Going through a divorce is challenging enough. Don't complicate it further with tax filing errors.
Tax season can add more stress during this time. Here are some crucial tips to keep you organized for tax day.
1. Choose the Correct Filing Status
Your marital status on December 31 determines your tax filing status. If you're not divorced by that date, you'll need to use either married filing jointly or married filing separately.
In certain cases, married individuals living apart for over half the year may qualify for head of household status, provided they maintain more than half of their household. If you qualify as head of household, you must have a dependent living with you for more than half the year and cover more than half the home costs. Otherwise, you typically file as single.
2. Update Your Name
If your name or address has changed during the divorce, make sure to update your information.
Request a new Social Security card reflecting your new name. Your tax return must match the name the Social Security Administration has on file; discrepancies can delay processing and refunds. Also, file Form 8822 to update your address with the IRS.
3. Report Alimony and Child Support Correctly
Previously, alimony was taxable income for the recipient and deductible for the payer. However, the Tax Cuts and Jobs Act of 2017 made it non-taxable and non-deductible.
Child support is not tax-deductible for the payer and is not considered income for the recipient, meaning it shouldn't be reported on tax returns.
4. Determine Who Claims Dependents
Only one parent can claim children as dependents on their tax return. Some parents alternate years, but typically, the custodial parent claims the child.
If the noncustodial parent wishes to claim a child, they need written permission from the custodial parent, which requires completing Form 8332 to release the exemption.
5. Protect Yourself Against Incorrect Income Reporting
Divorce or separation often prompts a review of tax history. If you suspect your spouse incorrectly reported income or owes back taxes, you can request injured spouse relief. If approved, you'll receive your portion of any tax refund, while your spouse's debt is settled with their share.
If you suspect a past joint return understated income, you might seek relief by filing for innocent spouse relief, which has specific eligibility criteria.