Divorce Versus Annulment: The Tax Difference

According to the dictionaries, there is a dif­ference between a divorce and an annulment. The courts grant a divorce to mark the end of a marriage that was valid when entered into, whereas an annulment is for a marriage that at no time was valid, as when one of the parties was under the age of consent at the time of the marriage.

To a couple interested only in the fastest way to untie the knot, the question may seem to be an unimportant technicality. Those watchful souls at the Internal Revenue Service, however, think that there is an important difference when Form 1040 time rolls around.

According to an IRS ruling, if an annulment is retroactive, the couple was never married. Result: They had no right to file joint returns (Revenue Ruling 76-255).

An example: John and Mary married in 2005, filed jointly for that year, and had their marriage annulled after the filing deadline. Because their marriage was declared null and void from its very inception by the annulment decree, they are considered to be unmarried at the end of 2005. Consequently, as an unmarried couple, they were ineligible to file jointly. The IRS requires John and Mary to “undo” their joint return by the filing of amended returns as unmarried filers. That can mean they get dunned for additional taxes.

Normally, the IRS does not allow people who file joint returns to change their filing status and switch to separate returns once the filing deadline of April 15 (for most individuals) has passed. Revenue Ruling 76-255 deals with the rare circumstance in which joint filers can switch to separate returns. This ruling involved only a one-year marriage.  Nevertheless, the theory would presumably apply regardless of the marriage's length. On the plus side, refunds may be available to couples whose marriages were annulled and who would have paid reduced taxes as single persons.

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Julian Block is a syndicated columnist, attorney and former IRS investigator who has been cited by the New York Times as “a leading tax professional” and by the Wall Street Journal as an “accomplished writer on taxes.” This article is excerpted from “Marriage And Divorce: Savvy Ways For Persons Marrying, Married Or Divorcing To Trim Their Taxes To The Legal Minimum.” For a postpaid copy, send $19.95 to: J. Block, 3 Washington Square, #1-G, Larchmont, NY 10538-2032. Information about his other books is at his Web site, www.julianblocktaxexpert.com.