D-I-V-O-R-C-E and taxes

In My Humble Opinion
1

I’m not asking for advice, just personal experiences from Dopers who’ve been through a divorce. In North Carolina, my ex-to-be and I have to be separated for a year to obtain a divorce. That separation began June 29 for us. For the previous 16 years, we had filed our taxes jointly. Since we are still married, I’m trying to decide if it would be better for us to file jointly again this year and just divvy up the money (owed or refunded, whichever) between ourselves or if it would make next year that much easier to go ahead and file separately this year.

And, I figured the collective wisdom of the Teeming Millions could help guide me to the most prudent choice.

Discuss.

2

In our case, separation begins today. I discussions with my lawyer it is advantageous to file joint then divvy the proceeds, which we will do next year as well. Ours is a situation that includes 2 kids. I’m gonna get creamed on taxes once I can’t claim them…

If you have the time and can do it, why not rough estimate both ways and see which one saves more money? You can split the ‘profit’ between you and make each of you happy.

3

Sorry to hear about your situation, 2gigch1, especially with kids involved. Thanks for the input. Stay well.

4

KneadToKnow, I’m in the same boat as you. When I put everything into TurboTax and clicked “married filing singly”, I had to pay $1200. When I changed it to “married filing jointly” I got a refund of $1100. Made it pretty easy for me to make a phone call to my ex. We will be filing jointly. IANA (tax professional).

5

Holy jumpin’ catfish, Hockey Monkey. That’s definitely food for thought.

6

It really depends on your relationship with your ex. When I got divorced we filed the last year as joint for all the reasons stated above. I got remarried last year in November and the nice thing was that we were considered married for the entire year as far as the government is concerned.

But I have had friends who had, er…well let’s say not so amiable divorces and to discuss filing jointly would not have worked, even if it saved them money on their taxes. The ex would have chewed that much up just in attorney fees. So they just filed seperately and lived with the loss. It is all a matter of perspective.

But if you get along with your ex enough to discuss this without resentment, then the smart money is to file jointly! Good luck!

7

Ok…here a twist to this and a (hopefully) minor highjack. As of Aug. 25th of 2007, my ex and I were divorced. He thinks we should file jointly for the year 2007 for the taxes up to that date.
The background is I usually get a refund–I’m a school teacher–and he doesn’t–he’s “retired” (actually on disability for back problems).
I think he wants part of the refund one last time.

8

Excellent point, Hakuna Matata. The holidays and all the stressors around them made communication difficult for us for a while there, but I think we’ll be able to accomplish what we need to do with regard to this.

IANH&RBlock, but don’t you have to be married as of Dec. 31 to file as married? I’d definitely consult a professional on that one, Gail. Maybe your state taxes do things differently, but I’m pretty sure with the IRS it’s all-or-nothing: whatever your status was Dec. 31 is your status for the whole year (See Hakuna Matata’s post above).

9

Yeah, Gail – if you were divorced in 2007, you can not under any circumstances file as married/joint. I am a tax preparer. Sorry.

10

That’s because the government hates single people.

11

Thanks again to everybody for the input and especially to drpepper for the professional insight on Gail’s issue!

12

That is correct but just to be clear, this is only if the divorce is final. If you filed in '07 or even agreed to terms in '07 but the divorce wasn’t or won’t be totally final until sometime in '08, you can still file together and, if you are filing separately, must file as married-separate. So, KneadtoKnow, you will still have to file as married.

From a purely financial point of view, you are better off filing jointly in almost all circumstances. From a practical point of view, you may want to file separate to avoid hassles. Things can get complicated. You may be tempted to just split the refund but think about that. What if one person withheld way more from their salary? What if one person made more money on investments or had a loss? Trying to fairly divide the refund can get tricky and may be more trouble than it’s worth.

13

As far as getting creamed on the taxes, 2gigch1…

Your divorce agreement should have a section to spell out how to handle the tax deductions for each child (and if it doesn’t for your state, make a point to add an addendum). Custody arrangements don’t have a thing to do with taxes.

Based on my experience here in Colorado, anything you mutually agree upon can be made binding.

My recent ex and I have three kids. For tax deduction purposes, while they’re all of deductible age, I get to claim two, she gets to claim one. When the first ages off, then I get one and she gets one. When we’re down to one, I claim him. This is all spelled out in the divorce papers.

This is my one compensation for having to pay out (currently) $22K a year in child support. Everything I’ve found so far says child support cannot be written off. Right now, I’m paying lots of taxes on income I just hand over to her to mis-handle and waste on big screen HD TV’s (not that I’m bitter or anything). The two-kid-deduction thing is supposed to give me a bit back on that.

FYI, “spousal support”, aka: alimony, is deductible and the recipient has to claim it as income, too.

As I read the rules, I also qualify for the head-of-household status which gets me closer to married than single on the tax charts so there may be some benefit there. With this and the ability to write off child-care costs, I’m actually hoping I’ll get a refund this year.

As far as the return while separated thing? We just agreed to split the return minus a few “deductions” to compensate me for costs that she owed me (for pawning my possessions among other offenses). If you’re both working, the debate might be to split the return (or payment) based on proportional income levels or simply 50/50. That’s a political answer, in my opinion.

More advice: make sure you change your W4 with your employer to update your withholding amounts.

14

All correct, thank you for adding and clarifying.

15

Oh, I was clear on that fact; sorry if my wording muddled my meaning. My question was always whether I should go “married filing jointly” or “married filing separately.” And the feedback here and IRL has led me to believe that “married filing jointly” is definitely the way to go.

16

Thanks. I am a newly minted licensed tax preparer although I won’t file my first return for someone else until later this week. A good friend of mine has a family tax practice which has grown to the point that he needs some extra help. He talked me into getting my license and working for him for a couple nights a week and on weekends during tax season. I am glad that my first piece of tax advice was correct.

I guess that I should add, although I am a tax preparer, I am not your tax preparer. Please see a tax professional in your State to blah blah blah…

hajario, mechanical engineer by day…tax preparer by night!