How Will Divorce Impact My Tax Return This Year?

With April 15th fast approaching, many divorcing couples are wondering how a pending dissolution matter will impact their 2014 tax filings. After several years of marriage most couples are used to preparing their taxes the same way each year and reaping the benefits of the “married filing jointly” tax status. Divorce deeply impacts all areas of finances for both parties and taxes are no exception; however, depending on the particular facts of each case, the parties may be able to work together this tax year in order to maximize their joint tax benefit.

If you are currently litigating your divorce case and have not terminated your marital status, there are generally two filing options – “married filing jointly” and “married filing separately”. In most cases, “married filing jointly” minimizes taxed owed/maximizes the tax refund. It is not uncommon for divorcing parties to believe that once a petition has been filed or once the parties “separate,” they can no longer file joint taxes. This is not the case. Before jumping on the “married filing jointly” bandwagon and reaping the tax benefits for one more year with your spouse, it is important to consider how divorce will impact your decision.

In order to file a joint tax return, both parties must be in agreement to do so and cooperate with each other by providing necessary documents and information. If there is distrust between the parties as a result of underlying divorce proceeding, one or both parties will likely not feel comfortable signing a joint return. Similarly, in high-conflict divorce cases, especially if one or both parties have made accusations that the other is hiding income, the parties will not likely file a joint tax return. In addition, if one spouse has a good faith belief that the other is being dishonest regarding his/her income, the innocent spouse will not likely agree to sign an allegedly false joint tax return.

In some cases, it is more advantageous for one party to file separately resulting in a big tax hit to the other. It is important to consult with a tax professional to consider all of your options so that you can make the most informed decision. If one side would materially benefit from a joint return, many times this is an issue that is negotiated in the overall divorce settlement. If you and your spouse decide to file a joint return, be sure to consult with a divorce attorney before signing off. It is crucial to obtain an agreement in writing regarding the allocation of any tax obligation or of any tax refund. An attorney can prepare an enforceable order that outlines the procedure for receipt and distribution of a tax refund to ensure the parties’ agreement is upheld.

If you would like to learn more about how divorce will impact your tax return this year, the California divorce process, child support, spousal support, child custody and visitation or property division, schedule a consultation with an experienced family law attorney at Cage & Miles, LLP. Our skilled attorneys can provide you with the knowledge you need to make informed decisions and protect your rights.