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Filing Taxes When Your Divorce Is Not Yet Final

As if getting divorced weren’t already difficult enough, there is the issue of taxes to think about. The end of your marriage also alters your relationship with the Internal Revenue Service, and this requires careful decision-making. Some of the tax choices can be made on your own, while others will require communicating with you soon-to-be ex-spouse.

The first question you may have is, “Can I file as single?” The answer is no. If your divorce is not finalized by December 31, then the IRS considers you married for the entire tax year. Your filing status must be either married filing jointly or married filing separately.

If you choose married filing jointly, you and your spouse have joint and several liability concerning all income reported on the return. This sounds complicated, but it basically means:

  • You are both responsible for any taxes, interest and penalties due.
  • If there is a tax underpayment, you are both responsible for making it up.
  • If your spouse fails to pay their share of the outstanding amounts, you may have to cover all of them.

If you choose to file jointly but are worried about being held liable for your spouse’s tax obligation, an attorney can draft and negotiate an indemnification agreement for you. This is a contract between husband and wife spelling out how income and therefore taxes should be apportioned. If you have such an agreement, the IRS can still come after both of you for payment, but you can use the agreement to pursue reimbursement from your spouse for their share of any tax deficiency.

If you choose married filing separately, you may be eligible to opt for head-of-household status. This can be an advantage for you because it may lead to a lower taxable income and greater potential for a refund. Several conditions must be met to file under this status:

  • You and your spouse did not live in the same home after July 1 of the tax year.
  • You paid for more than half the costs related to your home during the year.
  • You had primary custody of your child (or stepchild or foster child) and the child lived in your home.
  • You are able to claim an exemption for the child.

In some circumstances, you may still qualify as head of household even if you cannot claim a child exemption.

Since each couples’ financial situation is unique, it is a good idea to consult with your attorney and accountant regarding whether you should file a tax return jointly or separately while your divorce is pending. At The Law Offices of Jennifer Courtney, P.C., in Yardley, we regularly advise clients on financial issues relating to divorce. To talk to our Bucks County legal team, please call 215.493.3360 or contact us online anytime.

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