If you are involved in or considering a divorce, there are certain steps you want to take to minimize the tax consequences of the divorce. The most important of these include:
• Filing status on your final joint tax return
• Dependency exemptions
Filing Status on Your Final Joint Tax Return
If you initiate and finalize your divorce in a single year, you will not have an issue, as your filing status is determined as of December 31 of the tax year. If you are in the middle of a divorce on December 31, you may be faced with a choice of filing a joint return or submitting a return claiming married filing separately. If you have not lived together for at least six months as of December 31, you may qualify as head of household for filing purposes.
If you choose to file jointly, you will want to enter into a written agreement regarding how to share any savings that come from the joint filing. You want to be careful, though, about agreeing to file a joint return. If you file a joint return, you will generally be equally liable for any amounts owed. You cannot subsequently change your status from married filing jointly to any other status. However, if you initially file a separate return, you can subsequently change your status and file an amended return as married filing jointly. As a result, you may be liable for taxes on any income that your spouse has hidden from revenue authorities. The IRS offers what is known as "innocent spouse relief," which can limit your liability.
Pursuant to the provisions of the Internal Revenue Code, a custodial parent has a right to claim exemptions for all children in their care, unless they sign the IRS release form. To claim the exemption, the non-custodial parent must attach a copy of the release to their return. This is true even if you have a court order granting the non-custodial parent the right to the exemption.
Contact the Law Offices of Pfister Borserine & Associates
At Pfister Borserine & Associates, we bring two decades of experience to people throughout north Texas. Attorney John Pfister is board-certified in family law by the Texas Board of Legal Specialization. We have the experience to know that every case is unique, and that the strategy that works for one client may not meet the needs of others. We can help you protect your rights in court, or can work with you to resolve your family law differences through alternative means, including negotiated settlements or mediation.