Divorce and Taxes: Five Often Overlooked Tax Tips

The following information is intended for educational purposes and you should speak with your CPA, Accountant or Tax Adviser before taking action.

Divorced taxpayers tend to focus on tax issues related to children and alimony. However, when trying to figure out what you should pay Uncle Sam, the divorced taxpayer should be aware of the following:

1. What you can and cannot deduct: Generally you cannot deduct legal fees and court costs for getting divorced, but you may be able to deduct legal fees for tax advice, appraisers, and accountants all in the context of a divorce, as well as for fees for obtaining alimony.

2. Property Transfers: There is generally no tax consequence for property transfers between spouses (including those into trust) provided that such transfer is to a spouse and is “incident to a divorce.” A property transfer is “incident to a divorce” if the transfer occurs 1 year after the date that your marriage ends and is related to the ending of your marriage.

3. Form W-4: Remember when you become divorced or separated to file a new Form W-4 to ensure your withholding allowances are properly reflected. 

4. Tax Liability: You are jointly and individually responsible for any tax, penalty or interest due on a joint return for tax years before you were divorced even if your separation agreement states that your former spouse will be responsible for any outstanding amounts due on filed joint returns. A spouse may be able to seek relief under the innocent spouse rule, equitable relief, etc.

5. Sale of Jointly-Owned Property: If you and your spouse sell jointly owned property, make sure that you report your share of the gain or loss from the sale. In order to determine your share of jointly owned property you will have to refer to the state law administering ownership of your property.

As you prepare to file your taxes, take some time to sit down with your tax adviser to ensure you receive the full tax benefit of your alimony payments. IRS Publication 504: Divorce or Separated Individuals 2013 can further assist you as you prepare to file your taxes.

I wish you all the best,

Josh Robbins

Of Counsel

Scafidi, Juliano & Hurd, LLP

310 Washington Street, Suite 201

Wellesley, Massachusetts 02481

(T): 781-210-4710

(F): 781-210-4711

(E): jrobbins@sjh-law.com

Disclaimer:

This Blog/Website is made available for educational purposes only as well as to give you general information and a general understanding of the law, not to provide specific legal advice (or any legal advice).  This blog is for general informational purposes only. Joshua N. Robbins, Esq. does not offer or dispense legal advise through this blog or by emails to or from this site. By using this Blog / Website you understand that there is no attorney-client relationship between you and the Blog/Website publisher.  The Blog/Website should not be used as a substitute for competent legal advice from a licensed professional attorney in your state or jurisdiction. This blog is not published for advertising or solicitation purposes. Regardless, the hiring of a lawyer is an important decision that should not be based solely upon a Blog / Website. The information on the blog may be changed without notice and is not guaranteed to be complete, correct or up-to-date. While the blog is revised on a regular basis, it may not reflect the most current legal developments. The opinions expressed at or through the blog are the opinions of the individual author and may not reflect the opinions of the firm or any individual attorney.

To ensure compliance with requirements imposed by the U.S. Internal Revenue Service in Circular 230, we inform you that any tax advice contained on this site (including any links provided) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the U.S. Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed in this communication.

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Divorce and Taxes: Claiming Your Child as a Dependent for Tax Purposes

As we approach the deadline for filing personal tax returns, I will focus on tax-related issues in the context of divorce. To reiterate the following information is intended for educational purposes and you should speak with your CPA, Accountant or Tax Adviser before taking action.

If you are divorced with children your Separation Agreement or Judgment of Divorce likely will address who is entitled to claim the children as a dependent for tax purposes.

1. If you will not be claiming a child for tax purposes be sure to file Form 8332: Release / Revocation of Release of Claim to Exemption for Child by Custodial Parent. Take steps to ensure this form is properly completed as you do not want your tax returns to be denied or to miss out on this valuable tax benefit.

2. If your divorce agreement provides that the parties will alternate claiming the exemption keep in mind that you need to complete Form 8332 every time there is a change in the dependent deductions.

3. If you are in the process of a divorce and working towards negotiating a separation agreement you should speak with a CPA or other Tax Adviser and try to determine the value of the dependency and how it should be apportioned between the parties.

EXTRA TIP: If you recently executed a separation agreement and the judgment for divorce nisi has not become absolute, then you are still married and need to file either jointly or as married filing separately. If you are trying to file jointly and your spouse (soon to be ex-spouse) refuses to sign the joint return or cannot be located then unfortunately you will need to file married filing separately.

I strongly encourage that you carefully review your Separation Agreement or Judgment of Divorce to ensure that the correct spouse claims the child(ren) for tax related purposes as this issue is often the subject of a Complaint for Contempt.

I wish you all the best,

Josh Robbins

Of Counsel

Scafidi, Juliano & Hurd, LLP

310 Washington Street, Suite 201

Wellesley, Massachusetts 02481

(T): 781-210-4710

(F): 781-210-4711

(E): jrobbins@sjh-law.com

Disclaimer:

This Blog/Website is made available for educational purposes only as well as to give you general information and a general understanding of the law, not to provide specific legal advice (or any legal advice).  This blog is for general informational purposes only. Joshua N. Robbins, Esq. does not offer or dispense legal advise through this blog or by emails to or from this site. By using this Blog / Website you understand that there is no attorney-client relationship between you and the Blog/Website publisher.  The Blog/Website should not be used as a substitute for competent legal advice from a licensed professional attorney in your state or jurisdiction. This blog is not published for advertising or solicitation purposes. Regardless, the hiring of a lawyer is an important decision that should not be based solely upon a Blog / Website. The information on the blog may be changed without notice and is not guaranteed to be complete, correct or up-to-date. While the blog is revised on a regular basis, it may not reflect the most current legal developments. The opinions expressed at or through the blog are the opinions of the individual author and may not reflect the opinions of the firm or any individual attorney.

To ensure compliance with requirements imposed by the U.S. Internal Revenue Service in Circular 230, we inform you that any tax advice contained on this site (including any links provided) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the U.S. Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed in this communication.