Tax Tips for a New Divorce
Everyone knows ending a marriage is an emotional and difficult process. And if you're recently divorced, you now have the added challenge of figuring out a more complicated tax situation. Make some common mistakes, and you could end up paying more than you need to.
Here's some advice from Susan Carlisle, a Woodland Hills, Calif., based accountant who works with clients who are getting divorced:
If You're Separated
If your divorce (or legal separation) wasn't final by December 31st, the IRS considers you married for the 2010 tax season. This means you can file your taxes with your spouse, provided you're still getting along well enough to do so.
Your second option is to take the Married Filing Separately option. This one will cost you since Uncle Sam won't allow you as many tax breaks. But if you're worried your ex will owe the government money -- maybe he works for himself and doesn't make estimated payments through out the year-- this may be a good idea, says Carlisle.
No matter what you do, Carlisle recommends you call the IRS to see if you and your spouse owe back taxes (plus interest and penalties) from previous years. You'd be surprised how many partners keep this sort of information from the other person in a marriage. If you do owe money, you'll want to make sure that issue gets discussed during your divorce negotiations.
Claiming Your Tax Breaks
Whether you're separated or divorced you'll want to make sure you claim as many tax breaks as you're entitled to. If you're the primary caregiver of the children, ask your accountant if you can claim Head of Household status. You may also be able to claim the Child Tax Credit (which could be worth up to $1,000 per child) and the Child and Dependent Credit, says Carlisle.
If You're Divorced
Did the ink dry on your divorce decree before January 1, 2011? If so, you can now file your 2010 taxes as a single person without any penalties. Again, if you are your child's primary caregiver, you should claim the Head of Household status. If you and your ex have joint custody, you'll need to check your agreement to see which tax breaks you get to claim.
Here's some good news: If you receive child support the IRS will not tax this money.
Spousal support, however, is another story. Alimony is treated like income. So Uncle Sam does tax it. But you can -- and should -- put some of this money toward IRA contributions, even if you're not working, says Carlisle. Sure you won't have as much cash to spend now, but you'll thank yourself later when you have a retirement account to dip into.
Do you find filing your taxes is more stressful now that you've split from your spouse?
Stacey Bradford is the author of The Wall Street Journal Financial Guidebook for New Parents.
Hammer 365 Taxes Are Done image courtesy of Flickr, CC 2.0.
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