more than half the tax year, if you paid for more than half of the upkeep of your home for the year, and if a dependent child lived with you for more than half the year. This option offers significant financial benefits, such as expanded tax credits.

Update Your Withholdings

Your W-4 form dictates how much tax your employer withholds from your paycheck. After a divorce, you may need to adjust your allowances based on your new filing status and number of dependents.

For example, if your ex-spouse claimed the children as dependents in the divorce settlement, you’ll need to remove them from your W-4. If you fail to do this, the IRS may penalize you for claiming dependents improperly.

Consider Who Claims the Children

Divorce agreements often dictate who gets to claim the children as dependents. The parent with primary custody typically has the right to do this, but this isn’t always the case as this is often a negotiated item in the divorce with the result of sharing the dependency/child care credit.

If you’re the non-custodial parent, the custodial parent must sign Form 8332 to release their claim to the exemption. Be sure to attach this form to your tax return if you’re a non-custodial parent.

Consider the Impact of the Nisi Period

Massachusetts’ rules in this area are different from those of other states. We use something called a “nisi period” here; this is a mandatory waiting period after the granting of your divorce by a judge before it is considered final. Nisi periods last for either 90 days.

The nisi period does not apply to all your financial affairs post-divorce. When it comes to child support, division of assets, and child custody, there is no need to wait until the period has elapsed to put new arrangements in place. However, the nisi period does generally apply to tax filings.

So, if a judge grants your divorce in November, you’ll still be married (for the purposes of your tax filing) on December 31.

Filing Jointly While Preparing for Divorce

If your divorce hasn’t been finalized, you may have the option to file jointly. This could provide financial benefits, depending on your situation.

First, if there is a considerable gap between your earnings and those of your spouse, the higher earner may be pulled into a lower tax bracket because of their marital status. This is because tax brackets are determined on the basis of joint total income.

Similarly, the standard deduction doubles when you file as a married couple rather than as a single person. If you earn the majority of your household’s income, you may be able to get a bigger discount with this deduction.

Additionally, you may reap more benefits from other tax credits as a married couple than as a single person.

The benefits of joint filing tend to be less pronounced for couples with similar earnings. In fact, you could end up worse off if you file as a married couple in this position. For more detailed insights on the best course of action in your situation, you should schedule a consultation with an attorney who focuses on family law.

Potential Risks

While the financial incentives may be appealing, filing jointly ties you to your spouse’s tax situation. If your spouse underreports income or owes back taxes, you could be held responsible—even if you weren’t aware of it. In some cases, filing separately while still married may be the safer option, especially if there are trust issues between you and your former partner.

How a Lawyer Can Help

Navigating the breakup of your marriage and important financial considerations all at once can be completely overwhelming. That’s why the assistance of a capable and caring family law attorney is so crucial at this challenging time.

We can help you by:

• Explaining the tax implications of your divorce settlement: We will ensure you understand the financial and practical consequences of property division, alimony, and child custody agreements.
• Negotiating dependent claims: In any divorce involving children, the welfare of those children is always the paramount consideration. We’ll help you work through all issues related to custody, ensuring that your children’s best interests are put first and that your rights as a parent are protected as well.
• Coordinating with tax professionals: We’ll work with your accountant or tax preparer to optimize your financial outcome.
• Assist with pre-divorce filing decisions: If you’re considering filing jointly one last time, we’ll help you to weigh the associated risks and benefits.
• Advocate in disputes with your ex: If tax issues arise after the divorce (such as unfiled taxes or disputes over dependent claims) we’ll be there to protect your interests.

Ready to Simplify Your Divorce Tax Concerns?

Divorce complicates every aspect of life, and taxes are no exception. At Lamb & Lamb, we’ll be here to walk you through every step of this incredibly challenging process, and to help you build a happy, stable life on the other side. Remember, there’s always light at the end of the tunnel.

Contact us today to schedule a free initial consultation. You can reach us over the phone by dialing (978) 744-8818, or you can fill out the contact form on our website. We give the advice you need to hear, not the advice you want to hear.