The drone of the “Get your billion back, America” commercials have likely already alerted you to the fact, but tax season is officially upon us! Things can get a little complicated if you’ve separated or divorced within the last year, so here are a few things to pay attention to when filing your paperwork:
1. Communicate with your ex-partner. It’s important that BOTH of you list the same figure for alimony support and that only ONE of you claims a single child as a dependent. The tax terms should be explicitly stated in your separation or divorce decree, but it’s definitely worth revisiting what you’ve already agreed to in order to avoid any innocent mistakes. Discrepancies in the numbers and duplicated claims are red flags for the IRS, and the last thing anyone wants is a laborious audit with their former spouse.
2. How you file depends on your status on the last day of 2013. If your separation or divorce decree came through between January 1 and April 15 of 2014, the tax return you submit for 2013 should still reflect your married status. On the other hand, you cannot file as married for financial reasons even if your decree only came through in December and you were together for most of the year. Some people, however, may qualify for the “Head of Household” status if they lived apart from their spouse for the last six months of 2013.
On that note, you need to register a name change immediately. The name you write on the tax return and the one registered with the Social Security Administration must match. If you’ve reverted to your maiden name or dropped a hyphenated surname, use these instructions to make sure your tax refund isn’t delayed over a bureaucratic matter.
3. The “Head of Household” or “Custodial Parent” is the person with whom your children live for more than half the year (i.e., 183 nights). If, however, the child spent an equal number of nights at each house, the custodial parent is the one with the higher adjusted gross income. To get down into the nitty gritty, begin your calculations from December 31 as that is considered the first night of the year. There are a whole bunch of addendums for those in special situations, such as parents who work nights or for when a child is away at camp, so we recommend you read up on those here.
4. If you do split custody evenly and aren’t using the “Head of Household” status, consider also splitting the dependency claim. The IRS allows parents to divide their children for tax benefits even if the children are always together and spend an identical amount of time with each parent. Therefore, the mother could claim Jack while the father claims Jill without penalty. Alternatively””or if you don’t have an even number of children””you could switch back and forth over who gets the dependency claim each year. The main thing is that both parents cannot claim the same child as a dependent in the same tax year.
5. Child support is neither deductible nor taxable. If your ex-spouse owes you back child support though, it is possible to apply for an offset from the IRS. This means the delinquent parent’s tax refund will be intercepted and sent to you instead to settle the debt. More information on submitting a case for the Federal Tax Refund Offset Program may be found here.
6. Alimony payments are deductible and taxable, however, if there is legal documentation of the support agreement. It’s perfectly legitimate to include all forms of support (a salary deduction and car insurance payments, for instance) as part of the alimony calculation, just make sure both of you are writing down the exact same figure.
7. Unfortunately, you cannot deduct any legal or court fees for getting a divorce. You may, however, deduct legal fees for getting advice on your alimony arrangement or on how to file your taxes. You may also deduct the cost of appraisers and accountants obtained to determine your tax obligations or to help you get alimony.
Confused? Call us at 720.542.6142 and we’ll get all your (tax-deductible!) questions sorted.