Divorce is an exhausting and complicated process. Unfortunately, taxes are a major part of this major transition – in addition to being emotionally painful and exhausting. Divorce taxation can present several complicated accounting, business and tax-related issues. The process presents many disputes which can require extensive valuation or forensic accounting to uncover hidden or missing assets. Balog+Tamburri CPAs marital dissolution specialists can work closely with family law attorneys to examine all financial aspects of your divorce situation.
Here are some key tax tips to keep in mind if you get divorced or separated:
If you pay child support, you can’t deduct it on your tax return. If you receive child support, the amount you receive is not taxable.
If you make payments under a divorce or separate maintenance decree or written separation agreement you may be able to deduct them as alimony. This applies only if the payments qualify as alimony for federal tax purposes. If the decree or agreement does not require the payments, they do not qualify as alimony.
If you receive alimony from your spouse or former spouse, it is taxable in the year you receive it. Alimony is not subject to tax withholding so you may need to increase the tax you pay during the year to avoid a penalty. To do this, you can make estimated tax payments or increase the amount of tax withheld from your wages.
If you get a final decree of divorce or separate maintenance by the end of your tax year, you can’t deduct contributions you make to your former spouse’s traditional IRA. You may be able to deduct contributions you make to your own traditional IRA.
If you change your name after your divorce, notify the Social Security Administration of the change. The name on your tax return must match SSA records. A name mismatch can delay your refund.
Who Claims the Children?
Be sure to work out who will claim the children as dependents and for which years. Your lawyer can help you come up with a reasonable agreement ahead of time. Beware that if each ex-spouse claims the same dependents on his or her returns, it can delay filing and refunds.
Depending on when you separated or divorced, your filing status may be married or single. It’s important to speak with Balog+Tamburri CPAs to figure which is the most advantageous for tax purposes. After the divorce is finalized, you may qualify to file as Head of Household depending on a number of factors.
Being proactive and understanding your tax situation can possibly save you substantial taxes during and long after your divorce is final.
Balog + Tamburri is proud to be a part of the group Divorce911, located in Atlanta, GA. For more information, please click on the logo.