Taxes are a chore. I don’t think I’ve met a single person who enjoys this season, unless you are a Type A personality with extra time on your hands; you don’t look forward to taxes. Going through a divorce is difficult enough and then on top of it the divorce is never finalized the same year unless there are zero assets and no kids under 18. You must decide how you will handle taxes. Hands down, money will be saved if filing jointly. In some states, married filing separately you still must account for your estranged spouse’s income, community property and you’re still 100% responsible for taxes due. Complicated, complicated, complicated. It’s a chore, so you need to ask yourself, what are my options? Disclosure, I’m not a tax expert or an accountant.
Are you the one filing the divorce and haven’t yet?
Try to avoid tax issues and time your divorce so you’re only having to deal with one year of taxes instead of two. Dealing with taxes early in the process is such a headache. It adds to all the stress and puts extra pressure on everyone. One spouse must take the reins, bite the bullet and get it done. That will be you or if you’re a bully or lazy you’ll make your spouse do it. If you trust your spouse gave you everything you needed to file the tax return, married file jointly is the best option.
The next question to ask, is the divorce amicable or contested?
If your divorce is amicable, filing taxes as a couple is a no brainer if the divorce is not final. Depending on what state you live in you get the full benefit of deducting the main residence, the dependents, child care, etc. Filing as a couple is always better financially for both parties. If your divorce is contested and the other spouse refuses to file as a couple, you have no choice, but to file separately. When you file separately you must choose whether you’ll take the deduction or itemize. Both of you have to select the same one. This is extremely tricky. Gotta love our government. If one spouse doesn’t have income and the other is a straight up W2 employee, easy take the standard deduction. If one spouse has a W2 and a business and the other spouse has nothing, that spouse can’t itemize effectively and still in most cases must claim the income, so it depends. If one spouse is a W2 employee and the other is a 1099, it again depends whether there are enough deductions to equal the standard deduction; because the W2 employee will be swimming in taxes if they don’t itemize everything they need to. There are so many combinations I can’t possibly cover them all. Remember, going through a divorce makes everything topsy-turvy including taxes. This could be different is some states, so be sure you do your research or talk to a CPA or tax preparer.
Final question, if you decide married filing jointly is the best option – How will you handle the return and/or taxes due?
This is a very difficult question to answer, especially if one spouse says here, you do it and the divorce is highly contested. Try to get your spouse to agree how to handle it. Write it down and make them sign. If your spouse has been compliant with the money portion of your separation or divorce, then it is probably likely they will follow through with whatever you agree to. If money has been an issue in the divorce, then filing separately is your best bet to avoid arguments and improper income reporting.
Taxes are just around the corner. Remember to time the divorce so you don’t have to do taxes twice, decide what is better financially and understand your relationship dynamics and make a decision on how the return and/or payment of taxes will be handled. If you need more general tax help, try researching more online Nolo.com is a good place to start. If you have unlimited resources at your disposal filing separately with a professional is probably the very best option in a contested divorce.