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When a couple is separated as a consequence of an ongoing divorce process, it affects the way in which the partners pay their taxes to the IRS, because they cease being a single taxpaying entity, of course.
Filing taxes when legally separated can be quite a dilemma when neither of the partners knows the rules imposed by the IRS in this respect. All in all, filing taxes when separated can be a process as nerve-wracking as a divorce.
The vast majority of couples that are separated while waiting for the divorce to be settled don’t know how to deal with paying their taxes, and this is understandable. A major mistake is taking the matter into their own hands when they have little to no expertise in this issue.
Let’s see some of the choices you have. You should discuss all of them with a tax professional because he/she will know best what option to choose.
How to File Taxes When Separated – General Aspects
First of all, there are no deductions for the legal fees of a divorce. You can deduct some fractions of the alimony and tax advice fees, however. When it comes to filing your taxes when separated, there are two notions you should be familiar with: MFJ (Married Filing Jointly) and MFS (Married Filing Separately).
If you choose the first option, you must communicate with your spouse, since you’ll have joint liability. That means that you’ll both be responsible for penalties, interests, taxes, underpayments. Even though it sounds pretty harmless, this can turn sour when your spouse fails to pay the tax. In such a case, you will have to do it yourself. That’s where the communication comes in very handy.
The Married Filing Separately option allows one of the ex-partners to file as “Head of Household.” There are numerous requirements you must meet to be able to do this:
- You were separated for six months (i.e. your spouse didn’t live with you for half a year),
- You were the one that provided more than 50% of the costs of maintaining the house in all this time
- You’ve lived in the same place during this 6-month period.
As Head of Household, you will be the beneficiary of a variety of deductions that are not available under the MFJ and MFS. The deductions can amount to thousands of dollars, depending on the scenario.
If you do file as Married Filing Jointly, all the burdens related to the taxes will be divided in two, which means less weight on your shoulders. With all these, if your spouse is not trustworthy and doesn’t pay the taxes on time, you’ll be responsible for paying the entire sum.
As for Married Filing Separately, this usually leads to paying more taxes by yourself than you’d pay under the circumstance of an MFJ.
When Am I Considered Legally Separated?
The IRS puts a lot of stress on the fact that your status remained “Married” if you didn’t have the Decree of Separation prior to the last day of December. Now, this involves a lot more aspects that mainly pertain to the custody.
For example, if the child lives with you, you can be eligible for certain deductions. This is called “Dependent Exemption, ” and your spouse must agree on this. In other words, your spouse must let you claim the child as a “Dependent Exemption,” which will offer you some benefits in regards to the amount of taxes you’ll be paying.
One thing that is worth mentioning here is that your filing status will be affected by the state you’re living in. Keep in mind that each state has different divorce laws and the IRS respects them. For example, there are some states in which you’ll remain married in spite of the Decree of Separation. Such a case might make this whole process of filing for taxes when separated a lot more difficult.
What Do I Do If that Happens?
The best choice you can make is to hire a tax attorney. Such a professional will be able to communicate with the IRS and try to negotiate with them as much as possible. Although that doesn’t ensure that your status will be changed, at least you know what you’re confronting with.
The financial implications of a separation are quite impressive and they should not be taken for granted. That is why you need a helping hand to guide you through the entire process and to show you which alternative would work best for you. An attorney will also be able to tell you if you should opt for Married Filing Jointly or Married Filing Separately, based on your specific situation and the state you are living in.