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Filing tax returns during divorce

Of the many things to consider during divorce, taxes are not typically high on the priority list, at least initially. However, divorce will have a significant impact on your filing status, especially if your divorce is still in process at the end of the tax year. Generally speaking, if you received a final decree of divorce or separate maintenance by the last day of the tax year, you can file as a "single" individual or "head of household."

If you are still in the midst of divorce, you may need to file as "married filing separately" or "married filing jointly." Filing returns jointly means that you are jointly and individually responsible for any tax liabilities, interest or penalties assessed. This is true even if you have an agreement indicating that your ex-spouse will take responsibility for any amounts payable. If he or she fails to pay, you could be the subject of a tax audit from the IRS or the California tax authority.

You can seek relief from joint liability, but only under certain circumstances, such as:

  • You did not realize that your joint tax return had erroneous information, thus leading to an understatement of tax ("innocent spouse relief")
  • You and your ex were legally separated and not members of the same household in the year your joint tax return was filed ("separation of liability")
  • You do not qualify for innocent spouse relief or a separation of liability, and have made a good faith effort to comply with the law but cannot do so due to hardship or other extenuating circumstances ("equitable liability")

As a community property state, California has unique requirements if you file your taxes as "married filing separately." Essentially, this filing status means you and your spouse file your own returns detailing your personal income, exemptions, deductions and credits. However, if you have any community income, such as income generated from community property you acquired or owned during your marriage, you must report half of it in addition to all of your own separate income. Failure to do so could lead to an underassessment of tax.

Conversely, California's community property laws offer spouses additional relief from tax liability if they had no knowledge of the community income and thus did not report it. The burden of proof will fall on you to prove your ignorance, so to speak, something a skilled tax and divorce attorney can help you with.

As with all matters involving your divorce, it is best to speak with a qualified attorney about these matters, ideally one experienced in both family law and tax law. He or she can review your financial outlook and advise you on the most beneficial options given your current situation and goals.

Source: California Tax Service Center, "Divorce," Accessed Oct. 14, 2015

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