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ThThe Taxing Side of Divorce: Filing Statuse only topic people hate more than divorce is taxes, and aren’t you lucky to be reading a blog about both! Fake enthusiasm aside, since your situation has changed, your taxes must follow suit. So if you don’t want to get swindled or worse (is ignorance an acceptable excuse for tax evasion?) there has to come a time when you figure out what divorce means for tax season. So take a deep breath, pinch your nose, close your eyes, or do whatever you need to do when completing an unpleasant task, because things are going to get serious.

Status is Everything

It may not make much sense to you, but just stick to this very simple rule: Your status as of December 31st determines your filing status for the entire year.

If your divorce was finalized on December 31st, 2012, you will file as single for your taxes for 2012. If you were separated earlier in 2012, but your divorce wasn’t finalized until January 1st, 2013, you will file as married (either jointly or separately) on your taxes for 2012.

To File Jointly or Separately

You and your spouse might be separated and currently going through the divorce process when tax season sneaks up on you. Then you are faced with the question to file jointly, or not to file jointly. There are benefits and drawbacks to either option, but the status of your divorce may be the deciding factor. For example, it might be more difficult to file jointly in a contested divorce than it would be in an uncontested divorce.

If you file separately from your soon-to-be ex, then you will not be held liable for any underpaid taxes or other tax tomfoolery. That freedom and distinct division in finances is a great thing, but it means you will not be able to reap any rewards for filing with a married status.

If you decide to play nice and file jointly for one last time, you will get those joint filing tax benefits, but you will also be in the line of fire should your sort-of ex do their taxes incorrectly. To avoid this, though, you can ask to sign an indemnification agreement that protects you from any tax backlash.

As a little reminder for everyone out there, just because you divorced doesn’t mean you both aren’t responsible for past joint filings.

Kings and Queens of the Castle

There is an alternative to filing as single on your taxes, and that is as head of household. Filing as a head of household, you will enjoy a few of the tax break perks, but nothing is ever free and easy. There are a few very strict guidelines to follow in order to file as a head of household, and they are:

  • your household must include your child, even if they are not claimed as a dependent
  • you must pay more than half of the household’s maintenance costs
  • you must be single by December 31st, or living apart from your soon-to-be ex for more than 6 months
  • you must be a U.S. citizen or resident alien for the whole tax year

Tax season is truly upon us, and although we would love nothing more than to play opossum for the IRS, they would sniff you out and make you pay anyway. So get your tax affairs in order sooner rather than later. If you have more divorce tax questions, stick with us for Part 2, which will be about divorce and tax exemptions.

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