Divorce is a complex procedure both emotionally and financially. The tax code provides many options for divorcing couples and here are several important aspects from Conner & Roberts to know before getting divorced:
Identify your filing status. Make every effort to set an arrangement with your partner (and include the terms of that arrangement into your divorce decree) concerning how the two of you will handle your tax returns for the year of divorce. Your status as married or divorced is identified by your status on December 31 of the appropriate year. The divorce court cannot order either of you to resolve it in a certain method, but you and your partner could agree on filing certain means as well as write it right into your divorce decree.
Declaring single status. To illustrate, let’s imagine you got divorced in late December 2016– also as late as December 31, 2016– without agreeing to terms on taxes. Your filing status is single, because you were divorced in 2016. That means you should report 100% of your income as well as could assert 100% of your withholding (absent any written arrangement on the contrary). You are entitled to assert your individual exception, but not the exception for your partner. If you are not the main custodian of your children, your partner will certainly have the presumptive right to claim the exemptions. If you and your spouse possessed a house on which you paid home loan interest and advertisement valorem tax obligations, you may or may not be able to declare those tax reductions, as no presumptions apply. Due to the fact that Tennessee is a community property state, although if you were the only earner, these profits would belong to both you and your partner . You could clear up all these issues as a part of your divorce, by reaching contract with your partner on tax obligations for the year of divorce, and including the terms of that agreement in your divorce decree.
Married declaring independently standing. Let’s change the dates and say you got divorced on January 2, 2017, or thereafter, without agreeing to terms on tax obligations. Now, the IRS regulations require you to report yourself as married for filing status purposes for tax year 2016. It also refers to your spouse. Following the regulations clearly, the IRS requires that each of you file as married filing separately, reporting one-half of all income, estimated tax payments, withholding tax payments, and fifty percent of all deductions applicable to each of you. It means your spouse claims half of your withholding, allowed deductions and other tax payments and reports half of your income. Similarly, you must report half of your spouse’s income, and may claim half of your spouse’s withholding and other tax payments and half of all his or her allowable deductions. You would be accountable for any tax obligations due based upon your return, and be entitled to any overpayment of taxes shown on your return. Remember that married, filing separately results in a higher tax rate than filing as a single person or married, filing jointly, and that you may not be getting truthful information from your spouse.
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The tax obligation code provides many options for separating couples to make legal arrangements on tax obligation coverage issues. It should be a key goal of your own making such arrangements and put them into your divorce decree as a contract, rather than as a court order. Conner & Roberts attorneys offer a wide range of affordable legal services and flexible payment options. Contact us for more information.