How Divorce Can Affect Your Taxes
Will Divorce Affect Your Taxes?
Going through a divorce can be one of the most difficult experiences in a person’s life. There are so many factors that can weigh in during a divorce; legal issues, child custody, monetary settlements, division of property, and emotional stress.
On top of everything, the IRS will also be in the equation. Divorce plays a major role in your tax situation and you can find yourself facing serious dilemmas when trying to make sense of the intricacies of post-marriage tax filing.
There are several things to keep in mind when preparing for your taxes in Arizona after a divorce.
Timing is Everything
When filing taxes after a divorce, timing is everything.
Which box you check to indicate your marital status is determined by what your marital status was by midnight of December 31st of the year you are filing for, not what your status is when actually filling out the tax forms.
If the divorce was not finalized until January, then you would still file as married.
Deductions and Assests
Understanding deductions can be very perplexing; alimony payments can be deducted, but child support payments cannot. “Family Support” payments can be the combination of support payments and can be deducted by the payer.
The party receiving the alimony must count that as taxable income, though child support payments received are not taxed.
Asset transfers, whether those be liquid, investments, or retirement funds, can be incredibly difficult to make sense of.
There are myriad rules regarding how funds and property can be taxed before and after divorce. One party could easily get stuck with the responsibility of the tax burden if proper care is not taken.
Worse yet, if the correct procedures are not followed, both parties could be responsible for back taxes, interest, and penalties if the appropriate taxes are not paid.
The most important aspect of successfully completing a divorce with the least amount of stress and liability is preparedness.
Your best strategy is to have an experienced Arizona divorce lawyer on your side to help you decipher the complexities of divorce and prepare you for what you will be facing.