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Deciding on your tax filing status if your divorce wasn’t finalized last year

On Behalf of | Mar 24, 2021 | Divorce

Filing income taxes comes with a number of changes and considerations after divorce. However, what if you and your spouse haven’t finalized your divorce yet – or perhaps haven’t even begun it? Maybe it was finalized early this year. Unless you filed for legal separation and that was final before Jan. 1 of this year, then you’re still married in the eyes of the Internal Revenue Service (IRS) for purposes of your 2020 return.

So what status should you use when you file your income taxes? That depends on multiple factors that you’ll want to discuss with your tax adviser as well as your spouses. Two options that all married couples have are “Married filing jointly” and “Married filing separately.”

Should you file jointly or separately?

There can be significant tax advantages for married couples who file their taxes jointly in tax credits and deductions. It can also be easier to file jointly if you were together for most of last year and had a number of joint expenses and deductions. If the two of you can amicably file one more tax return together, this may be the way to go.

In some cases, it can be more financially sound to file separately. For example, some deductions, like medical expenses, are limited to the amount over and above a certain percentage of your income. If your income is considerably lower than your spouse’s, you’d be able to deduct more of those expenses by filing separately.

What if you suspect your spouse of tax evasion?

Another reason to consider filing separately is if you have reason to believe your spouse isn’t completely honest in reporting their income. The sooner you separate your taxes from theirs (and get your own tax professional), the better. 

You’ll want to notify both your tax professional and your family law attorney if you believe your spouse (and you) may owe taxes because of failure to pay the correct amount (accidentally or intentionally) in previous years. You may be able to seek “innocent spouse relief” from the IRS. 

If you know of back taxes that are owed on your previous joint filings, it’s best to pay those off by the time the divorce is final. A complicated divorce can leave you with issues even after the final paperwork is signed, so don’t be afraid to lean on your attorney for some guidance.