Getting a Divorce – Should You File a Joint Tax Return?
By Mark Morrison
Divorce is typically a very emotional time for most people.
There are so many details to be considered, and in a highly charged emotional state, it’s easy to overlook them. If you’re in the position that you’re considering divorce or have already decided to file, there are a few things you need to keep in mind when it comes to filing your taxes.
While it’s true that tax laws can sometimes be confusing, when it comes to filing taxes and marital status, the law is crystal clear. The marital status you use on your income tax return should reflect your status on December 31 of the tax year you’re filing for.
Even if you’re in the process of divorce, if you were still legally married (even if you were separated on Dec 31), you’re eligible to file jointly on your income taxes. If you choose, you can file ‘married, filing separately’, but that’s not usually recommended by most tax experts. It’s generally the most expensive way of filing.
The only time it may be cheaper on you to file separately is in the event one of you is not working or if the difference in your income is so great that you fall into a completely different tax bracket.
Another consideration is whether your name also appears on the mortgage note for your house and the title lists you as ‘Tenants in the Entirety.’ This could affect your decision to file separately or jointly and it’s something you’ll need to discuss with your attorney, accountant, or other professional.
There can be long-term repercussions if you choose to file jointly and you need to be aware of those possibilities before you decide. Consider what could happen if you file a joint return with a spouse you’re in the process of divorcing. If you’ve been separated for a while, do you really know the status of your spouse’s income, savings, retirement funds, bonuses, deductions, and other tax related monies?
Are you willing to be held liable in the event your spouse is less than 100% honest with tax information? If you file jointly, your signature says you are. Despite what the court may decree about financial liability, the IRS, as a third party creditor, is not bound by a court ruling.
Filing jointly, as far as the IRS is concerned, means both of you are liable for any additional taxes, penalties, or interest owed to them. They can put a lien against your income or any property you own in order to satisfy additional funds owed to them.
If, after considering all the possibilities and getting advice from professionals, you decide to file jointly make it clear in writing what your expectations are. Decide ahead of time how you’ll divide the expense of having your taxes prepared. Agree on how you’ll split the costs of any additional taxes owed as well as how you’ll share any refund you may receive.
Filing jointly may be a perfectly logical decision to make in your situation. But under the wrong circumstances, it could affect you many years after the divorce is final.
Get all the facts before making a decision that could impact your life for years to come.
COPYRIGHT (C) BY MARK MORRISON. ALL RIGHTS RESERVED.
Mark Morrison is a Divorce Mortgage Planning Specialist. Mark has been in the mortgage business for 20 years. He can be reached at 240-390-2230 or 1-800-851-3730. You can read more on mortgages, divorce and money at http://divorceandmoney.blogspot.com or his daily posts on mortgages & real estate at http://mortgagesbymark.thewrittenblog.com
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