By Massachusetts divorce lawyer and mediator Katherine Thomas
Forget abut death and taxes, what about divorce and taxes?
If you are getting a Massachusetts divorce, you have a lot to think about. To make matters even more interesting, tax season is here. Please curtail your excitement. Tax commercials flood the airwaves, people stand in silly costumes by the side of the road, and the W2s have arrived. CPAs retreat to the dark, deep chambers of their lairs.
Completing and filing taxes can be painful enough (especially when you find out you owe more money to Uncle Sam), but couples who are in the midst of a divorce or have already divorced may have a few extra considerations regarding taxes, especially filing status and dependency exemptions.
While a divorce is pending, a couple is still considered married by the IRS. It is up to a married couple to determine how they will file while a divorce is pending. If the couple agrees, they can file a joint return. However, if one or both spouses does not want to file a joint return then the couple will have to file married, filing separately.
You cannot force your spouse to file a joint return.
But what happens when you receive your divorce judgment? Can you still file jointly for that tax year if you were married for most of the year?
Unfortunately, the answer is no. IRS Publication 504 states that you are considered to be unmarried (single) for the whole year if you obtained your final divorce decree by the last day of that tax year. This means that even if you receive your divorce judgment on December 31st, the IRS considers you to be unmarried for the entire year and you must file an individual return.
It is important to remember that if a married couple filed joint returns (while married), either spouse can be held jointly and individually liable for any interest or penalty due on a joint return. This means that one spouse may be held liable for all tax due even if the other party earned the income! Even if it is included in the Separation Agreement that your former spouse will be liable for any amounts due on a joint return, the IRS is still able to hold both parties individually and jointly liable under IRS Publication 504.
One of the most frequent tax questions our clients ask is “Who gets to claim the children as dependency exemptions?”
Only one parent can claim a child as a dependency exemption, and there are a number of factors to consider in determining the most sensible way to claim the available exemptions. Determining how to maximize dependency exemptions depends on your particular situation, including your income, your spouse’s income, other tax considerations, and your parenting schedule.
If there is more than one child, the exemptions can be divided so that the parents share the exemptions. Parents can also alternate years in which they claim a child. For example, the Mother claims the child on her return in odd years and the Father claims the child on his return in even years. Although the claiming of dependency exemptions is usually detailed in the Separation Agreement, under IRS Publication 501, the IRS will treat the child as the qualifying child eligible to be claimed as a dependency exemption for the “custodial” parent.
The IRS defines custodial parent as the parent with whom the child lived with for a longer period of time during the year (measured by number of nights). If the child lived with both parents for an equal amount of time then the IRS says that the parent with the higher adjusted gross income can claim the child as an exemption. What happens if the Separation Agreement says that the “noncustodial” parent is supposed to claim the child(ren) on their returns? The dependency exemption will have to be transferred from the “custodial” parent to the “noncustodial” parent. In order to transfer the exemption and allow the noncustodial parent to claim the child, the following four requirements must be met:
- The parents are divorced or legally separated under a decree of divorce or separate maintenance, the parents are separated under a written separation agreement, or lived apart at all times during the last 6 months of the year, whether or not they are or were married;
- The child received over half of his or her support for the year from the parents;
- The child is in the custody of one or both parents for more than half of the year; and
- The custodial parent signs a written declaration, Form 8332, that he or she will not claim the child as a dependent for the year, and the noncustodial parent attaches this written declaration to his or her return.
It is important to remember to fill out the Form 8332 because the IRS may reject the return without this form attached, even if it is in the Separation Agreement. If the custodial parent refuses to comply with the Separation Agreement and complete this form, then a Complaint for Contempt will need to be filed in the Probate Court.
Despite frequent chatter about simplifying the tax code, don’t hold your breath. There are a lot of changes going into effect for 2013, and having a tax professional available to assist you is worth the investment.
Of course, an experienced Massachusetts divorce attorney or divorce mediator will be familiar with these important issues as well.
Attorney Katherine Thomas is a divorce and family law attorney and mediator with The Divorce Collaborative LLC of Bedford, Franklin, and Shrewsbury.
The Divorce Collaborative serves clients throughout central and eastern Massachusetts experiencing divorce or other family conflict, including issues such as custody, child support, alimony, and division of property. The firm also works with parents in the area of school and special education law.
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Massachusetts divorce lawyer and divorce mediator serving the Franklin, Walpole, Medfield, Millis, Medway, Milford, Norfolk, Holliston and Wrentham areas.
Massachusetts divorce attorney and divorce mediator serving the Bedford, Concord, Lexington, Carlisle, Billerica, Wayland, Weston, Burlington, Stow, Sudbury, Acton areas.