Ask Avvo: How do I file my taxes during a divorce?

Divorce, Money, Relationships, Taxes

Q: How do I file my taxes during a divorce? What are the most important things I should keep in mind when talking to my accountant?

A: Although no one enjoys the annual chore of preparing and filing taxes, the task becomes even more daunting when you’re in the midst of a divorce. Filing status and tax exemptions for minor children — previous no-brainers — now become areas of compromise. And the questions don’t stop there. Is alimony deductible? What about divorce attorney fees? Below, five things to consider as you prepare your taxes during or after a divorce.

1. Status

Even if you are separated and going through a divorce, you can still file your taxes jointly if you were legally married on Dec. 31 of the tax-paying year. While filing jointly can have some financial benefits, it can also create some problems. For example, say there is a question about the validity of one person’s income or deductions. If the tax return is later audited and back taxes, interest or penalties are owed, both parties may be held liable.

If the parties do not want to file jointly but were still legally married as of Dec. 31 of the tax-paying year, they must file as “married filing separately” or, if eligible, as “head of household.”

If the parties were divorced prior to the end of the tax-paying year, they may file as “single.”

Visit the IRS’s website for more information on filing status.

2. Alimony

If the taxpayer has paid alimony or spousal support in accordance with a court order, those amounts are usually deductible. The person receiving spousal support or alimony based on a court order must include alimony as income for tax purposes.

Child support is different. Child support payors cannot deduct the amount they have paid, and child support payees should not include payments they have received as income.

3. Tax exemptions for children

Tax exemptions for minor children usually belong to the primary custodial parent, meaning the parent who has physical custody most of the year. However, tax exemptions can be shared by parents either by agreement or court order, and many people alternate which parent claims the child on taxes each year in order to evenly distribute the tax benefit. The primary custodial parent just has to sign a form allowing the non-custodial parent to take the exemption.

4. Attorneys fees

Divorces are not inexpensive, and people often want to deduct the legal fees that added up during the process. Unfortunately, fees paid to an attorney for a divorce are not deductible. However, fees paid to an attorney while trying to secure alimony are deductible with certain limitations.

5. Fairness

Although those going through a divorce are often at odds, it’s not helpful to anyone to be shortsighted when it comes to taxes. Causing one person to incur more taxes out of spite can backfire in the long run; it will mean less available income for payment of child support and alimony.

It is crucial to consult with a tax professional and your divorce lawyer to determine the best approach to filing.