If you’re in the middle of a divorce, you may file a joint return only if you are married at the end of the tax year (December 31), and both of you agree to the filing. The box you check on your return is “Married filing jointly.”
A temporary order relating to child support, alimony, or child custody does not affect your marital status. However, if the divorce is final as of December 31, you can’t file jointly with your ex-spouse. You must file as either “Single” or “Head of household.”
Discuss the pros and cons of a joint return with your tax advisor and your attorney. Usually, but not always, your tax burden will be lower filing jointly, depending on your respective incomes, deductions, and credits. The main disadvantage of filing jointly is that both spouses are jointly and severally liable for taxes on the return, including any tax deficiencies, interest, and penalties.
You can protect against tax burdens to some extent with a Tax Indemnification Agreement, discussed below. Also, the IRS may allow relief to a spouse who files jointly. For more information on the three types of IRS relief (“innocent spouse,” “separation of liability,” and “equitable” relief), review IRS Publication 971, Innocent Spouse Relief.
Spouses (whether happily married or going through a divorce) can’t use tax filings as a bargaining tool. In most cases, spouses must agree to file a joint return. If you’re legally married, the IRS permits you to file joint tax returns but does not require you to file together. In some cases, filing separately from your spouse is financially beneficial. In other cases, spouses can utilize the benefits of tax breaks reserved for married couples. A court will not order unwilling spouses to file a joint return.
The IRS requires both spouses to sign a joint tax return. If one spouse fails to sign, the IRS will likely flag it as incomplete and return it to the couple so they can fix the missing signature. If you are your spouse’s legal power of attorney, you may submit and sign the tax return for your spouse, but you must include a copy of a power of attorney with your return. In rare circumstances, a spouse is unable to sign due to a physical limitation. In that case, the signing spouse can sign with the incapacitated spouse’s oral permission but must also include a statement “signed by husband or wife.” You must also include a statement explaining why the incapacitated spouse can’t sign the document.
If you and your spouse agreed to file a joint tax return, it’s important that your marital settlement agreement or judgment, or a separate agreement, addresses how you’ll deal with any tax liability or refunds. If you expect a check refund, ensure the IRS issues a check paid to both spouses or that you have a written agreement that the recipient will pay the other spouse any share owed. You should also include a time frame in which the recipient must share the funds. For example, “the recipient must pay 50% of the proceeds to the other spouse within 14 days of receipt of the IRS check.”
If the IRS issues an electronic refund (direct deposit) ask the IRS to route the refund to a joint account or prepare a written agreement. You don’t have to share tax liability or refunds equally. You can do whatever is fair and consistent with your overall property division, but whatever you do, have a clear written agreement. One common approach for dealing with taxes owed is to prorate tax liability using a ratio based on each spouse’s income.
Divorcing spouses should also prepare a written agreement that explains each spouse’s portion of the liability and the requirements for paying on-time.
If you will file taxes jointly and one spouse is responsible for preparing the returns, you should consider entering a stipulation (agreement) regarding tax indemnification. An indemnification agreement says that one spouse will be liable for any amounts due on previously filed joint returns and protects the spouse who didn’t prepare the return. However, if you have doubts about your spouse’s ability to prepare accurate tax returns, you’re better off filing separately.
If you’re legally married at the end of the tax year, you can file jointly, but the IRS doesn’t limit you to the joint return. You can file either “Married filing separately” or “Head of household” depending on your circumstances. Filing as head of household allows you to claim the standard deduction even if your spouse itemizes deductions and allows you to claim additional credits such as the dependent care credit and earned income credit. The IRS may also tax you at a lower rate.
For you to be able to file as head of household, all of the following must be true:
If you file as head of household, your spouse must file as married filing separately. Once you are divorced, you may still file as head of household if you pay more than half the cost of maintaining your home for the tax year and your children live with you for more than half the tax year.
It depends. There is more than one type of separation, but not all separations are created equally. If you and your spouse stopped living together, stopped sharing expenses, and live separate lives, but neither of you filed official court documents, it will not change your tax status. You qualify as married even if you are separated as long as there is no final divorce judgment ending your marital status.
Legal separation (available in some states) is a legal process similar to a traditional divorce. A legal separation follows the same steps as a divorce, but you’re still legally married in the end. While a legal separation doesn’t allow either spouse to remarry legally, it does permit both spouses to file as “Single” or “Head of household” for tax purposes if the court finalized the separation before December 31.
In 2015, the United States Supreme Court issued a historic ruling legalizing same-sex marriage throughout the country. (Obergefell v. Hodges, 576 U.S. 644.) Along with celebrating the right to marry and adopt children together, same-sex couples across the country also began enjoying the benefits (and drawbacks) of filing joint federal taxes. Like opposite-sex marriages, when a marriage doesn’t work out, divorcing or separating spouses must file a joint return unless the court issued a final court order dissolving the marriage before December 31 of the tax year.
A few states continue to allow couples (same-sex and opposite-sex) to register as domestic partners. While couples can choose a domestic partnership to gain access to certain state rights, the federal government does not recognize domestic partnership for tax purposes. Couples involved in a domestic partnership must file federal taxes as “Single.” The Internal Revenue Service (IRS) does not recognize domestic partnerships for filing as “Head of household” if the individual’s only dependent is the registered domestic partner. If the individuals have children and otherwise meet the IRS’s requirements for a Head of household filing, either parent can file as “Head of household.”
For more information on how your domestic partnership impacts your federal taxes, visit the IRS website.
There are many tax issues and financial considerations to be aware of during a divorce. Make sure you take the time to understand these issues. If you have questions, speak with a qualified tax or divorce attorney in your area.