Preparing tax returns for the year of divorce can be challenging. Professional help and consistent filing with your ex-spouse is key to avoiding IRS issues. In order to navigate preparation of your 2015 tax returns, start by reviewing your marital settlement agreement (MSA) and consider these tax tips for the newly divorced:
1. Filing status – if you were divorced as of December 31, your options are to file as single or head of household; filing jointly is not an option.
2. Did you sign an Income Reclassification Agreement? If so, you will report your separate income, deductions and withholdings for the year. If not, you will need to allocate marital income, deductions and withholdings between you and your former spouse from January 1st through the date of divorce.
3. Dependent exemption – if you have minor children, your MSA should indicate which parent is claiming which children. If your agreement does not specify, you need to address this with your former spouse to avoid both claiming the same child. Use form 8332.
4. Check with your attorney to see if any of the legal fees you paid are tax deductible.
5. If you use flexible spending accounts, make sure you qualify for the child care credit or other pre-tax items which are tied to the dependents you are allocated per your MSA.
6. Make sure you know the tax cost basis in the assets allocated to you as part of your divorce settlement.
7. Be certain you understand the tax impact of payments you are receiving or paying, including maintenance/alimony, to assure proper estimated payments and reporting.
8. Use a CPA who has experience and expertise in divorce tax issues.
Finally, start gathering your tax information early! You can avoid issues with proper preparation and a knowledgeable tax preparer.
Gaylene A Stingl, MST, CPA, CVA
Gaylene is a principal with Blau-Himmel LLC, providing tax, business valuation and litigation support services. Gaylene has worked with divorcing couples for over 20 years, providing cost effective, creative solutions to individuals and transitioning families.